In May 2024, India signed a 10-year agreement with the Islamic Republic of Iran to manage the strategically located Iranian port of Chabahar, which is the first overseas port an Indian company is managing, aimed at facilitating expanded trade with Central Asia. This long-term agreement is critical to India’s economic and geopolitical strategy for Central Asia and beyond. Hence, the port is geopolitically and geo-economically highly crucial for India. At the same time, it is a significant component of INSTC. The article will trace the evolution and examine the significance of the INSTC multi-modal project keeping special focus on India’s stake in Chabahar Port.
International North-South Transport Corridor
The idea of the project was first mooted in 2000 in St. Petersburg by Iran, Russia and India. The 7200-km long corridor is a multi-modal transportation project in order to build a transport network linking Russia’s Baltic Sea coast to India’s western ports in the Arabian Sea and the Persian Gulf to the Caspian Sea via Iran. In 2002, Russia, India and Iran signed preliminary agreements to develop the inter-continental International North-South Transport Corridor (INSTC).The INSTC was eventually expanded to other countries and ratified by 13 countries — India, Russia, Iran, Azerbaijan, Belarus, Bulgaria, Armenia, Kazakhstan, Kyrgyzstan, Oman, Tajikistan, Turkey and Ukraine. Bulgaria joined the project as an observer state.
Despite the perceived potential and the eagerness exhibited by the member countries, the implementation of the project experienced minimal progress for an extended period. One of the contributing factors to the sluggish advancement was the Western sanctions (especially the United States) imposed on Iran due to its nuclear program. Other nations and their respective private corporations resisted substantial investments in Iran, driven by the apprehension of potential third-party sanctions from the United States. However, Russia’s invasion of Ukraine in February 2022, followed by the subsequent imposition of Western sanctions, has fostered a closer alignment between Moscow and Tehran, thereby injecting a renewed impetus into the INSTC.
The 10-year agreement between India and Iran on the Chabahar Port is a significant step towards global connectivity. The long-term agreement between India and Iran brings connectivity to the landlocked Central Asia region and beyond, providing a promising alternative route—India’s aim to reduce reliance on conventional routes susceptible to geopolitical fallout. In this context, the Chabahar Port and INSTC, with their potential to connect continents, hold the promise of enhanced regional as well as global connectivity.
India and the Integration of Chabahar with INSTC
India’s proactive engagement in initiatives such as the International North-South Transport Corridor (INSTC) and Chabahar port underscores its aspirations to cultivate strategic relations with Central Asia and Afghanistan. Incorporating Chabahar into the INSTC holds profound strategic significance for regional nations. By circumventing Pakistan, India gains access to Afghanistan and paves the way to Central Asia, a geopolitical shift of substantial importance. This maneuver fundamentally reshapes the regional dynamics.
Iran and India both recognise the pivotal role of Chabahar port in the INSTC project. A trilateral working group comprising Iran, India, and Uzbekistan was established in 2020 to foster cooperation on the Chabahar Port and other connectivity initiatives. During the group’s second meeting in December 2021, the significance of Chabahar’s Shahid Beheshti Terminal was accentuated. The group also acknowledged the necessity of constructing a transit corridor to enhance regional connectivity by interconnecting South and Central Asia. At the India-Central Asia Summit in January 2022, emphasis was placed on coordinating various connectivity projects. India’s endeavour to integrate Chabahar Port into the INSTC garnered an endorsement from five Central Asian nations, recognising the port’s tremendous potential to augment connectivity with Eurasia and Central Asia. Subsequently, in April 2023, the India-Central Asia Joint Working Group (JWG) on Chabahar Port convened its inaugural meeting in Mumbai.
The Taliban regime in Afghanistan also expressed support for the Chabahar Port and stated its preparedness to provide the requisite “facilities.” The Taliban’s Foreign Ministry has “welcomed” the integration of Chabahar Port into the INSTC, underscoring that the regime is “ready to provide all necessary protection and facilities in this regard.” This endorsement from the Taliban, a critical regional political entity, could significantly bolster the port’s development and its role in regional connectivity. Furthermore, in March 2024, acknowledging the port’s potential, the Taliban also announced an investment of $35 million in Chabahar.
Implications
The integration of Chabahar Port with the INSTC, which will serve as an additional port of entry for Bandar Abbas and the INSTC, holds immense promise. With Russia expressing interest in utilising the Chabahar Port to facilitate India’s access to its resource-rich regions, these developments possess the potential to significantly enhance India’s connectivity and trade with Russia and Eurasia, kindling optimism for future trade prospects. Their mutual reinforcement underscores the strategic importance of Chabahar Port and the INSTC. Their integration fortifies India’s ties to the substantial Russian and Eurasian markets and amplifies the strategic value of these initiatives for India’s economic relations.
The INSTC is touted as a shorter and cheaper alternative to the traditional Suez Canal route for trade between Russia/Europe and India. It is strategically vital for India’s energy security and trade with Russia and Central Asia. India successfully integrated the Chabahar port, which is developing in Iran, with the INSTC. However, challenges remain, including financing constraints due to sanctions on Russia and Iran, differing rail gauges, geopolitical tensions in the Caucasus region, and the practical difficulties of constructing the Rasht-Astara railway link, which requires tunnels and bridges along the Caspian Sea. Despite these hurdles, India, Russia, and Iran view the INSTC as a potential game-changer for Eurasian economic integration and seem determined to push ahead with its implementation.
