Afghanistan And India Pave New Trade Paths For Regional Growth – OpEd

The geopolitical landscape of Central and South Asia is undergoing significant changes as Afghanistan seeks to reposition itself as a pivotal trade hub in the region. Two notable agreements—the Afghanistan-Kazakhstan-Turkmenistan logistics hub and the India-Iran Chabahar port deal—illustrate regional integration’s shifting dynamics and potential benefits. These initiatives underscore Afghanistan’s and India’s attempts to bypass traditional routes through Pakistan, diversify its trade partnerships, and leverage its strategic location to foster economic growth.

Afghanistan-Kazakhstan-Turkmenistan Logistics Hub

The Taliban government, alongside Kazakhstan and Turkmenistan, has agreed to establish a logistics hub in Herat province. This hub aims to enhance regional trade by facilitating the transportation of goods, including Russian oil, to South Asian markets via the North-South corridor​. The logistics center will be established in Herat province, which can connect the north to South Asian initiative reflecting a strategic move to transform Afghanistan from an aid-dependent nation into a trade-centric economy, capitalizing on its historic role as a crossroads of commerce. Taliban acting commerce minister Nooruddin Azizi told Reuters that technical teams would draw up a written agreement within two months on the formal plans for the hub, which all three countries would invest in after six months of talks. The logistics hub is planned initially to have a capacity of 1 million tons of oil, the Taliban minister said but did not specify when such hub could start operations. 

Kazakhstan, for its part, is eyeing the development of roads and a railway through Afghanistan to have connections with the Gulf and South Asia, the Kazakh trade ministry told Reuters in a statement.

Currently, Kazakhstan’s crude oil exports are dependent on logistics in Russia and Russian ports on the Black Sea.

This project holds multiple implications:

Economic Revival: The logistics hub is expected to boost Afghanistan’s economy by creating job opportunities, improving infrastructure, and increasing trade volumes. The projected annual volume of hydrocarbons through the hub could reach 1 million tons, significantly enhancing Afghanistan’s trade capacity​.

Regional Connectivity: By linking Central Asia to South Asia, the hub will facilitate smoother and more efficient trade routes, reducing dependence on Pakistani ports and potentially lowering transportation costs for landlocked Central Asian countries.

Strategic Positioning: Afghanistan’s central location in Eurasia makes it an ideal transit point, helping to integrate the region more closely with global trade networks. This could shift the geopolitical balance by reducing the reliance on traditional routes through Pakistan and fostering new alliances. Azizi said the new hub was part of broader efforts to take advantage of Afghanistan’s strategic location, once a thoroughfare for the ancient Silk Road trade route, lying between South and Central Asia and sharing borders with China and Iran. “Reaching Pakistan through Afghanistan will be the best option,” Azizi added, saying they were focused on Russia’s petroleum exports and that Kazakhstan was also planning to export goods through Herat into South Asian markets.

India-Iran Chabahar Port Deal

India’s long-term investment in the Chabahar port in Iran exemplifies another strategic effort to bypass Pakistan and enhance regional trade. The Chabahar port is a critical gateway for India to access Afghanistan and Central Asia, circumventing the overland routes through Pakistan​ ​. This deal underscores India’s commitment to strengthening its regional economic footprint and countering China’s influence through the Belt and Road Initiative. It [the port] serves as a vital trade artery connecting India with Afghanistan and Central Asian Countries,” India’s Shipping Minister Sarbananda Sonowal said, as New Delhi attempts to strengthen ties with an important Middle Eastern nation. Located in southeastern Sistan-Baluchestan province and perched on the Gulf of Oman, Chabahar Port consists of two separate ports – Shahid Kalantari and Shahid Beheshti. India will operate a terminal in Shahid Beheshti, and as per Monday’s agreement, invest $120m into equipping it. An additional $250m loan credit facility for related projects in the port brings the contract’s value to $370m.

Key aspects of the Chabahar port deal include:

Economic and Trade Benefits: The port facilitates the shipment of goods such as wheat and pulses from India to Afghanistan, boosting trade and economic ties between the two nations. Since IPGL took over operations in 2018, the port has handled substantial cargo, demonstrating its potential as a significant trade hub​.

Geopolitical Implications: By investing in Chabahar, India enhances its strategic leverage over Pakistan and secures a vital supply route less vulnerable to regional tensions. This move also aligns with the US’s South Asia strategy, despite existing sanctions on Iran.

Regional Stability: Improved trade links through Chabahar can contribute to the economic stabilization of Afghanistan, reducing its dependency on aid and fostering regional economic integration.

Implications and Benefits

The development of new trade routes and hubs in Afghanistan and Iran presents several advantages for regional players:

For Afghanistan: These initiatives provide a pathway to economic revival, reducing aid dependency and fostering self-sufficiency through enhanced trade and investment.

For India: Strengthening trade routes through Chabahar allows India to enhance its strategic presence in Central Asia, counter China’s influence, and reduce dependency on Pakistani transit routes.

For Central Asia: Improved connectivity through Afghanistan and Iran opens new markets and reduces logistical barriers, fostering regional economic growth and cooperation.

Repercussions

While these developments hold promise, they also bring potential challenges:

US Sanctions on Iran: The Chabahar port deal faces hurdles due to US sanctions, which could complicate investment and operational aspects​. Any entity, anyone considering business deals with Iran, they need to be aware of the potential risk that they are opening themselves up to and the potential risk of sanctions,” US State Department spokesman Vedant Patel told reporters.

China’s Reaction: China’s extensive investments in Pakistan through the China-Pakistan Economic Corridor (CPEC) might face competition, potentially leading to geopolitical tensions. Some analysts say the Chabahar deal is additionally a bulwark against rival China’s dealings with Pakistan. Just four hours east of the Chabahar Port is Pakistan’s Gwadar Port which is partly controlled by Chinese developers who have pumped some $1.62bn into upgrading it since 2015.

Security Concerns: The stability of these trade routes depends on the security situation in Afghanistan, which remains precarious under Taliban rule.

Afghanistan’s and India’s strategic moves to develop new trade routes and hubs signify a major shift towards regional integration and economic independence. By leveraging their geographical advantages, these nations aim to enhance connectivity, foster economic growth, and reconfigure regional trade dynamics. For India, Chabahar is “one of the centerpieces of its neighborhood policies” — a sort of golden gate to more investment opportunities in West and Central Asia — said Kabir Taneja, a fellow at the New Delhi-based Observer Research Foundation think tank.

However, the success of these initiatives will hinge on navigating geopolitical challenges, ensuring security, and fostering sustained cooperation among regional players.