The true potential of Chabahar

Last week we discussed the possibility of Iran shifting its capital to Makran coast in the south, to boost its maritime trade. Iran's Chabahar Port Project (CPP) on Makran coast is around 180 km west of Gwadar Port. It provides Iran – or any other nation, especially India – direct access to Afghanistan and Central Asia bypassing Pakistan's Gwadar and China's CPEC infrastructure. The rail/road infrastructure of this trade corridor, which is mostly in place, connects Chabahar with Kabul and beyond. The 217 km Dilaram-Zaranj Highway now links Chabahar with Afghanistan's 2,100 km Ring Road System connecting Herat, Kandahar, Kabul and Mazar-e-Shareef. Chabahar's two older ports (Shahid Beheshti and Shahid Kalantari) are now incorporated into the Chabahar Free Economic Zone. CPP is located at the confluence of the Indian Ocean and Sea of Oman, built as a multipurpose container cargo terminal. India operates two CPP berths on ten-year lease under Afghanistan-Iran-India Tri-Lateral Transport and Transit Agreement. CPP Phase One was inaugurated in December 2017, exporting first Afghan cargo in February 2019. India's first import cargo reached Afghanistan shortly, in May; and between February 2019 and January 2021, CPP handled 123 vessels carrying 1.8 million metric tons (MMT) of bulk and general cargo, including 75,000 tons of Indian wheat for Afghanistan after COVID, and 50 tons of Indian pesticides for Iran. CPP is designed to handle 82 MMT per annum. Karachi Port on average handles 25 MMT and Gwadar 11 MMT annually. India has invested heavily in this connectivity corridor, assisting in building CPP, and the Zaranj-Delaram Highway, previously a missing link between CPP and the Afghanistan ring road. India also provided $1.6 billion for the 610 km CPP-Zahedan railway link, as part of the 900 km Hajigak-CPP Line. India has interest in the Hajigak iron ore mines in Wardak/Bamiyan, Afghanistan's largest iron deposits. CPP and its multi-purpose Free Zone also offers lucrative investment opportunities. CPP already handles almost 85% of Iran's imports, as Bandar Abbas faces congestion and limited containerised cargo capacity issues. Kabul plans developing 2,100 km Five-Nation-Railway-Corridor (FNRC) to connect CPP and Bandar Abbas with China, Tajikistan, Kyrgyzstan and Uzbekistan. Khaf (Iran)-Herat railway, already operational since 2020, links Mashhad-Bafq Line, connecting Bandar Abbas. FNRC also enables Tajikistan and Kyrgyzstan, currently reliant on Uzbekistan rail/road network for accessing global markets. This Corridor also enables direct access to India's Fakhor and Ayni airbases in Tajikistan, hence New Delhi's over $2 billion investment in CPP, and its steadfast support. India delivered the much-needed remaining four cranes to make CPP fully operational. Strong Indo-Afghan bilateralism is rooted in history. Deepening it through T3 (trade, transit, transportation) connectivity, from an IEA standpoint too, enhances landlocked Afghanistan's stability; promotes regime independence and its domestic and regional influence; and provides Kabul with more liberty of action. Afghanistan's transit trade through Karachi is centuries-old and not easily replaceable because of: Pakistan's rail/road network being closer; its relatively good quality infrastructure; the historic socio-ethnic affinity of mostly Pashtun Afghan traders and drivers, coursing through familiar Pakistan; Afghan refugees' kith and kin being in Pakistan; and bulk handling capacity of international container cargo at Karachi and Gwadar ports. Bandar Abbas, by contrast, is away less developed and under international sanctions. However, CPP might be a challenger. Pakistan has consistently used bilateral trade under the 2010 Afghanistan Pakistan Transit Trade Agreement (APTTA), as leverage against IEA, for its support to TTP; and during COVID in recent years. This causes great losses to time-sensitive perishable products. Pakistan also permits Afghanistan's export to India through Wagah-Attari entry/exit points, but no imports. This makes the trucks returning empty from the Indian border. India-specific ATT is also complex given that the cargo is offloaded at Wagah, ferreted through wheelbarrows, carts for kms to Attari, and reloaded on Indian transport. Afghanistan tried National Air Corridor Program, giving traders subsidies on air freight, but it is also challenging given its cost and unsuitability for bulk cargo. Other Pakistan-specific challenges include excessive security screening of Afghan cargo; unpredictable port operating hours; unannounced and lengthy border closures; slow clearance processes at seaports and land ports; and official corruption at entry/exit points. Slow port clearances incur hefty demurrage and detention charges at Karachi, averaging $80-240 per container. Afghanistan-Pakistan Joint Chamber of Commerce and Industry (PAJCCI) estimates Rs21,000 per container as bribes. These impediments eat up Afghan traders' profit margins, significantly raising the cost of cross-border commerce. Such fraught trade relations and IEA's crucial import dependence naturally leads Kabul to look for alternatives. Chabahar provides one such alternative. Even the US, during occupation, exempted Afghan trade in certain items through Chabahar from Iran-specific sanctions. A fully functional Chabahar outstrips both Karachi and Bandar Abbas in the medium to long term. Mineral exports (talc, coal, iron ore, marble, etc) also make CPP an attractive outlet for Afghanistan. Indian interest in Chabahar emanates from its geostrategic competition with rival China's project, in nemesis Pakistan's Gwadar, the terminus of CPEC. CPP supports Indian design to wean away Kabul from Pakistani port dependence, and undo the 'strategic dividend' Pakistan accrued, once Taliban succeeded in Islamabad-assisted takeover of Kabul in August 2021. CPP is also showcased to Central Asian states through India-Central Asia Dialogue (3rd held in 2021). India has been working with Uzbekistan in particular to connect South and Central Asia outside the Chinese influence, and that suits Russia as well. Uzbekistan, using Asian Development Bank support, has linked Mazar-e-Sharif in Afghanistan's Balkh Province via rail, extending it west to Herat, towards Afghanistan's border with Iran. In February 2021 Uzbekistan announced ADB-financed project to build rail links to Kabul, Kandahar and then connect Pakistani rail network, a move likely to bring down the cost of regional trade by almost 30%. CPP, however, faces several operational issues like visa issuance, port services, banking difficulties, sanctions, etc in addition to Iran's sectarian predilections that discourage its optimal usage. If these, and technical issues like track gauge (Iran uses European Gauge, while Central Asia the Soviet gauge) are resolved, this improved T3 connectivity might one day drastically alter the Central/South Asian balance of power, catapulting Afghanistan to being a trade hub. Central Asia's actual trade potential next time!

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