Close this search box.

Chabahar port pact: India and Iran’s strategic endeavor

Chabahar port pact: India and Iran's strategic endeavor

India and Iran have made significant progress in narrowing their differences on a proposed 10-year pact for operations at the Chabahar port. This strategic port, crucial for both nations, facilitates the trans-shipment of goods to places like Afghanistan and Central Asia. The two countries are also exploring ways to replenish the rupee vostro account held by Iran, which has been depleted recently. This account is essential for Indian exports of items such as rice, tea, and pharmaceuticals.

The major hurdle in the long-term agreement was a clause related to jurisdiction for arbitration. However, the two sides have made headway on this issue and are considering arbitration in locations like Dubai. Political clearance from both nations is necessary for the signing of the long-term agreement, but the initial agreement for India’s operations at Shahid Beheshti terminal in Chabahar port has been renewed for this year, providing temporary relief.

Ship Recycling : HRW alleged European companies are dumping old ships

The Chabahar port holds strategic importance for India as it offers access to West Asia and Central Asian republics. Iran views India as a significant partner in its “Look to the East” policy, emphasizing the importance of a definitive deal with India to expand the Chabahar port.

Additionally, the depletion of rupee reserves in the vostro account has affected Iran’s ability to import commodities like basmati rice and tea from India. Both nations are exploring ways to recharge the account. Iran is interested in conducting trade in local currency, reviving commerce between the two countries that has been impacted by US and Western sanctions on Tehran.

DP World expands its reach with mega port on India’s west coast

India’s trade with Iran fell sharply in 2019-20 due to the sanctions. While imports, mainly crude oil, drastically reduced, exports remained relatively stable. India had previously imported a significant amount of Iranian crude, meeting nearly one-tenth of its total requirement in 2018-19. However, after India halted crude imports, the trade balance shifted in favor of India.

In summary, India and Iran are making progress in resolving their differences regarding the Chabahar port agreement. Reaching a consensus on arbitration and finding solutions to recharge the rupee vostro account are critical steps in enhancing their trade relations, which have been affected by international sanctions.

Leave A Comment

All fields marked with an asterisk (*) are required