Bolstering trade connectivity and international relations, India and Iran have signed a 10-year agreement for India to operate and manage the Shahid Beheshti terminal at Chabahar Port. This partnership, finalized in May 2024, is seen as a cornerstone for economic and geopolitical cooperation, reinforcing a shared vision of promoting regional stability and economic prosperity. The Chabahar Port is the only Iranian port with direct access to the Indian Ocean.
Located in the Sistan and Baluchistan Province of southeastern Iran, Chabahar Port is a crucial point of strategic importance for both Iran and India. Unlike other Iranian ports, which are limited by the Persian Gulf and the Strait of Hormuz, Chabahar offers direct access to the Indian Ocean, positioning it as a vital hub for regional trade. With its proximity to key maritime routes, the port serves as an ideal gateway for landlocked Afghanistan and Central Asia to connect with global markets.
India’s involvement with Chabahar dates back to 2016, when it pledged to help develop the port as part of a broader strategy to enhance connectivity across the region. Since then, both countries have worked closely to upgrade the port’s infrastructure. The May 2024 agreement has significantly deepened their partnership, with India Ports Global Limited (IPGL) committing to invest approximately $120 million in port development and securing a $250 million credit line for additional projects identified by both nations.
As global supply chains witness major shifts, countries are seeking alternatives to traditional routes dominated by geopolitically sensitive chokepoints. Chabahar’s strategic location provides India with a valuable entry point into Central Asia, bypassing Pakistan’s land routes, which have long been a source of tension between the two neighbors. For Iran, the agreement opens up vital economic cooperation with India, a growing regional power with significant potential in trade and energy sectors.
Iranian officials have emphasized the paramount importance of connectivity between the two nations. One senior official described the collaboration as being in the “best interest of both countries” and mentioned that both sides are working in tandem to enhance port operations. Notably, the United States has granted exemptions from its sanctions on Iran for Chabahar, acknowledging the port’s role in regional trade and infrastructure development.
As part of the deal, India will manage the operations at Shahid Beheshti terminal, improving efficiency and increasing throughput capacity, which is expected to boost bilateral trade between India and Iran as well as trade with other countries in the region.
Furthermore, energy remains a significant area of cooperation between India and Iran, particularly in the context of Iran’s vast oil and natural gas reserves. Historically, Iran was one of India’s top suppliers of crude oil, but this relationship has been severely impacted by U.S. sanctions imposed in 2018. The sanctions, which included measures to halt the flow of Iranian oil to global markets, forced India to scale down its energy imports from Iran.
Despite these challenges, Iranian officials have made it clear that Tehran is committed to ensuring that energy trade with India continues without causing undue hardship. Iran has expressed a desire to maintain energy cooperation with India, with a particular focus on facilitating smooth and sustainable import channels for Indian companies. This includes not only oil but also natural gas and potential investment in infrastructure projects like pipelines and refineries.
The Iranian official also noted that if the incoming U.S. President were to reinstate the “maximum pressure” policy—referring to the harsh sanctions that were imposed during President Donald Trump’s first term—it would ultimately fail. Despite the challenges presented by such policies, Iran has shown resilience in pursuing strategic partnerships with countries like India, which remains a key energy partner in the region.
As Iran continues to build closer ties with India, it is also strengthening its relationship with Russia. In mid-January 2025, Tehran and Moscow are expected to sign a comprehensive strategic partnership, further expanding Iran’s diplomatic and economic network. This move is seen as part of a broader shift in global power dynamics, with countries increasingly seeking to form alternative alliances amid ongoing geopolitical tensions.
For India, the partnership with Iran, especially in the context of Chabahar, aligns with its broader strategy of enhancing connectivity to Central Asia, the Middle East, and beyond. The port is expected to play a pivotal role in facilitating trade, energy exports, and regional cooperation, all of which are integral to India’s ambitions as a regional economic powerhouse.
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