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Chabahar Port Could Be A ‘Game Changer’ For Indian Businesses But Sanctions Continue To Create Uncertainty

It’s spring season here. The blooms lend a splash of colour to the city’s roundabouts. The air is crisp and cool. Befittingly, the port town derives its name from this season with ‘Cha’ signifying four and ‘bahar’ signifying spring. In essence, the name means a place with four springs.

But ‘spring’ is still some time away for the Shaheed Beheshti terminal of Chabaharport and the Free Trade Zone (FTZ) both of which are waiting for business to pick up. It is for this reason that the Ports and Maritime Organisation (PMO) of Iran had organised the Chabahar conference here on February 26 to showcase what the port and the FTZ have to offer.

Iran, understandably, is eager for Indian businessmen to evince greater interest in investing in the FTZ and use the port for trans-shipments. “It’s like a garden full of flowers waiting for timely plucking,” said an Iranian official as he pressed Indian companies to show a sense of urgency in investing in Chabahar.

“The slow pace will be harmful as other countries are interested in investing in Chabahar,” warned the official. He added, “India should speed up in investing in the Chabahar project as it stands to benefit.”

India too is only too aware of the need to let Indian businessmen know what the Chabahar port and FTZ have to offer as New Delhi pushes for connectivity and trade via this strategic port to Iran, Afghanistan, Central Asia, and beyond. “It was an important event as it enabled Indian businessmen to see the port and learn what the port and the FTZ have to offer,” said an Indian diplomat. Indeed, he went so far as to say that the conference was a “game-changer”.

For the Iranians, the conference had been in the making for a long time and they had invited not just official delegations from India and Afghanistan but a large number of members of the diplomatic corps posted in Tehran as well.

The Confederation of Indian Industry (CII), an industry body, sent a large delegation to participate in the Chabahar conference to assess for itself what the new port and FTZ have in store for India businesses. The delegation comprised members whose companies are either into logistics or want to trade with Iran, Afghanistan and the Central Asian region via Chabahar.

However, the unilateral sanctions imposed by the US last year on Iran have queered the pitch for Chabahar. “There is an element of uncertainty in Iran and the region following the re-imposition of sanctions, the withdrawal of major European companies and Iranian threats to block oil transports through the Strait of Hormuz,” said an Indian official. He added, “The FTZ has been set up but it is awaiting investments. Sanctions have affected the flow of investments.”

Another Indian official agreed with this sentiment adding, “The situation is very fluid because of the sanctions.”

The devaluation of the Iranian Rial, which was 1,30,000 Rial to the US dollar last month along with double digit inflation, has hit the Iranian economy hard. India does not recognise unilateral sanctions like the one imposed by the US and has created a rupee payment mechanism for oil exports and imports from Iran.

Amid this tough economic situation, Indian companies are not rushing in to use the port or invest in the FTZ. However, the desire to use this strategically located port in the future is certainly there. The Iranian government has already declared that the port would be part of the Chabahar FTZ though the decision is yet to get formal approval. “An FTZ is a sweetener for any port when it is starting as it needs incentives,” said Umesh Shedde, president of the Ennore Tank Terminals Pvt. Ltd. who was part of the delegation.

Suresh Vadapoo, another member of the Indian delegation, can also see the benefits of using the port. Vadapoo who is a senior general manager with TVS Dynamic, a company that deals in freight forwarding, told SNI, “I’m here to see if we can use Chabahar. Our company has using Bandar Abbas since 2007 but this stopped in July last year because of US sanctions. Before the sanctions, the volatility of the exchange rate along with the devaluation of the Iranian Rial had affected our business.”

Stating that his company is “looking to do business with Afghanistan and the Central Asian countries through Chabahar,” Vadapoo added, “We want to know when connectivity to Afghanistan and the CIS countries will happen and position ourselves accordingly”. For now, though he said his company wasn’t looking to ship goods from India to Iran because of the sanctions. “Unless the sanctions are removed, shipments for Iran cannot be sent through Chabahar,” Vadapoo noted.

The sanctions have clearly been a dampener for Iran with Chabahar having a waiver only to allow the shipping of humanitarian assistance to Afghanistan. Delegation members said that because of the sanctions, Indian businessmen have not been able to commit anything in terms of using the port for shipments to Iran or elsewhere.

Sumeer Bhasin, whose company, the Anaar Group, does business with Afghanistan said, “There are serious issues in making Chabahar an option as the sanctions have created a situation wherein trade is not viable. We cannot remit dollars from Chabahar and this restricts its potential. ” He added, “The banking transactions issue to do third country trade needs to be sorted out. When you set up an FTZ, you want companies to set up business. But how will you sort out the payments issue given the sanctions?”

Another delegation member Datta Shinde, who owns the logistics company Global Express Multilogistics that ships bananas and pomegranates to Iran, came to see Chabahar to see what infrastructure and facilities it had to offer. He also wanted to assess how the port “will help route containers to other countries”.

Shinde noted that at present, there are just two or three shipping companies that offer cargo services to Chabahar. “One major reason for this is the US sanctions as ship operators who call on this port are then not allowed to call on other neighbouring ports. So it means we have to depend on these few companies for transhipment,” he said.

For now, Indian business may be playing the wait and watch game. But it clearly hopes to reap the benefits from this strategically located port once sanctions are lifted.  


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Under The Shadow Of U.S. Sanctions, Hope Afloat For Chabahar Port

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