India-bound cargo ships are now sailing through the Strait of Hormuz after the United States ended its blockade of Iranian ports. This follows a peace deal, and India is studying the agreement to potentially revive economic ties, including energy trade and major connectivity projects like Chabahar Port and the INSTC.
India-bound cargo ships are now transiting the Strait of Hormuz after the United States officially ended its blockade of Iranian ports. This development follows a peace deal that includes a 60-day ceasefire, with a full agreement to be negotiated during this period.
Chabahar Port and INSTC Gain Prominence
New Delhi is carefully reviewing the details of the agreement, looking to restart economic engagement with Iran. Key interests include energy trade and connectivity projects, particularly the International North-South Transport Corridor (INSTC), which connects India with Eurasia through Iran. Iran is also expected to resume oil exports to India, a significant market it previously supplied.
The Chabahar Port is also drawing considerable attention. India had reached an understanding with Iran to maintain its role at the port after the withdrawal of a sanctions waiver. Formal US notification is awaited to lift sanctions specifically on the port. Plans are advancing to integrate Chabahar Port with the INSTC, and then connect the INSTC to the Northern Sea Route in the Arctic.
India's Operations at Chabahar Port
India had been in discussions with Iran to secure its interests at Chabahar Port following the expiration of a six-month US sanctions waiver on April 25. New Delhi aimed for an agreement with a local port authority to manage the port, with provisions for regaining full control once US sanctions were lifted. India also sought official government assurances from Iran for this arrangement.
Experts have noted that China could potentially seek control of Chabahar Port if India's presence is not sustained. On May 13, 2024, India finalized a 10-year contract for India Ports Global Ltd (IPGL) to operate the port, marking its first overseas port management. IPGL has committed approximately $120 million for port equipment and allocated a credit line of 250 million rupees for related infrastructure.
Regional Connectivity and Trade Boost
The Chabahar Port is vital for enhancing economic ties between India and Afghanistan and for facilitating humanitarian aid. The Taliban regime in Afghanistan sees the port as essential for its international trade efforts. Central Asian countries, including Uzbekistan, Kazakhstan, and Tajikistan, are eager to use Chabahar Port to increase trade with India and gain access to the Indian Ocean. India is also working towards an early-harvest free trade agreement with the Eurasian Economic Union to access markets and secure resources like rare earth minerals, with Chabahar Port anticipated to play a key role in facilitating India-EAEU trade.