Iran to Hand Over Chabahar Port Operations to India in a Month

Iran will hand over the strategic Chabahar Port to an Indian company within a month for operation as per an interim pact, Iranian Minister of Roads and Urban Development Abbas Akhoundi said on Thursday.

Akhoundi is in India to participate in the Mobility Summit by NITI Aaayog at the Indian government’s invitation.

“Now, we are ready just to hand over the port (Chabahar) to the Indian company just to operate this in interim agreement that already we had with Indian part for one and a half year,” Akhoundi told Press Trust of India.

Chabahar Port is easily accessible from India’s western coast and is increasingly seen as a counter to Pakistan’s Gwadar Port located 80 km from Chabahar.

After a meeting with his Indian counterpart, Road Transport and Highways Minister Nitin Gadkari, Akhoundi said, “We have already moved one step forward ... We should introduce a banking channel to India, which we already did and fortunately has been formally accepted by the Indian side”.

He said India has also introduced a banking channel, which has been approved by the Central Bank of Iran.

“The Indian side had investment in Chabahar Port and we are moving towards utilization of the Chabahar Port,” Akhoundi said, adding that the handing over of the port should be done “during one month. We have done everything”.

The first phase of Chabahar Port was inaugurated in December 2017 by Iranian President Hassan Rouhani, opening a new strategic route connecting Iran, India and Afghanistan bypassing Pakistan.

Chabahar Port is being considered as a gateway to golden opportunities for trade by India, Iran and Afghanistan with Central Asian countries, besides ramping up trade among the three countries in the wake of Pakistan denying transit access to New Delhi.

“The routes of the region should be connected by land, sea and air,” Hassan Rouhani said at the inauguration ceremony.

Under the agreement signed between India and Iran earlier, India is to equip and operate two berths in Chabahar Port Phase-I with a capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.

On US sanctions impacting oil trade, the visiting minister hoped to find a way out to continue selling crude oil to India.

“Of course, it will impact trade between the two countries,” Akhoundi said, adding that sanctions would not halt oil sale to India.

“At the end of the day, both sides will find some way out to carry on their relationship, as we hear from the Indian part that they are already committed to buying crude oil and we are also committed to continuing our trade relationship with India and buy rice and other food material and also industrial material from the Indian side”.

Iran is India’s third biggest supplier of crude oil but US sanctions will from November 3 block payment gateways.

“There has been some impact ... I will just not say something that is not realistic ... Certainly US has made the trade between the two sides uneasy but I would like to emphasize that this is not something that US can halt and stop this relationship between the two sides,” Akhoundi added.

He said Iran welcomes Indian firms to develop the giant Farzad-B gas field in the Persian Gulf nation.

“Indian side is very keen to invest there. We are still to receive the project proposal,” he said.

In his meeting with Gadkari, the Iranian minister said, “We reviewed the formal statement released by Prime Minister Narendra Modi during Hassan Rouhani’s visit to India. That statement is very, very strong which shows that we have very deep relationship”.

He said it was emphasized in the meeting that India is very committed to all the agreements it has signed.

The Iranian delegation’s visit coincided with the 2+2 India-US Dialogue.

   Working on Payment Window

While the focus is on the 2+2 India-US Dialogue, the Iranian delegation is quietly operating behind the scenes in Delhi to work out a payment mechanism for the strategically important Chabahar Port, besides showing interest in buying railroad and heavy engineering equipment from India, Times of India reported.

Discussions are underway to rope in UCO Bank and Bank Pasargad for a payment mechanism that will help circumvent US-driven sanctions against Iran, which can help bring down prices of crude. Significantly, the Iranian bank recently received a go-ahead to open a branch in the country.

One of the first tests facing Chabahar, which is seen as a gateway to Afghanistan, is the Iranian government’s insistence on a $3.5 million performance guarantee for commencement of interim operations at the port. Indian authorities have sought an exemption from the condition, arguing that it will be tough to comply in the wake of sanctions.

But there is another issue too: the need to provide bank guarantees to operate two berths at the port for which equipment has been ordered. This is where a tie-up between UCO Bank and Bank Pasargad is seen to be crucial. The partnership can be used for payment of oil purchased from Iran with export of Indian products such as rice and engineering goods. A similar mechanism was in place during the earlier US sanctions.

The Iranian delegation also expressed its interest in buying Indian locomotives, rail and signaling systems, and engineering goods and generators made by Indian company BHEL.

Akhoundi was scheduled to meet Indian Commerce Minister Suresh Prabhu on Friday, where other trade opportunities were expected to come up for discussions.

In the past, India has been keen to export medicines and auto parts although companies have been reluctant because of sanctions.

One option was to get an Indian public sector undertaking to buy the products and ship them to Iran.