Mint Explainer: Why Iran’s Chabahar Port is vital to India's interests

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Mint takes a closer look at what it means for India. India and Iran signed a long-term contract for the development of Chabahar Port during shipping minister Sarbananda Sonowal’s visit to Iran. Signed by Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran, the agreement allows the Shahid Beheshti terminal at Chabahar Port to operate for 10 years.

The pact replaces one-year contracts that were being signed since 2016 to keep the port operational. These short-term arrangements, and geopolitical tensions involving Iran, proved a major deterrent for shippers, who were looking for a more permanent arrangement before making investments and commencing operations. In 2003, India agreed to help Iran develop the port and accompanying infrastructure links during Iranian President Muhammad Khatami’s visit to India, but talks progressed slowly.

In 2013, India committed to providing $100 million for the port’s development and two years later, in May 2015, it signed a memorandum of understanding (MoU). The contract was executed on 23 May 2016 in Tehran during the Indian prime minister’’s visit. India also agreed to invest $85 million to the Shahid Beheshti terminal.

However, the reimposition of US sanctions on Iran for its nuclear programme hampered India’s ability to develop the port. The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, facilitated the first consignment of exports from Afghanistan to India only in 2019 and the operations continued through short terms contracts while negotiations on the Long-Term Agreement peaked pace with the visit of Sonowal to Chabahar in August, 2022. Negotiations on the long-term contract stalled over disagreements on arbitration clauses, with Iran