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India and Iran are moving slowly and steadily to overcome all hurdles to convert the International North-South Transport Corridor (INSTC) into a bigger economic corridor with better prospects and potential than the China Pakistan Economic Corridor (CPEC).
President Rouhani, on his first state visit to New Delhi after assuming office in 2013, held talks with PM Modi, and the two sides moved forward on several contentious issues stuck for decades due to sanctions and now because of pressure from Washington.
Pitch for Chabahar to Become Main Point for Economic Corridor
Among the agreements signed, the most important was the lease contract for one berth, multipurpose and container terminal at Shahid Beheshti Port-Phase 1 of Chabahar for 18 months, between Port and Maritime Organisation (PMO) of Iran and India Ports Global Limited (IPGL). IPGL will now begin full operations immediately, using one existing spare berth after installing additional equipment at terminal one, four more berths will be also constructed at terminal 1 and 2 in phases with an investment of US $150 million after taking them on lease for ten years.
Termed as the ‘Golden Gateway’ by Nitin Gadkari, Minister for Shipping and Water Resources, now through Chabahar a shorter alternative route to Kabul from the Arabian sea has become fully operational, bypassing Pakistan which had been denying access route to Afghanistan. A trail run with a wheat shipment of 1.1 million tons from India to Afghanistan in containers via road has been completed.
India has built the 215 km-long strategic Delaram-Zaranj highway at a cost of Rs 600- crore, completing the road link from Chabahar to Kabul. Strategists in New Delhi want Chabahar port to become the major point for an economic corridor from India-Arabian sea-Iran-Afghanistan-Central Asia to Europe and become a better alternative to Gwadar Port just 75 km away in Pakistan at the starting point of US $62 billion CPEC China Pakistan Economic corridor from the Arabian sea.
Iran Urges For Indian Investment in Chabahar
The INSTC as an economic corridor from Iran to Europe has far better prospects then CPEC.
Dr Meena Singh Roy, Research Fellow & Head, West Asia Center, Institute for Defense Studies and Analyses
To clear the way for an economic corridor “two sides have agreed to hold a meeting in Tehran at the earliest to include Chabahar in the INSTC framework”, an India official said on condition of anonymity.
Actually the whole goal is to connect south of Iran, Chabahar to rest of Iran and to Europe... the investment of India in Chabahar will be of great help to achieve this goal.
Dr Mohammad Khazaee, Vice Minister of Economic Affairs and Finance-in charge for International affairs and Investment of Iran
He confirmed that “negotiations between the Indian and Iranian companies are on for financing the railways in Iran,” to complete the missing rail link from Chabahar to Europe. A high-level delegation led by SK Choudhary, CMD of IRCON, an Indian government organisation, is now in Iran to finalise various contracts worth US $1.6 billion, for a 663-km railway line from Chabahar to Zahedan. IRCON has signed a MOU with Construction, Development of Transport and Infrastructure Company of Iran (CDTIC), after doing a pre-feasibility study for this route.
Iran’s ‘New Silk Route’
IRCON is in the process of finalising various funding options, including loans from EXIM Bank. India's recent accession to United Nations TIR (Transports Internationaux Routiers) Convention on international customs and transports to facilitate smooth movement of goods across international borders, and the Ashgabat Agreement which envisages setting up of an international transport and transit corridor linking central Asia with the Persian Gulf, are additional steps at enhancing regional connectivity and linking regional centers of economic growth from India-Iran-Central Asia-Europe.
Business leaders in the Iranian President’s delegation are upbeat about these new opportunities, as it offers many advantages as compared to the CPEC.
It is much safer and quicker in terms of transport from East Asia to western countries, as compared to the Silk Route, which Iran is not joining. It also offers better opportunities for all businesses and nations involved in this new, alternative route.
Reza Jamili, VP, Iran-India Business chamber & Zarrin Industrial and Mining Group
Does CPEC Violate India’s Sovereignty?
CPEC first goes to China from Gwadar and then turns to Russia and Europe which is a much longer route than the INSTC. Gwadar is in the restive Balochistan Province, where there is an ongoing struggle for freedom from Pakistan. CPEC passes via Quetta, the Taliban hotbed. Many attacks on Chinese nationals have forced Pakistan to deploy 15,000 military personnel, as part of the Special Security Division (SSD) and Maritime Security Force (MSF).
The fear of major unrest in the Muslim-majority Xinjiang province of China is also a cause of concern. India has also raised red flag, as CPEC passing via Pakistan-occupied- Kashmir (PoK), violates the sovereignty of India.
A very peaceful INSTC has huge resources of crude oil and gas in Iran and Central Asia, mineral deposits of iron ore, bauxite, copper, coal and lithium in Afghanistan… which can act as the basic inputs for immensely successful economic corridor with several manufacturing centers of high growth potential.
A high-level Iranian government official on the condition of anonymity
India is roping in Japan as a strategic partner to counter CPEC. JICA, JBIC and Japanese Banks have expressed interest in funding the rail link and the International North-South Transport Corridor and invest in the Chabahar Free Trade Zone. OVL has offered to invest US $5.5 billion in a LNG terminal with petrochemical and fertiliser production complex at Chabahar.
An under-sea gas pipeline from Iran to India bypassing Pakistan is also on the cards. Nitin Gadkari has committed to invest US $500 million in the Chabahar Free Trade Zone.
However, the plans by Indian aluminum producer NALCO to set a green field for US $2.8 billion aluminum smelter plant of 0.5 million metric tons near Chabahar Free Trade Zone has not made any progress, as there in no assured gas supply for the captive power plant of 1,200 MW.
Iranian Banks to Open Outlets in India
Both countries have also signed a double taxation avoidance agreement to facilitate the increasing trade which expects a big boost in the coming years. Hossein Yaghoobi Myab, Director-General for International Affairs at the Central Bank of Iran, who traveled with the presidential delegation said, “One bank (Bank Pasargad) has been ratified and approved to open a branch (in India)... Saman Bank will also open a representative office” in India very soon.
Iran’s Parsian Bank has also applied for permits to open a branch in India. Hossein is also trying to convince private banks like IDBI to do business with Iran. Most business deals now are done by UCO Bank in euros to escape the eagle eyes of President Trump, who threatens to impose sanctions on Iran every other day.
As business blooms between two countries, PM Modi will have to do a difficult tight rope walk of balancing Washington, DC, a ‘major defense partner’, and Tehran a ‘friend as old as history’.
(The writer is a New Delhi-based freelance journalist. This is an opinion piece and the views expressed above are the author’s own. He can be reached at @kjs