India has key first-mover edge on China in Iran

India doubling down on Iran’s Chabahar port project as strategic counter to China’s Belt and Road gains trade traction

By FM SHAKIL

When China clinched a massive $400 billion bilateral investment pact with Iran, few noted that India was already well-engaged.

By the end of May, India will begin full-scale operations in its first foreign port venture at Iran’s Chabahar. That is facility that opens on the Gulf of Oman that will aim to facilitate more South Asia, Central Asia and Middle East trade while bypassing Pakistan.

India’s US$500 million investment represents a clear and potent commercial challenge to China’s massive port investment in neighboring Pakistan’s Gwadar. Gwadar is a key component of Beijing’s Belt and Road Initiative (BRI).

The 10-year lease agreement, a deal first clinched by Prime Minister Narendra Modi in Tehran in 2016, has until now been hobbled by US sanctions imposed under the Donald Trump administration.  

Indian suppliers and engineers, some with interests in the US, were reluctant to deliver essential machinery and services to Iran on fears they could somehow be sanctioned, despite clear exemptions on Chabahar in Trump’s sanction order. That led to certain speculation that China may take over the project from India.

New Delhi has doubled down and accelerated the project with the shift from Trump to Biden. It is banking like others on a new breakthrough on the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement and a broader US-Iran warming trend.

Aerial view of Iran’s Chabahar port. Image: Twitter

India has supplied two large cargo-moving cranes. It will deliver two more in the coming weeks before the facility’s expected ceremonial opening.

New Delhi is already promoting the port’s potential humanitarian role, noting it was used to send emergency shipments of wheat to Afghanistan during the Covid-19 crisis and pesticide to Iran to deal with a recent locust infestation.

Pakistan is getting worried about losing regional trade

India’s renewed commitment to Iran via Chabahar is already setting alarm bells ringing in neighboring Pakistan, which is already losing regional trade mainly from Afghanistan to Iran despite US sanctions.

India and Pakistan recently announced a renewed commitment to an existing 2003 ceasefire over contested Kashmir. That move that should allow both to focus more on economic linkages than strategic rivalry.

Chabahar has seen limited operations since 2019, a result of US restrictions imposed on Iran’s energy exports. The port handled a mere 123 vessels with 1.8 million tons of bulk and general cargo from February 2019 to January 2021. It is well below its operating capacity, according to reports.

That’s set to change. New Delhi ultimately aims to link Chabahar to its International North-South Transport Corridor (INSTC). It is a project initially proposed by India, Russia and Iran in 2000 and later joined by 10 other Central Asian nations.

Some see the INSTC as a less-monied rival to China’s BRI. Belt-Road-Initiative has invested heavily in Pakistan’s road, power and trade infrastructure. And including huge multi-billion dollar investments at Gwadar port some critics have likened to a debt trap.

Security concerns sparked by armed groups in Pakistan’s Balochistan province, where Gwadar is situated, have hindered progress on various BRI projects and pushed Pakistan to recently ramp up security at the Beijing-invested port.

From India to Europe – cheaper and faster

INSTC envisions a 7,200 kilometer-long, multimode network comprised of shipping, rail and road links. It is connecting India’s Mumbai with Europe via Moscow and Central Asia. Initial estimates suggest INSTC could cut current carriage costs by about 30% and travel times by half.

That means more trade and port activity for Iran and less for Pakistan. Last year Iran has already usurped 70% of Pakistan’s recent transport business at Karachi port.

Landlocked Afghanistan has traditionally relied on Pakistan as its gateway to international shipping routes. However, recent trends indicate that as much as 70% of Afghan transit trade is now handled by Iran.

If India presses ahead as planned with INSTC, Pakistan would be the ultimate loser as Afghan and Central Asian transport business diverts increasingly to Chabahar and away from Karachi and Gwadar.

“Iran had already started working on a 600-kilometer-long railway line connecting Chabahar port to Zahedan, the provincial capital of Sistan-Baluchestan province close to the Afghan border,” he said.

India has already lined up $1.6 billion for the project to facilitate the movement of goods to and from Afghanistan via Iran. India also plans to invest $2 billion to develop supporting infrastructure including the Chabahar-Hajigak railway line in Afghanistan.

Many Afghan traders are plugging into Chabahar

Many Afghan traders still rely on traditional transit routes through Pakistan. However, many are plugging into Chabahar’s comparative cost-effectiveness and speed in handling transit cargo, analysts say. The same is true for Uzbekistan, Tajikistan and other landlocked Central Asian countries looking for alternatives to Pakistani ports.      

Pakistan-Afghanistan trade has recently fallen from around $2.5 billion to $1 billion annually due to wide-ranging differences over the now expired transit agreement.

“Afghans want Pakistan to allow Afghan wheelers to enter into Indian border areas through Wagah for transportation of Afghan export goods and on return upload import consignments from India,”

“Pakistan on the other hand argues that the APTTA is a bilateral arrangement between Pakistan and Afghanistan and not a trilateral agreement to facilitate mutual trade between India and Afghanistan,”.

Chabahar is Iran’s only oceanic port and so far consists of Shahid Kalantari and Shahid Beheshti terminals. Each of which has five berth facilities. The port is located in Iran’s Sistan and Baluchestan Province. It is about 120 kilometers southwest of Pakistan’s Balochistan province, where the China-funded Gwadar port is situated.

In May 2016, India, Iran and Afghanistan signed a trilateral agreement for the strategically-located Chabahar to give New Delhi access to Kabul and Central Asia without having to travel through Pakistan.

Chabahar is regional project unlike Gwadar which is China oriented

The original plan committed at least $21 billion to the so-called Chabahar–Hajigak corridor, which then included $85 million for Chabahar port development, a $150 million credit line to Iran, an $8 billion India-Iran MoU for Indian industrial investment in a Chabahar special economic zone, and $11 billion for the Hajigak iron and steel mining project awarded to seven Indian companies in central Afghanistan.

Unlike Chabahar, which is designed more to serve the economic and trade interests of the wider region, Gwadar is more tilted toward Beijing’s ambitions, analysts and traders say.

Gwadar port’s planned capacity will accommodate a massive 300 to 400 million tons of cargo annually, comparable to the combined annual capacity of all Indian ports. It also dwarfs the 10-12 million tons of cargo handling capacity now planned for Chabahar.

In another comparison, the largest US port at Long Beach, California, handles 80 million tons of cargo, about a quarter of what Gwadar could handle upon completion of a project that is designed largely to receive and move China’s, not the region’s, trade.

Why world powers are fighting for influence in the Faroe Islands?

The world powers United States, Russia and China are showing interest in the Arctic archipelago, and Denmark is rebuilding a radar station there

Richard Orange

At the summit of Mount Sornfelli, towering over the capital of the Faroe Islands, Torshavn, round, golf-ball-like structures are still visible. But after the end of the Cold War, when the Danish military unit serving this radar was disbanded, Russian planes and submarines roam unnoticed along this strategic sea route leading to the Arctic Ocean.

Then a sharp rivalry began for influence in the Arctic. Now the situation in the Faroe Islands could change dramatically.

Last month, Danish political parties agreed to allocate £ 170 million to rebuild the radar complex. These premises are now used as the archipelago’s only prison. They also agreed to purchase new drones to explore Greenland.

For this reason, the Foreign Minister of the Faroe Islands, Jenis av Rana, expects to speak with Anthony Blinken in the coming weeks. This will be his second meeting with the US Secretary of State in less than a year.

“Climate change in the Arctic is putting the Faroe Islands at the center of events. That means that other countries such as the United States, China and Russia are paying more attention to us.”

“This is a good opportunity and we will use it. We have a small, very small country, but we want to be part of the big world. “

The Faroe Islands are the smallest of the three counties in the Danish kingdom. This windswept archipelago of high basalt cliffs and low snow-capped mountains lies in the middle of the Atlantic. 350 kilometers northwest of Scotland. It is located right in the middle of the Faroe-Icelandic border between Greenland and Britain. The Pentagon has declared it “a strategic corridor for naval operations between the Arctic and the North Atlantic.”

Natural resources and strategic position

President Trump, in response to the growing strategic importance of the region, inquired about the opportunity to buy Greenland. Blinken’s predecessor Mike Pompeo in 2019 stunned the participants in the Arctic Council meeting, pompously proclaiming “a new era of strategic engagement in the Arctic, when new threats to the Arctic interests and wealth of this region “.

He pointed to the fact that in connection with the melting of the ice deposits of oil, gas, rare earth minerals and gold are becoming available. He also condemned China for its attempts to show up in the Arctic and Russia for its “aggressive” behavior in the region.

In November, the Americans signed a partnership agreement with these islands.

“The fact that the US secretary of state is spending time on such negotiations says a lot about what is happening,” said Mikkel Runge Olesen, an Arctic security expert at the Danish Institute of International Relations. – The Faroe Islands are back on the map. The value of the Faroe Islands is growing in geopolitical terms. “

Olesen explains this by the growing tension between Russia and NATO in general and the strengthening of Russian activity in the Arctic in particular. This increase has been happening since 2014. Then Moscow created a new Arctic strategic command based on the Northern Fleet.

Over the past five years, Russia has kept up with the Cold War in terms of activity in the North Atlantic. Its long-range nuclear submarines and long-range aircraft are constantly checking NATO detection equipment.

Gap in NATO radar coverage

British Navy intends to regularly be present in the Arctic. It is due to the fact that against the background of climate change and melting ice, Russia and China can use the new strategic sea routes emerging there.

When the radar system in the Faroe Islands is rebuilt and operational again, it will close the gap in the radar coverage that appeared after Britain reopened the radar station on Anst Island in the northern Shetland Islands in 2018.

“If we look at the radar coverage of NATO countries in the North Atlantic and the Arctic and plot it on a map, we will see large gaps over Greenland and the Faroe Islands,” explains Olesen.

According to him, the United States also “wondered if they could use the Faroe Islands as a kind of naval base.”

Washington isn’t alone in trying to influence this tiny country of 18 islands. In 2019, the Faroes opened a representative office in Beijing,. It began to deal with large-scale fish shipments for China. China declared itself a “near-Arctic state” and intended to pave the “Polar Silk Road” using new shipping routes.

At the same time, the Chinese began to put pressure on the Faroe Islands, urging them to agree to the construction of a 5G network by Huawei. The authorities of the islands are still dragging out a decision.

Memorandum of understanding with the Eurasian Economic Union

In 2018, the Faroe Islands signed a memorandum of understanding with the Eurasian Economic Union, which is headed by Moscow. The Faroese economy is completely dependent on fishing and salmon farming. Russia is the islands’ largest market. But the Faroe Islands do not want to get involved in the rivalry between the great powers.

“We don’t think it will be primarily a military facility,” says Dr. av Rana of the radar complex. “It’s a natural way for us to protect the Faroe Islands, and we need it. There were cases when foreign planes flew in the Faroes area, but radars in the surrounding countries did not detect them. “

He is against further steps to militarize the islands. “We do not need military activity in the Faroe Islands. The people of the Faroes will not allow this. We are talking about the creation of a sea transit hub. It will be intended for civilian ships. We have no intention of inviting warships. “