India to Invest USD 500 Million in Chabahar Port, India-Iran Coming Closer Strategically

India to Invest USD 500 Million in Chabahar Port, India-Iran Coming Closer Strategically

Compiled by Faiz Askari, Founder Editor, SMEStreet

Heading a high-ranking delegation, Prime Minister of India, Mr Narendra Modi reached Tehran on Sunday and began the activities for historic dialogues between the two great civilizations of Asia. The Indian prime minister was accorded an official welcome in Tehran at the start of a two-day visit to make a case for India’s space in Iran’s market following the lifting of sanctions from Iran.

PM Modi is the first Indian prime minister in Iran in the last 15 years on a visit which will mainly focus on connectivity, infrastructure, energy partnership and bilateral trade.

President Rouhani said the Indian Prime Minister’s visit has prepared the ground for the further enhancement of economic ties between Iran and India following the implementation of the nuclear agreement between Iran and the P5+1 group and the lifting of sanctions against the Islamic republic.

“Iran-India relations have always been of significance and today these ties can serve the interests of the two nations and the whole region,” said Rouhani.

Prior to the joint press conference, Iranian and Indian ministers signed 12 cooperation agreements, including an agreement to develop the southern Iranian port of Chabahar.

Afghan President Ashraf Ghani also arrived in Tehran on Monday to join Rouhani and Modi in signing a trilateral agreement.

Chabahar Port is located in the Gulf of Oman on the border with Pakistan. It is Iran’s closest and best access point to the Indian Ocean.

The Chabahar Port will be a game changer for regional connectivity, especially for Afghanistan, which can find an assured and reliable alternative access to India via sea.

Prime Minister Modi has singed an agreement by which India will invest USD 500 Million to develop the strategically located Chabahar port in Iran allowing New Delhi easy access to Afghanistan and Europe circumventing Pakistan.

The development of the port in southern is a strategic decision as it will counter China’s growing involvement in the region. Chabahar port lies just 72 km from the Gwadar port in Pakistan, which is part of China’s $46 billion plan to develop China-Pakistan Economic Corridor and is aimed at opening new trade and transport routes across Asia.

A trilateral agreement on transport and transit corridor was also signed by India, Afghanistan and Iran, which Prime Minister Narendra Modi said could alter the course of the history of the region.

According to the Iranian president, Tehran and New Delhi have discussed cooperation in banking systems as well as bio-technology, nano-technology and aerospace.

Rouhani further said terrorism was a big challenge in the region and that India and Iran will also expand intelligence sharing in the fight against terrorism.

The route will also significantly enhance prospects for India’s connectivity with Afghanistan, Central Asia and beyond through synergies with other initiatives touching the region such as North-South transport corridor.

Prime Minister Narendra Modi expressed his gratitude for this memorable trip to Iran on Twitter. He wrote that this visit is a step towards enhancing connectivity, trade, investments, energy partnership, culture and people to people contacts between the two nations.

India is one of the biggest clients of Iranian crude. Ahead of Modi’s visit, reports said India had made the first euro payments to Iran in four years to clear part of its $6.4-billion oil debt to Tehran.

Overall, India’s crude oil imports from Iran have topped 500,000 barrels per day (bpd), reaching the highest level in at least five years.

With the lifting of international sanctions, major economies including China and Korea are courting Iran, which has the world’s second-largest gas reserves after Russia.

Indian refiners are looking at nearly doubling buying of crude oil from Iran’s national oil company, NIOC to 20 million tonnes this year and it having a permanent office would help trade.

Also, Iran has sought permission for three of its banks to open branches in India.

As a background activity of this landmark trip, Bank Pasargad and Parsian Bank expressed their interest in opening their offices in India while Saman Bank is interested in opening a subsidiary in India. The Reserve Bank of India is closely and keenly exploring these requests from Iran.

However, the Finance Ministry in 2012 had declined the permission to Parsian Bank to open a branch in India apparently due to security concerns and threat of money laundering. The ministry decision then was based on a report from RBI.