India supports linking the Chabahar Port with the INSTC so it can become a transit hub for trade with countries in the Commonwealth of Independent States. This was recently highlighted by government representatives on Chabahar Day, observed July 31. The INSTC is also receiving renewed interest from New Delhi as it will enable an increase in India-Russia overland trade. Western-led sanctions on Russia followed by the retreat of several MNCs from the country have created an economic vacuum that India is competing to fill.
What’s at stake
India considers the Chabahar Port to be a strategically located facility that can improve trade connectivity between Central and South Asia and rationalise logistics costs. New Delhi is thus keen to include the port within the International North-South Transport Corridor (INSTC) although the proposal has not received much support.
The INSTC is an ambitious regional connectivity undertaking and will speed up the time taken for trade shipments headed to markets in Russia, Europe, and Central Asia.
For India, the INSTC offers shorter trade routes with Iran, Russia, and beyond to Europe. It also creates newfound opportunities for economic engagement and direct trade with untapped markets in the Commonwealth of Independent States (CIS). The CIS countries include erstwhile members of the Soviet Union and are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan.
Eight out of nine CIS countries are part of the INSTC, along with Oman, Syria, and Bulgaria, noted a senior Commerce Department official. India’s exports to Central Asia amount to about US$ 678 million but there are huge prospects for growth. India mostly exports pharmaceuticals, machinery, coffee, tea, and spices. Moreover, India could diversify its sourcing networks for energy and minerals if it had better access to the region.
Most recently, on July 28, India and Uzbekistan agreed to a pilot container cargo shipment from Tashkent to India through a hybrid land-sea route via the Chabahar Port. The shipment docked at the Jawaharlal Nehru Port (JNPT) at Navi Mumbai. India and Uzbekistan are currently working to increase bilateral trade by two times – to over US$1 billion and have arranged frequent high-level visits. In 2021-22, India-Uzbekistan bilateral trade stood at US$ 342 million. The INSTC would create a multimodal transport corridor to facilitate this trade push.
INSTC corridors make use of several thousand kilometers of “all-weather highways” from the city of Chabahar in the south through to Azerbaijan in the north and onwards to Russia and Europe.
Both Iran and India are now interested in using the INSTC to increase their overland trade with Russia, which was discussed during a recent visit to Delhi by Iranian Foreign Minister Hossein Amir-Abdollahian. India’s exports to Russia in 2021-22 amounted to US$ 3.24 billion while imports rose to US$ 9.86 billion, including US$ 5.25 billion worth imports of crude oil, processed petroleum, and coal. India’s imports pre-pandemic stood at US$ 7 billion (2019-20) and exports US$ 3 billion.
India’s role in Chabahar
India has heavily invested in the Chabahar Port, which will provide it with sea-land access to Afghanistan and Central Asia through Iran, bypassing Pakistan. This investment is key to India’s strategic ambitions in the region as well as to bolster trade and economic linkages. The Iranian port, once completed, will rival the Gwadar Port, about 80 km away, in the Balochistan province of Pakistan.
India has helped develop two terminals at the Chabahar port, which is Iran’s only ocean port, including the Shahid Beheshti complex. Under an agreement with Iran, India will run the terminal for 10 years. Since December 2018, an Indian company, Indian Ports Global Limited (IPGL), has been managing the port’s operations. IPGL acquired Chabahar Port through its subsidiary India Ports Global Chabahar Free Zone (IPGCFZ).
The Indian government introduced a “Chabahar Day”, observed July 31, to mark the beginning of INSTC – an Indian vision to economize movement of cargo between India and Central Asia.
The Indian Union Ports, Shipping and Waterways Minister Sarbananda Sonowal urged Central Asian countries to use the Chabahar Port for trade logistics as it provides a shorter, faster, and more reliable route between India and the region.