Is it Gwadar Vs Chabahar or India Vs China in sea trade in Indian Ocean

Chabahar Port is located in the southeastern part of Iran, which is the only port in Iran to have direct connected to the ocean. Located at a distance of 750 Nautical Miles from India’s financial capital (Mumbai), it is considered as the best and most efficient route to access land-blocked Central Asian countries like Afghanistan, Kazakhstan, etc.… for their valuable untapped natural resources. In this post we will have a detailed analysis on why Chabahar is very important for all the Central Asian countries and emerging powers of the world rather Gwadar which connects the land-locked western side of China.

 

Chabahar port

The NSTC link from Mumbai to Europe through Chabahar

 

A small history about Chabahar

 

Iran wanted to develop Chabahar Port on its own. So in 1982 they started developing the port by terming it the “Golden Gate” to all Central Asian nations. To get it ambitions fulfilled (to be a dominant regional player), it had partnered with Russia, India and Turkmenistan to develop the links to the port thereby reducing the traffic at Karachi.

 

Due to US-sponsored sanctions, the links created were under-utilized making the investments of foreign nations idle for a long time. India and China always wanted to trade with Afghanistan and Chabahar was the only link present. Investments are expected to pay for India after the lifting of the US sanctions in January 2016, thereby making India access to the huge untapped resources of Afghanistan.

 

Why does India need Chabahar Port

 

India has developed close ties with Afghanistan but doesn’t have access to Afghanistan through the land route. In 1947, India had a small passage access to Afghanistan through Kashmir. But after Pakistan occupied some parts of the Western side of Kashmir, it lost this link to Afghanistan. Pakistan is not allowing India to trade through the PoK (in Pakistan it is called as Azad Kashmir) despite the good intentions of India to develop trade relations with Pakistan and Afghanistan thereby benefitting Pakistan to develop better infrastructure for its own nation.

But the reality is the other way round. Despite various attempts notably Lahore bus through the Wagah border by India, no serious attempts are being made by our counterparts to improve relations between the nations.

 

If there wasn’t any dispute over Kashmir between India, Pakistan and China, then Kashmir would have been a rich developed state thanks to its geographical location which helps to connect various Central Asian nations and natural beauty of the valley would have made it a perfect tourist spot. Infrastructure would have been improved, making India’s products available at a lower cost in the Central Asian and European nations thanks to lower transportation costs. India would have been the major partner in the ambitious North-South Transport Corridor as the investments in India would have been less to reach the European nations. Presently IRCON (Indian Railways Construction Company Limited is a wholly subsidiary of Indian Railways) is investing in building railways in Iran and Afghanistan would have ended up investing in Kashmir, thereby developing the economy of the region.

 

Afghanistan has huge reserves of untapped natural resources like natural gas and petroleum along with barite, chromite, copper, coal, gold, gemstones, etc… which is claimed to have a value of $30 trillion. China has signed a pact with China National Petroleum Corporation to develop three oil fields in Afghanistan. On a short note, it is estimated that Iran has over 2 billion barrels of crude oil along with over 15 trillion cubic feet of natural gas thereby making it a potential attraction for all regional players. China has already entered the space, making India’s motive to enter with a better infrastructure to benefit from the huge resources.

 

Iran also has large resources of natural gas and Chabahar ready to construct a pipeline to Mundra Port (controlled by the Adanis) in Gujarat for importing natural gas more efficiently. This makes India secured of the largest gas reserves in Iran for a justified price when it isn’t the only major player in the region (the other is China).

 

Through the Chabahar Port India gets access to the North-South Transport Corridor, which expects to transport goods from India to Europe through Iran, Russia and Azerbaijan thereby reducing 50% of the time and cost compared to the existing long sea-route through the Suez Canal.

 

Gwadar Port is being developed by China in Pakistan is merely 172 km away from the Chabahar Port. With the presence of China in the region, it really makes a need for India, do develop an overseas port to keep a check on the Chinese ambitions to become a superpower at the cost of another emerging power (India).

 

Why do Iran and Afghanistan need the Chabahar Port.?

 

Iran has world’s second largest oil reserves in the world, thereby at its peak it was the second largest exporter of oil in India. But due to the US-sanctions, there was a drop in the extraction of oil in Iran. Come January 2016, after the sanctions were lifted Iran wants to make a stellar dent by grabbing a large share of oil exports in the world trying to achieve its previous glory of 2011 to be the second-largest supplier of oil. But this time it’s not only wants to export a maximum to India, but to other energy-hungry nations like China and South-East Asian nations too.

 

Bandar Abbas port in the Strait of Hormuz handles about 85% of the trade in Iran. But the major problem with this port is it being crowded and secondly due to shallow waters; it cannot handle ships of size over 100,000 tons. So the larger ships are segregated into smaller ships (in UAE) and then transported to Iran. This leads to loss of lots of resources in terms of transportation costs to UAE and makes it vulnerable to UAE for its trade needs. Chabahar not having such constraints well is the best alternative to Bandar Abbas.

 

Afghanistan has a huge untapped resource worth over $30 trillion, but the nation isn’t able to tap this wealth to its potential due to poor economy and a huge debt. More than 60% of the populations are earning less than $1 per day. War-torn Afghanistan today has to find help from other nations. China has already started developing three oil fields in the country. India has extended a warm hand of friendship with the country by helping them in developing their rail/road infrastructure and hydro projects too.

All about the deal to develop Chabahar Port

 

The deal to develop the port is between two entities, namely Arya Bandar (private company leased for a long time by Iran) and India Ports Global (JV of Jawaharlal Nehru Port Trust and Kandla Port Trust) for a period of ten years.

 

When India went on to sign the Memorandum of Understanding with Iran to develop the port, they were unaware of the fact that Iran government has leased out the port for a long time with a local private firm Arya Bandar. This came in as a shock to India as India thought that the agreement for the development of the port would be between two nations rather two entities.

 

I really feel that the Iran government should have been responsible to inform India initially about the deal of the government with Arya Bandar. India re-negotiated the deal with Iran and allowed Arya Bandar to participate in the deal. When the sanctions were put on Iran, no nation except for India and China. They maintained the Iranian-Oil company accounts in their respective nations in the local currency. While China cut the imports by half after the sanctions to get a better deal on the basis of the sanctions, it also wanted to promote the yuan as a world currency. India on the other hand extended a hand of friendship to Iran in its difficult times (P.S: India has never waged a war against any nation in 10000 years) by purchasing their oil. Friendship counts, and that’s what was expected from Iran to be reciprocated.

 

India has signed a pact to develop the rail network {IRCON – [Indian Railways Construction Company Limited] at $1.6 billion} from Chabahar to Zahedan (Afghan border) which would connect to the existing rail network after the Kerman-Zahedan rail line is complete. It has already constructed a highway from Zahedan to Delaram in 2009 (218km) which connects to the garland highway in Afghanistan connecting four major cities namely Kabul, Kandahar, Maser-e-Sharif and Heart.

 

India has announced to develop the Hajigak iron ore under SAIL (Steel Authority of India Limited). This ore would be connected by a 900 km rail from Hajigak to Chabahar via Delaram and Zahedan making a committed investment of $2.235 billion in the Chahabar deal.

 

 

Benefits for India in the deal

 

India is the biggest benefactor of the Chabahar deal. In the backdrop, it is helping Iran and Afghanistan to develop their infrastructure for its own gains.

Notable points are

  1. India would get direct access to the Central Asian nations without the need of Pakistan.
  2. It can have a diplomatic check on the ambitions of China in Pakistan where there may be future chances of Pakistan handing over the entire port to China.
  3. It can transport goods to the Europe in the shortest way possible, rather circling the entire Europe through the Suez Canal and the Caspian Sea.
  4. Chabahar Port would be the most used port if there is any blockage in the Strait of Hormuz, Strait of Malacca and Suez Canal due to various economic, social and political reasons.

 

Gwadar Vs Chabahar

 

Chabahar Port

The two ports are in a proximity of 172 km on the Makran Coast.

 

Gwadar and Chabahar are located just 172 km apart on the Makran Coast. Both have their own strategic, diplomatic and economic benefits. While China is funding 80% of the port infrastructure, India is committed to develop the infrastructure for the entire region. Some salient points to compare between these ports

 

  1. Why these countries need them
  • India needs Chabahar port to get direct access to the European and Central Asian nations by the shortest route since these nations are the major importers and exporters respectively to India.
  • China needs Gwadar port as it is a large nation, most of its ports are on the eastern coast, thereby despite 60% of the oil coming from the Gulf; it has to travel around the ocean for 16000 km for over 3 months. This port would give it a land route to reach Xinjiang region in China in only 2000 km.

 

  1. Which country is more accessible to Afghanistan

Both the nations are trying their best to get the most out of Afghanistan because of its huge untapped reserves.

  • Currently, most of the cities are trading through Karachi being the nearest sea port, but there seem to be some problems like security, infrastructure, etc…
  • While India has constructed Route 606 highway connected to the garland highway of four major cities in Afghanistan to subdue the distance advantage given by Gwadar compare to Chabahar. Chabahar is quite far comparing to Gwadar for most of the cities in Afghanistan. India is developing a robust rail-road network to give more advantage to Chabahar port.
  • While China’s Gwadar port despite the benefits suffers with some issues. Pakistan has huge reserves of oil in Baluchistan region. But the country gives only 20% royalty to this area, thereby making the area underdeveloped. This has made the region rebellious to Pakistan, thereby posing an threat to the security despite Pakistan’s effort to develop an airport, build a LNG depot, etc…

 

  1. Alienation

China’s Gwadar port could be alienated compare to India’s Chabahar port. This is because

  • China has developed the port for better access to the Xinjiang region, ignoring its Central Asian ambitions.
  • Mostly the port would be dominated by the Chinese, thereby not feasible to be used by other nations efficiently.
  • India has on the contrary developed a rail link to the Iran’s existing rail link. It has developed a road link via Russia (India’s big brother) to Europe.
  • While Chabahar Port is developed as a consortium of different nations, China is solely developing the port. US may consider investing in Chabahar (despite the previous sanctions in Iran) rather to an emerging superpower’s port (China).
  • In the future we may see China using the Chabahar port to trade with the Central Asian countries and Europe if Pakistan falls in a turmoil; thereby improving the India-China relations leading to world peace.

 

Robust network, fear of Baluchistan separation, emerging dominance of China in the Indian Ocean would help Chabahar to grow with the support of all major nations in the world.

 

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