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Friday, July 1, 2016

Chabahar : A Double-Edged Deal

It has great potential to throw open more business opportunities for Indian firms, at the same time, it could also fan tensions with Pakistan and China—of course, all shrouded in uncertainty.

Iran—the world’s 17th most populous nation with 80 million people that of course lacks even basic goods—having succeeded in getting the economic sanctions lifted, is now focusing on achieving 8% growth over the next five years. Although growth has rebounded to around 5%, it is now feared to stall again due to the steep fall in oil prices. Backed against the wall, the government is looking for more and more foreign investment to lift its economy.

It is against this backdrop that when Prime Minister Narendra Modi signed an agreement with Iran to develop the Chabahar seaport with an investment of $500 mn and the trilateral transit and trade treaty between Iran, India and Afghanistan, it generated quite an excitement in the Indian press, while eyebrows were raised in China and Pakistan, and rightly too. For, prima facie, the agreement is supposed to squarely rest on India’s larger geostrategic calculations such as: one, to cut Pakistan out of the route between India and Pakistan; two, to gain access to the Middle East and Central Asia for Indian goods; three, to counter the Pakistan-China deal to develop Gwadar port; and four, to check the Wahabi influence that had taken roots in the area ever since the erstwhile Soviet Union intervened in Afghanistan in 1979. To cap it, Prime Minister Modi described the agreement as an alliance against terrorism.

Besides the geopolitical and strategic stakes, the development of Chabahar port will no doubt offer significant economic benefits to India: it plays a crucial role in facilitating access for Indian goods to Afghanistan and those from Afghan to Indian Ocean sea-lines, besides giving an edge to India’s trade with Iran. It is also sure to rationalize transport costs and importantly will reduce freight time for the movement of Indian goods to Central Asia through the proposed North-South transport corridor—a project under the ongoing power game in the region: US through its New Silk Road initiative and China with its One-Belt-One-Road—that will run through Iran. 

That apart, as Iran is planning to develop a Free Trade Zone around the port, Indian businesses will have an opportunity to invest in gas-based fertilizer plants, petrochemical plants, etc. This also gives a fresh thrust to develop Iran’s long-pending Farzad-B gas field which is estimated to hold 21 trillion cubic feet of gas by ONGC Videsh Ltd.-led consortium of Oil India Ltd. and Indian Oil Corporation. Strategically, development of this gas field might give India an edge to convince Iran either for laying a sub-sea pipeline between Chabahar port and India instead of its preferred on-land pipeline through Pakistan, or to ship the liquified natural gas from the Chabahar port that is hardly 940 miles away from India’s west coast-based Mudra port. It is now for the ingenuity of Indian businesses to capitalize on these opportunities.

Of course, as is the case with India’s international initiatives, there is a great ‘if’ behind all these expectations. For, we are known for our dilatory executions. For instance, this very Chabahar port development has been on cards since 2003 but failed to take off till date. And so is the case about the development of Farzad-B gas field. Indeed, many of our strategic engagements in and around the region are often found not taking off with the required swiftness, either owing to our own budget-constraints and domestic claims over the scarce capital or due to lack of diplomatic and political commitment to pursue key strategic objectives.

One way to overcome our innate capital constraints is to give up our traditional ‘unilateral-bias’ and instead adopt a practice of executing projects in partnership with our key strategic allies. Even in the present case of Chabahar port, it makes great sense to rope in a willing partner like Japan which is not only endowed with capital but also better technology. Such an approach is sure to enable us to execute the project well in time, that too without straining our capital resources, while also ensuring globally better acceptability. In short, we must adopt multilateral approach in executing such geostrategic projects, of course, by selecting partners with a clear understanding of our strategic objectives. For, what matters most in the international arena is the ultimate delivery of what has been promised on time. Such multilateralism will also help India in forging new alliances and coalitions to confront geopolitical challenges better and thus further our own economic interests.

Else, as a media report from China commenting on India’s investment in the Chabahar project—which China views “as a counterweight against Pakistan’s Gwadar Port”—wondered: “India may not be able to meet its generous offers and high sounding rhetoric”, we may certainly be “bound for disappointment”.

That aside, what we must importantly recall here is what the Iranian Ambassador to Pakistan said: “The [Chabahar] deal is not finished. We are waiting for new members. Pakistan, our brotherly neighbors, and China, a great partner of Iranians and good friend of Pakistan, are both welcome.” Which is why, there is a risk of losing Iran’s attention if we fail to deliver in time what the agreement has promised. Emerging India should therefore change its game plan: practice ‘selective engagement’ with due appreciation for the importance of ‘compromise’ in international politics and pursue the strategic needs using diplomatic, economic, political and military tools. 


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