Countries That Could Work With Iran For Developing Chabahar: India, China And Japan Competing For Investment – OpEd

By Madjid Raoufi*

Although the first Indian vessel, which set out from the country’s Kandla port, has already berthed at Iran’s Chabahar port, Indians have not worked fast enough to develop the Iranian oceanic port. China, which is now focused on developing Pakistan’s Gwadar port, also has an eye on Chabahar and Iran’s presence in Beijing’s “One Belt and One Road” initiative. Japan is another serious actor, who is openly interested in taking part in development of Chabahar. The question is which one of these three countries will be of priority to Iran for cooperation in development of Chabahar port and the country’s eastern rail routes?

One year after Indian Prime Minister Narendra Modi visited Iran and signed a “historic” deal for development of Iran’s Chabahar port, he paid a visit to Gujarat province saying that Iran and India would soon be connected through a marine route from Kandla to Chabahar. A few days later, the first container ship, which had set out from Kandla in India, berthed at Shahid Kalantari port of Chabahar. However, the outlook delineated in past years for development of Chabahar and a transport corridor from Chabahar to Afghanistan, Central Asia, Caucasus, Russia and Europe, as part of the North-South Transportation Corridor, goes far beyond this historic and symbolic development.

In fact, development of Chabahar and Iran’s rail routes from Chabahar to northeastern city of Mashhad must be seen as a package all of whose components must advance in parallel in order for Iran to be able to take advantage of this special opportunity. However, no final decision has been made about foreign investment in both projects. India has announced since many years ago that it would work with Iran in this regard while officials in China has also occasionally talked about their country’s willingness to be part of this project.

In reality, Pakistan is considered as China’s best neighboring country in Beijing’s security doctrine. Pakistan needs electricity, iron ore and economic aid and can be a good partner for development of China’s trade route in line with the One Belt and One Road initiative. China, however, must act cautiously in this regard in view of its trade ties with India. China has frequently called on India to be a partner to the One Belt and One Road initiative, but the two sides have not reached a conclusion in this regard yet.

China’s cooperation with Pakistan within framework of the One Belt and One Road initiative potentially threatens India’s interests, at least, in three ways: first of all, through increased cooperation between China and Pakistan in the disputed Kashmir region; secondly, through increased marine presence of China in the Indian Ocean; and thirdly, due to concerns about asymmetrical results of economic developments resulting from the One Belt and One Road initiative.

China’s strong presence in the Indian Ocean will increase New Delhi’s suspicions about Beijing’s activities in its marine backyard. In the same way, China’s presence in Pakistan’s Gwadar port is by no means desirable for India. However, although presence in Iran’s Chabahar port is very important to Indians, they still have not shown serious determination to speed up investment in Chabahar’s infrastructure and Iran’s eastern rail routes. Problems such as the opposition from the United States to India’s presence in Iran, India’s numerous foreign commitments, and the limited capacity of such Indian companies as the IPGPL for making investments compared to their Chinese counterparts have caused even Pakistan’s officials to have serious doubts about the success of India in developing Iran’s Chabahar port.

Although Iran has not been able like Pakistan and Kazakhstan to take advantage of investments related to the One Belt and One Road initiative by China, the two countries’ extensive cooperation keeps the door open to Iran’s participation in this project. Iran’s market is attractive enough to make China enter it with great zeal in the long run and make necessary investment in various fields after existing problems are solved.

Following a recent trip to Iran by the Chinese President Xi Jinping, officials have been talking about establishment of new free zones and industrial parks through Chinese capital and technology, including in Iran’s Jask port, and funding feasible projects by China’s EXIM bank. However, since China is currently focused on developing Pakistan’s Gwadar port, the country’s officials have been largely silent about development of Chabahar. Of course, during frequent visits to Chabahar, Chinese investors have indicated their interest in taking part in its development.

Despite China’s focus on developing Pakistan’s Gwadar port, which is located near Chabahar, eight plans have been forwarded by China, India and Russia to fund construction of the railroad, which will connect Chabahar to Zahedan and Mashhad cities and finally to city of Sarakhs and Incheborun border terminal in northeast Iran. There have been also plans for establishing a rail connection between Chabahar and Gwadar or supplying energy to Chinese contractors in Gwadar through Iran’s Chabahar.

Pakistan's Gwadar Port. Photo by Paranda, Wikipedia Commons.
Pakistan’s Gwadar Port. Photo by Paranda, Wikipedia Commons.

Gwadar is located in a politically unstable region of Balochistan in Pakistan while the southern part of Afghanistan, which is a possible transit corridor for the gas pipeline coming Central Asia, is quite unsafe. To the above list must be added problems related to social structures in this region, as well as the presence of Daesh and al-Qaeda in Afghanistan and Taliban in Pakistan’s Balochistan province.

There are also political and ethnic problems in various provinces of Pakistan, which serve as an obstacle in the face of China’s economic ideas in Pakistan. For example when the railroad connecting Gwadar to Chinese city of Kashghar was brought up, it was first to cross Pakistan’s Punjab province, whose head minister was brother of the current Pakistani Prime Minister Nawaz Sharif. However, the project elicited protests from both officials and people of Balochistan province. Another important problem in this region is production of illicit drugs and their transit from Afghanistan to Pakistan. All these reasons provide good grounds for simultaneous presence of China in Chabahar and Gwadar.

While Chabahar is the best option for India to get access to regional markets in Afghanistan, Central Asia, Russia, Caucasus and Europe, China has already got access to the Indian Ocean through Gwadar port. On the other hand, through participating in development of Chabahar, China will be able to take advantage of its vast hinterland. This country can also cooperate with Iran to supply energy to Gwadar and establish industries, which are dependent on oil and gas, while reducing the consequences of India’s exclusive presence in Chabahar close to Iran’s border with Pakistan.

In addition, connecting China to the North-South Transportation Corridor will provide Beijing with a good route to access regional markets in West Asia, Africa and even Europe. Job creation for Chinese companies, expanding markets for Chinese products and making sure about security of energy supply from oil- and gas-rich countries in the region are major grounds for China’s economic interactions with target countries of the One Belt and One Road initiative. Iran can play an important and determining role in all these cases.

The Japanese have also shown great interest in taking part in the development of Chabahar port quite recently. Therefore, Iran is now more at east for choosing its partners for development of Chabahar and creating transportation infrastructure in southeastern part of the country. Bolstering cooperation with Japan and India and developing relations with these countries in such fields as exchange of energy, construction and commissioning of refineries, development of Chabahar port, and establishing rail connection between this important Iranian oceanic port and Afghanistan and Central Asia are major measures, which can further encourage China to take part in the Iranian project in order not to lose a strategic ally like Iran.

All told, it seems that Iran’s cooperation with Japan and India, which are serious partners for each other, is Iran’s priority for development of Chabahar port. Development of relations with these two countries in such fields as exchange of energy, construction and commissioning of refineries, and implementation of infrastructural transportation projects can be a good way to speed up development of Chabahar port and rail routes connecting this important oceanic port in Iran to Afghanistan and Central Asia. It can also encourage China to take steps in order not to lose a strategic partner like Iran and play a more active role in the country’s projects.

*Madjid Raoufi
Ph.D. Student and Senior Researcher at Sharif Energy Policymaking Office


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