United States has given a ‘written’ assurance to India that will help facilitate global banks to fund the purchase of equipment worth $85 million to be erected at Chabahar port which India is developing in Iran, the Hindu BusinessLine reported.
Chabahar is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia.
In November 2018, the United States granted a waiver to the port from the sanctions it has imposed on the Persian Gulf nation.
“We have to procure equipment for running the port, but because of the US sanctions, we are not able to procure,” a government official briefed on the issue said.
“We have placed the orders for equipment, some as long as two years ago, but we are not able to open a letter of credit (LCs). Banks are not coming forward. The US had earlier given verbal assurances (on the waiver fine print) but were very reluctant to give anything in writing, and the banks insist on the document. Now, after the recent visit of Foreign Minister S Jaishankar, they have given us something in writing, and we are trying to go ahead,” the official stated.
“The payments are in dollars. We need some banks which deal in dollars or euros, so we have to hit the international banking system and there if the word Iran comes, no bank is prepared to stick its neck out,” he stated.
India Ports Global (a 60:40 joint venture between Jawaharlal Port Trust and Deendayal Port Trust) and Aria Banader Iranian Port signed a deal in May 2016 to equip and operate the container and multi-purpose terminals at Shahid Beheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $ 22.95 million on a 10-year lease. Cargo revenues collected will be shared by India and Iran as per an agreed formula.
Located in the Sistan-Baluchistan Province on Iran’s South-eastern coast (outside the Persian Gulf), Chabahar port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia.
India Ports Global has ordered four rail-mounted quay cranes (RMQCs) for a combined $29.8 million from Chinese port crane maker Shanghai Zhenhua Heavy Industries Co Ltd (ZPMC) and 14 rubber-tyred gantry cranes or RTGCs for about $18 million from Finnish crane maker Cargotec OYJ for erecting at Chabahar port. It had also placed orders for purchasing mobile harbour cranes at Italy’s Italgru SRL.
“The payments for the equipment can only be made when LCs are opened. Once you open the LC, the other party knows that the bank assures the money. And then, they start making the equipment. That is the whole purpose of LC. Then, the bank releases the money as per the stages/timelines specified in the contract,” the official said.
Because of the delay in opening the LCs, the equipment delivery will also be delayed, he added.
The delay in installing the equipment has, in turn, delayed India’s plans to hire an Indian manage, operate and maintain (MOM) contractor for the port.
“If the equipment is not there what will we do by having an Indian MOM operator; that is for the full ten-year contract. Currently, we are making short contracts until the issues are sorted out. Because of the sanctions, everything has been spoiled,” he added.
In 2016, India signed a deal with Iran entailing $8 billion investment in Chabahar port and industries in Chabar Special Economic Zone, including an aluminium smelter and a urea making facility, at Chabahar port is being developed was a transit route to Afghanistan and central Asia. India has already built a 240-km road connecting Afghanistan with Iran. Also in planning is a rail route connecting Chabahar with the India-promoted $11-billion Hajigak iron and steel mining project in central Afghanistan, as seven Indian companies in 2011 acquired rights to mine central Afghanistan’s Hajigak region, which contain Asia’s largest deposit of iron ore. The Government of India has pledged to Afghanistan to spend $2bn in developing supporting infrastructure including Chabahar to Hajigaj railway. All this will bring cargo to Bandar Abbas port and Chabahar port, and free Kabul from its dependence on Pakistan to reach the outer world, giving India access to Afghanistan and beyond to Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan, Kazakhstan, Russia and Europe via 7,200-km-long multi-modal North–South Transport Corridor (INSTC).
During the 1990s Iran and India, along with Russia, collaborated in backing the Northern Alliance in Afghanistan against the Pakistan-backed Taliban. At this time, Iran invited India to develop the Chabahar port to obtain ready access to Afghanistan. In 1997, a trilateral agreement was signed with Turkmenistan to expand trade into Central Asia and, in 2000, another agreement with Russia to provide seamless transport between India and Europe via an International North-South Transport Corridor.
After the American presence in Afghanistan, India, Iran and Afghanistan got together in January 2003, agreeing on a joint development of transportation links to Afghanistan. India agreed to expand the Chabahar port and to lay a railway track between Chabahar and Zaranj. Iran has completed 70 percent of the first phase of the Chabahar project at a cost of $340 million. India has spent $134 million during 2005–2009 to construct a road from Delaram in Afghanistan to Zaranj at the Iran-Afghanistan border. Iran has also built a roadway between Milak, close to Zaranj, and Chabahar passing through Zahedan and Iranshahr. Through Milak, Zaranj and Deleram, connectivity has been established to the Afghan `garland road’, which connects the major Afghan cities Herat, Kandahar, Kabul and Mazar-e-Sharif. In March 2012, ships from India docked at Chabahar carrying 100,000 tonnes of wheat under humanitarian aid to Afghanistan. The Afghan businesses have begun to shift from the Karachi port to Chabahar port for transit.
However, without further development of the Chabahar port, these road links would remain underutilized. Despite intentions, India’s involvement in the infrastructure development within Iran has been minimal, possibly due to the western pressure to apply sanctions. Iran is also believed to have a shown a preference for Iranian contractors instead of Indians. The initiative was restarted in August 2012 in a trilateral meeting on the sidelines of a Non-Aligned Summit.