Summary
India and Iran’s collaboration on the Chabahar port is a step toward India realizing its own ‘Belt and Road’ type regional connectivity project. Originally built in 1983 and expanded significantly in 2016, the port represents a win-win for both of the major players involved: for India, Chabahar port solidifies Delhi’s economic influence in Afghanistan and opens up the possibility of export corridors through Central Asia and toward Europe; and for Iran, Chabahar is potentially a lucrative source of foreign investment and a way to avoid Iran being elbowed out of regional trade flows by the nearby Gwadar port in Pakistan, which is a centerpiece in the China-Pakistan Economic Corridor (CPEC) and Belt and Road.
So what impact is Chabahar port having so far?
Impact
In overall terms, the bilateral trade relationship has waned: exports from India to Iran dropped around 11% and 7% in terms of tonnage and value respectively last year; exports from Iran to India registered even larger drops of approx. 15% and 25% respectively. These numbers mainly derive from maritime routes to three ports in Iran – not just Chabahar. They are also potentially skewed by the ongoing presence of US sanctions, which are distorting trade dynamics across the region.
The Chabahar port is the key link in India’s International North-South Transport Corridor (INSTC), a route that transports goods through Iran, Central Asia, Russia, and into Europe (notably bypassing Afghanistan). Here we see some encouraging numbers for Indian and Iranian policymakers. Just 27,000 tons of cargo were transported along the INSTC in 2017. One year later, that number had increased to 287,000, and if the numbers from the first few months of 2019 hold steady, then this year might post over 600,000 tons in total trade volume. That these increases are occurring with biting US sanctions in effect is a positive sign; however, it should also be noted that some shippers benefited from subsidies and discounts for unloading goods at the port (a practice not uncommon among Belt and Road projects as well).
