India in a bind as Iran okays port investment

India has just been put on the US’s list of countries exempted from Iran sanctions despite having had strong commercial links with Tehran. One of the key criterion for this was that India showed a declining trend in its oil imports.

Also,India was keen that Afghanistan be roped into the Chabahar agreement and a trilateral document be considered for finalisation on the margins of the Non-Aligned Meet,but Kabul has been cold to the suggestion so far .

The Indian argument has been that Afghanistan would be the ultimate beneficiary of such an arrangement and must commit itself to trading through Chabahar,else the entire exercise could get economically unviable. To that extent,India wants the MoU to specifically cover export to a third country from the port.

Given Afghanistan’s reluctance,the Indian side too has developed second thoughts on the matter,even though the MoU is said to be still under active consideration. It’s quite possible,sources said,that the intent could be signalled during the PM’s visit,but the agreement delayed until all loose ends have been tied up. In any case,a Bilateral Investment Protection Agreement is in the works to fill up the outcomes column for the visit.

The dilemma for India is that Chabahar serves its strategic interests. Delhi has been pushing for it with Iran for close to a decade. In fact,the origins of this connectivity project lie in another trilateral understanding,signed in 2003 between India,Iran and Afghanistan. The agreement covered building a road link from Chabahar to the Afghanistan border by Iran,from where India would construct a 135-mile road on the Afghanistan side between Zaranj and Delaram,which is located on the main Kandahar-Herat highway.

While India has finished constructing the Zaranj-Delaram road despite attacks from terror groups,the connecting link to Chabahar is also ready from the Iranian side. The development of the port is the only aspect of the arrangement that has not taken off,and Tehran has now suggested a fresh MoU to faciliate Indian investments. To get this far,the Iranian government had to undertake a major domestic exercise to designate Chabahar as a sort of a special economic zone to qualify it for receiving foreign direct investment under its own laws.

According to the proposed agreement,the investment can range from $15 million to $100 million depending on the construction activity India would like to undertake. Given India’s stakes in the overall project,India was looking to invest as extensively as it could.

However,a political call would be necessary for India to go ahead with this MoU at this time.

Linked to this is the issue of settling oil bills with Iran given that international banking channels have all been frozen. Project exports was being seen as one way to settle these pending amounts.