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  1. Chabahar agreement to reach a new level of India’s overseas ambitions

Chabahar agreement to reach a new level of India’s overseas ambitions

The agreement marks a new level in India’s overseas ambitions. Now it must show the resolve to see it through.India’s ambitious plans to develop the small Iranian port of Chabahar into a hub linking the Indian ocean with the energy-rich states of Central Asia may mark Prime Minister Narendra Modi’s most durable strategic legacy.

By: | Updated: May 25, 2016 11:43 AM
The Chabahar agreement marks a new level in India’s overseas ambitions, establishing a genuinely strategic presence not just in one of the world’s great energy markets, but potentially giving Indian business access to some of the fastest-growing economies of the future. (Source:IE) The Chabahar agreement marks a new level in India’s overseas ambitions, establishing a genuinely strategic presence not just in one of the world’s great energy markets, but potentially giving Indian business access to some of the fastest-growing economies of the future. (Source:IE)

The agreement marks a new level in India’s overseas ambitions. Now it must show the resolve to see it through.India’s ambitious plans to develop the small Iranian port of Chabahar into a hub linking the Indian ocean with the energy-rich states of Central Asia may mark Prime Minister Narendra Modi’s most durable strategic legacy.

The $500 million deal promises to lead to the development of a deep-water port, a 500-km rail line linking it to Iran’s rail network, and new aluminium and urea plants. The Chabahar agreement marks a new level in India’s overseas ambitions, establishing a genuinely strategic presence not just in one of the world’s great energy markets, but potentially giving Indian business access to some of the fastest-growing economies of the future. Freed of sanctions, Iran’s economy is expected to grow sharply in coming years; Indian businesses will now be in a position to capitalise on the coming boom.

Though Central Asia has faced severe economic difficulties in recent years, as a consequence of low energy prices, there’s little doubt about the region’s long-term potential. The deal will also allow India to expand its strategic presence in Afghanistan, allowing businesses in both countries to bypass a Pakistan that has proven reflexively hostile to allowing transit rights to trade between them. In short, the deal signals that India, like China, has big-league ambitions.The sad truth, however, is that India’s ambitions haven’t quite been matched by its ability to realise them: past transformational projects, though more modest in scale, are yet to get off the ground.

The Kaladan multimodal transport project, which was supposed to link the Northeastern states to Myanmar’s Sittwe port, was supposed to have been operational by 2013. The project is likely to take years to be completed, though. Meanwhile, the cost has ballooned from the Rs 535 crore estimated when it was announced in 2008 to Rs 2,904 crore. There are dozens of similar examples. The India-US nuclear deal was meant to usher in a new age of energy production, but not a single megawatt has yet been generated. In many parts of the world, India has developed a reputation for talking big, but failing to deliver.

The fate of the Chabahar project will depend on successive governments showing sustained resolve in the face of geopolitical hurdles. The potential spoilers are several. For one, relations between Tehran and the West, though vastly improved, remain fraught, with many hardliners in Iran believing the country was short-changed in the nuclear deal that paved the way for an end to sanctions. That, potentially, could lead to tensions — as could differences over Iran’s role in Syria and Afghanistan.

Indian governments will also have to incentivise private corporations for using the Iranian route to transit goods to Central Asia, rather than the fast, cheap networks they now use through Singapore and China. Finally, the project can only be successful if Indian manufacturing is globally competitive — no small ask at present. These hurdles can, and must, be overcome. The agreements signed this week are a beginning.

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