Development Outlook of Chabahar Port under New US Sanctions against Iran

Hesamoddin Hojjatzadehi
November 2018

The development of Iran's Chabahar port, which is located on the shores of the Sea of Oman and close to the Indian Ocean, through one-billion-dollar investment and technical assistance of India, has been without a doubt, one of the most important and yet most controversial development projects in Iran following the 1979 Islamic Revolution. Chabahar is the sole oceanic port of Iran, which has been regularly hitting the headlines during the past 15 years not only because of its geostrategic position, but also due to various political, security and economic considerations that surround its development. These considerations, which directly affect the future outlook of Chabahar and its turning into a regional hub and even an international port like Amsterdam, Istanbul, Marseilles, and Sydney, include:
1.At the present time, Khatam al-Anbiya Construction Headquarters, which is affiliated to the Islamic Revolution Guards Corps (IRGC), is present and active as the most important Iranian contractor in development of Chabahar port. Now, a question arises as a result of this issue and the role, which this port can play under conditions that the country is suffering from new US sanctions: What reaction will hostile rival states of the Islamic Republic, especially the United States and Saudi Arabia, show to this issue, if Khatam al-Anbiya Construction Headquarters continues its presence and investment in development of Chabahar port even on a limited scale?
2.So far, India has invested about nine billion dollars in development of Chabahar port and the future of this project is now tied to policies of the Indian government. As a result, and also in view of New Delhi’s not-so-desirable background of being influenced by foreign pressures in this project, the question is to what extent Chabahar port enjoys necessary potential to help Iran's economy and trade both under the US sanctions and after that?
With regard to the first consideration, it must be noted that active presence of Khatam-al Anbiya Construction Headquarters in development of Chabahar started in 2007 in line with the Leader of the Islamic Revolution’s order that the coasts of Makran region must be developed. Since the Indian side has moved sluggishly and sometimes refrained from fulfilling its commitments during this period, especially with regard to completing the first phase of Chabahar port’s docks, this headquarters has made up for the India’s delay. Therefore, one can say that Chabahar’s Shahid Beheshti dock, which was inaugurated by the Iranian president in December 2017 and is now being used by the Indian side, is more a product of the effort made by Iranian specialists through investment of the IRGC. The noteworthy point, however, is that participation of Khatam-al Anbiya Construction Headquarters in development of Chabahar and in construction of Chabahar-Zahedan railroad, which is part of the huge project known as the International North–South Transport Corridor (NOSTRAC), means that the IRGC is only trying to help implement this project. When finished, the aforementioned project will connect India to Russia and Europe through Iran, Afghanistan, Central Asia and Caucasus, and can reduce transportation cost of goods between India and these regions by about 40 percent.
In the meantime, Americans have shown conflicting reactions to the role played by Khatam-al Anbiya Construction Headquarters in Chabahar project. During its first year in office, the administration of US President Donald Trump made continued investment and cooperation of India in the Chabahar project conditional on withdrawal of this headquarters from it. However, in recent years, Washington has set aside this condition. Finally, the White House gave a waiver from sanctions to India for the development of Iran's Chabahar port, which meant that it has conceded to continued participation of Khatam-al Anbiya Construction Headquarters in this project.
Saudis, on the other hand, have been sparing no effort to stop development of Chabahar port by India and Khatam-al Anbiya Construction Headquarters. During the past year, Riyadh has been relatively successful in its effort to mount pressure on New Delhi to stop cooperation with Iran on the Chabahar project. Of course, the announcement by India that it would finish development of this port by 2019 proved that Saudi Arabia’s plot has not been totally successful. However, it is possible for India to gradually replace oil imports from Iran with those from Saudi Arabia, the United Arab Emirates or even Iraq. Therefore, as the first six-month sanctions waiver given by the United States to India wears off, there are concerns that Indians might become more susceptible to pressures from Saudi Arabia to stop, or at least decrease, cooperation with Iran for the development of Chabahar port.
In addition, Riyadh is planning to help development of Pakistan’s Gwadar port on the other side of Iran's border with its eastern neighbor under the pretext of building a big refinery in Pakistan’s Balochistan province. This means that Saudi Arabia is taking serious steps to undermine the Chabahar development project through bolstering its rival port. This measure is also in line with Al Saud regime’s efforts to consolidate its influence on Sunni-dominated border regions between Iran and Pakistan. In doing this, Riyadh means to strengthen Wahhabi groups on the two sides of the common border to disrupt security of the Islamic Republic and imbalance relations between Tehran and Islamabad. In this regard, Riyadh has offered a financial aid of 12 billion dollars to the government of Pakistan and has succeeded to get the positive views of Pakistan’s new Prime Minister Imran Khan, the country’s powerful army, and also China, as the main investor in Gwadar project, about Saudi Arabia’s participation in this project.
As for the second consideration, it must be noted that without a doubt, Chabahar port enjoys a special geographical position and its development can play an important role in changing the economy of South Asia, Iran, Afghanistan, Central Asia, and even Russia and Europe. Therefore, India, China and other countries will not be able to ignore its development project and leave it to rivals. During past years, Beijing has been adamantly seeking to take part in development of Chabahar port and has wanted to connect it to Pakistan’s Gwadar port with the final goal of completing the Makran coastal belt. This proposal has been welcomed by Iran and Pakistan, but angered India as a result of which, it has not gone beyond a proposal thus far. However, this proposal per se is a clear indication of the importance of Chabahar’s development. Therefore, investment by Iran in development of the sole port that it has along the Sea of Oman will give it higher potential to end the isolation that the United States and Iran's hostile regional rivals – especially Saudi Arabia, the United Arab Emirates and the Zionist regime of Israel – aim to impose on it. In the meantime, it will have a great effect on globalization of Iran's small and oil-based economy in the long run.
On the other hand, the United States reinstated sanctions against Iran's monetary, trade and oil sectors in early November 2018. It seems that by completing and launching next phases of Chabahar port and making them operational in cooperation with India, China, or any country willing to invest in this project, Iran will be able not only to circumvent the US sanctions, but also reduce their overall effect. However, there is one major problem in this regard. In order to cooperate with Iran in the Chabahar project, countries need to seek Washington’s permission. The Trump administration has so far maintained that development of this port will help develop Afghanistan’s economy and has, therefore, allowed India and Afghanistan to take part in this project and work with Iran for an indefinite period of time. Nonetheless, it is not clear whether Americans will issue such a permit for other countries applying to take part in development of Chabahar port. At the same time, the United States may eventually decide to set a deadline for the participation of Kabul and New Delhi in this project and answer any violation by Indian and Afghan sides with severe punishments.
All told, the outlook for development of Chabahar port is not very clear and the project is surrounded by many ambiguities and uncertainties. Therefore, only time will make it clear to what extent Chabahar port can be counted on as an effective port in the economy and trade of Iran and region, and what impact it will have on the Islamic Republic’s relations with the world.