Domestic Economy

Chabahar Risks Losing Out to Gwadar

The government and related entities need to reach consensus on how Chabahar project could benefit Iran’s economy
Chabahar is a strategic port located in Iran’s southeastern Sistan-Baluchestan Province.
Chabahar is a strategic port located in Iran’s southeastern Sistan-Baluchestan Province.

Iran is concerned the long-drawn-out Chabahar Port development project may be losing out to a similar project to develop the Pakistani port of Gwadar amid an internal dispute over the pressing need to attract foreign investment in the strategic Iranian port.

The Chabahar master plan includes a five-phase project to develop the harbor and a special economic zone in the port located in the southeastern Sistan-Baluchestan Province.

“Chabahar project’s completion requires $2.5 billion in investment,” says Gholamreza Salami, an advisor to Minister of Roads and Urban Development Abbas Akhoundi, was quoted as saying by the ministry’s news service.

“It is not possible to get access to this amount by relying on domestic resources. We need foreign investment. Foreign companies are ready to enter into partnership with Iran to develop the region, but we have not been able to select a suitable partner.”

Salami pointed the finger of blame at “domestic opponents of Chabahar’s expansion”, who should “change their mind-set and support the government in this regard”.

“The government and those who exert influence over the expansion of this corridor need to reach consensus on how much it could benefit Iran’s economy.”

On the back of a rail link that stretches to Iran’s northwestern border, Chabahar will pave the way for transport of goods from India to the landlocked countries of Commonwealth of Independent States and Afghanistan.

Tehran, New Delhi and Kabul signed a trilateral agreement to develop Chabahar in Tehran in May 2016, when Indian Prime Minister Narendra Modi and Afghan President Ashraf Ghani paid a state visit to Iran.

The deal stipulates the development and operation of two terminals and three berths at the port with cargo handling capacities for 10 years.

Based on the agreement, Iran is to provide land in Chabahar Special Economic Zone to Indian companies for setting up petrochemical, fertilizer and other gas-based industries.

India has also agreed to build a 500-km railroad from Chabahar to Zahedan, the provincial capitakl of Sistan-Baluchestan, close to the Afghan border. India’s state-owned IRCON has agreed to build a rail route at a cost of $1.6 billion as part of the transit corridor to Afghanistan.

After connecting Chabahar to Zahedan, the railroad will be linked to Zaranj in Afghanistan. Hence, when the Afghan cargo arrives in Zahedan, it can be transported by a 1,380-km railroad to Chabahar and then shipped to India.

  Regional Competition

India has agreed to investment $500 million in Chabahar Port’s development, although Salami says most of the credit shortage still pertains to the rail link.

“The Chabahar rail expansion project will only become economical when the port city is connected to Mashhad and Sarakhs (bordering Turkmenistan), creating a proper transit route,” he said.

India’s cooperation to develop Chabahar was perceived from the start as a challenge to a transport corridor from China to Pakistan’s Gwadar Port.

“Chabahar can be a transit path from the East to Central Asia and Afghanistan. It can even offer services to the Caspian Sea … This is while Pakistan’s Gwadar is completing its infrastructures, through some $50 billion in investment made by the Chinese,” Salami said.

“When the infrastructures are complete, a railroad will reach Pakistan from western China. Many experts believe the progress of this project will undermine Chabahar’s status.”

According to Salami, despite a long delay, the first phase of Chabahar to handle 8.5 million tons of cargo is expected to come on stream in the near future, even though the capacity will not be impressive in the beginning.

“We should target expansion of all five phases. The operationalization of the entire 80-million-ton capacity will bring about an economic paradigm shift in western Iran,” he said.

Salami noted that Japan, China and India are interested in making investments, with Japan being a “very suitable” choice for Iran, as it is known for its cautious economic approach, which shows the project is economically attractive.

“Iran should make haste and accept one of the investment offers. This is a strategic choice that is not up to the Ministry of Roads and Urban Development alone. Other bodies should also come to the understanding that Chabahar’s railroad will help reduce unemployment and migration while spurring development in the region,” he said.

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