India signed a key agreement with Iran on Monday to develop a strategic port in southeastern Iran that will give New Delhi easy access to landlocked Afghanistan and Central Asia, bypassing its archrival Pakistan.
The pact to build and operate the Chabahar Port was signed in Tehran after Indian Prime Minister Narendra Modi, who is visiting the country, held talks with Iranian President Hassan Rouhani.
It was the most significant of the 12 agreements the two countries signed during Modi’s two-day visit.
New Delhi will invest $500 million in developing two terminals and cargo berths at the port, which India and Iran want to turn into a regional transit hub. India, Iran and Afghanistan are also signing a trilateral agreement to build connecting roads and rail lines from the port.
Calling the project “an important milestone,” the Indian prime minister said it is a “major effort to boost economic growth in the region. We are committed to take steps for early implementation of the agreement signed today.”
Rouhani said "considering all the credit lines that are going to come from India into the Chabahar port, this very strategic port can very well turn into a very big symbol of cooperation between the two great countries of Iran and India."
Indian officials have called the agreement a “game changer” that will give New Delhi easy access to Afghanistan, where it is involved in several projects to rebuild the war-torn country.
India also hopes the Chabahar Port will give momentum to its efforts to import natural gas and expand trade and strategic ties with Central Asian republics. That effort has been hampered by lack of connectivity.
India’s Shipping Minister Nitin Gadkari pointed out that the distance between Kandla in Western India and the Chabahar Port is less than the distance between New Delhi and Mumbai, so it will allow quick movement of goods first to Iran and then onward to Afghanistan and Central Asia.
The Chabahar Port will also provide Kabul with an alternate to the Karachi port in Pakistan.
India sees the Chabahar port as a counterbalance to China, which has made strategic investments in ports and infrastructure in the neighborhood, raising concerns in New Delhi that China is pressing its footprint deep in the region. Chabahar is less than 100 kilometers from the Gwadar port Beijing is developing in Pakistan.
The Indian leader also focused on renewing close ties with Tehran, which is seeking to rebuild its economy after emerging from the shadows of U.S.-led sanctions.
“Expanded trade ties, deeper connectivity, including railways, partnerships in oil and gas sector, fertilizers, education and culture sphere are driving our overall economic engagements,” Prime Minister Modi said.
India, whose energy needs are growing dramatically, is expected to increase its crude purchases from Iran. New Delhi has always been a big customer of Iranian oil, though U.S. sanctions forced it to slash its imports from Tehran after 2012.
India lost some goodwill in Iran when it voted along with Western countries against Tehran at the International Atomic Energy Commission in 2009. Modi’s visit is expected to reinvigorate the friendship.
Both the Indian and Iranian leaders vowed to step up cooperation to fight terrorism, calling it a major threat in the region.
Modi’s visit to Tehran is part of a diplomatic push by India to build deeper ties with Middle East countries. He visited Saudi Arabia last month and is scheduled to visit Qatar next month.