India, Iran Sign 10-year Agreement for Trade Operations at Chabahar Port

16 May 2024

India and Iran have signed a 10-year agreement on trade operations at Chabahar Port. The new long-term agreement is intended to replace the original contract, which only covers India’s operations at the Shahid Beheshti terminal and is renewed every year. The Chabahar Port agreement is crucial for India-Iran bilateral trade relationship. Meanwhile, the United States warned potential sanctions after finalization of this deal. Let’s have an overview about how much India trade goods with Iran via Chabahar Port and possible pressures developed by other countries.  

India signs crucial agreement with Iran on Chabahar Port

India has signed an important agreement with Iran through which both countries will boost trade via Chabahar Port. The move comes at a time when China has been showing greater interest in investments in ports and other coastal infrastructure in Iran. Both India and Iran see Chabahar as a hub for the International North-South Transport Corridor (INSTC) that will allow shipping companies to use an alternative route and bypass the sensitive and busy Persian Gulf and Strait of Hormuz.

Chabahar Port is a seaport in Chabahar located in southeastern Iran, on the Gulf of Oman. It serves as Iran’s only oceanic port, and consists of two separate ports named Shahid Beheshti, and Shahid Kalantari. This port is only about 170 kilometres west of the Pakistani port of Gwadar. Indian companies will invest approximately $120 million in equipping the port. The country has also offered a credit window equivalent to $250 million for mutually identified projects aimed at improving Chabahar-related infrastructure.

So far, India has shipped 2.5 million tonnes of wheat and 2,000 tonnes of pulses to Afghanistan through the Chabahar port. In 2021, India supplied 40,000 litres of environment friendly pesticide (Malathion) to Iran through the port to fight locust menace.

United States warns of possible sanctions after India-Iran Chabahar Port deal

The United States of America warned of potential sanctions after India signed Chabahar Port deal with Iran. The country wants India to clarify about its own foreign policy goals vis-à-vis the Chabahar Port and its bilateral trade relationship with Iran.

India’s trade with Iran via Chabahar Port and other ports 2023-01-01 to 2024-03-31

India received shipments from Iran majorly from Sohar, Bandar Abbas, Asaluyeh, Jebel Ali, and Bandar Khomeini from Jan 2023 to Mar 2024. Chabahar Port was at 12^th position in the said period.

As far as exports are concerned, India’s shipments departed and arrived the most at Iran’s Bandar Abbas and Chabahar Ports during Jan 2023 and Mar 2024. They are followed by Bandar Khomeini, Bushehr, and Tehran. See data visualization of top Iranian ports that handled the highest number of import and export shipments in the said period.  

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India’s top exports to Iran via Chabahar Port

India’s top export commodities to Iran via Chabahar Port were rice, groundnuts, bananas, tea, and food preparations. Here are values of these products reported from Jan 2023 to Mar 2024.

India’s top imports from Iran via Chabahar Port

India imported apples, pears, and quinces the most from Iran via Chabahar Port from Jan 2023 to Mar 2024. India’s top import commodities from Iran via Chabahar Port were cement, plants & parts of plants, dates, figs, pineapples, avocados, guavas, mangoes, mangosteens, and gypsum, anhydrite, plasters consisting of calcined gypsum or calcium sulphate. See and analyse values of these products in the given chart.

Yearly trends of India’s trade with Iran

India’s imports from Iran increased in 2023 as compared to the previous year, while India’s exports to Iran declined in the same year. India imports from Iran are higher than India exports to Iran. See and study yearly trends of India’s trade with Iran for better insights.

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Why is the Chabahar Port Important?

The Chabahar Port allows India to bypass Pakistan’s ports in Karachi and Gwadar and reach land-locked Afghanistan and Central Asian countries.

It is considered a counter-response to China’s most touted Belt and Road initiative.

The port will open economic opportunities for businesses to explore an alternative transit route from the sensitive and busy Persian Gulf and Strait of Hormuz. However, US sanctions on Iran have slowed the development of the port.

The Chabahar Port is also a key hub for the International North-South Transport Corridor (INSTC) project that is a 7,200 km that will be used for moving freight among India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, and Europe.

India has pledged to invest around $85 million in the terminal and has already provided cranes and other equipment worth a few million dollars. 

India has been pushing for operations at Chabahar port to boost regional trade, especially for its connectivity to Afghanistan since 2016, when the sub-continent signed a tripartite agreement with Iran and the now Taliban-led nation to develop the terminal. This deal is crucial for boosting bilateral trade relations between India and Iran.