Chabahar Port and Iran’s Strategic Balancing With China and India

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Chabahar Port and Iran’s Strategic Balancing With China and India

Both China and India seek to use Chabahar port for their own strategic interests. Iran can use that competition to its own advantage.

Chabahar Port and Iran’s Strategic Balancing With China and India
Credit: Illustration by The Diplomat

The construction of a port project in the Iranian city of Chabahar has been gaining increased attention as a potential global trading hub – and an arena for geopolitical competition. India has served as the primary investor in Chabahar port, as New Delhi sees the port as a way to access Afghan and Central Asian markets without relying on Pakistan’s land routes. Furthermore, the port could strengthen Indo-Iranian ties, which could balance out growing Sino-Pakistani cooperation. At the same time, China has been growing increasingly influential in Iran, seeking to gain access to critical natural resources and shipping routes. As for Iran, the port could foster new diplomatic and economic partnerships – and given Iran’s reputation as a pariah state in the West, it desperately needs to find alternative options.

With India and China competing to invest in this harbor, Iran is trying to play the two rivals off each other to boost its own international standing while not becoming dominated by either one of these powers. Chabahar port is thus a key case study in both international collaboration and competition: It could offer a trade revolution in the area, but it could also exacerbate regional rivalries.

Chabahar Port: Background 

Chabahar port is located in Iran’s southeastern Sistan and Baluchestan province. The port has a number of distinguishing features that make it attractive from both a domestic and international perspective. Located on the edge of the Indian Ocean, it is the only deep-sea port in Iran with direct ocean access. Its geographic proximity to countries such as Afghanistan, Pakistan, and India, as well as its status as a key transit center on the burgeoning International North-South Transport Corridor, gives it the potential to develop into one of the most important commercial hubs in the region. Chabahar is also one of the few places in Iran that is exempt from U.S. sanctions, which significantly simplifies trade procedures with other countries.

Chabahar port has the capacity to transform trade in South and Central Asia. The proposed land-based trade routes linked to the port would facilitate greater access to the Afghan and Central Asian markets. The impact of this increased connectivity has enormous implications for Afghanistan in particular, although the fallout from the Taliban’s rapid takeover of the country could jeopardize these plans moving forward. Currently, Afghanistan conducts most of its trade via routes through Pakistan; Chabahar port could provide an alternative trade outlet for the country. In turn, Chabahar has the potential to generate massive economic growth in Afghanistan, as it would allow goods from other countries to more easily enter the country and bolster its export potential.

As for the Central Asian countries, Chabahar would offer these landlocked countries access to sea-based trading routes and serve as a bulwark against Chinese and Russian attempts to dominate trade in the region. Therefore, expanded trade with Afghanistan and the Central Asian countries has the potential to bolster Iran’s own status on the international stage.

Many international affairs analysts categorize Iran as a regional power with global superpower potential based on such criteria as its natural resource wealth, military strength, and robust population. However, Iran’s status as a global superpower is primarily constrained by its antagonistic relations with other countries, most notably the United States and Saudi Arabia, as well as economic sanctions that cripple its international trade capacities. To circumvent these limitations, Iran has looked to forge stronger ties with Asian countries that have less adversarial relations with it.

In that context, Chabahar port represents a means of connecting not only with Afghanistan and Central Asia, but also with the global economic juggernauts of India and China. Given that Iran’s development budget for the port’s home province has skyrocketed by 2,200 percent since 2018, it’s clear that Chabahar will be an integral part of Iran’s eastern engagement strategy.

Geopolitical Competition Over Chabahar Port

Meanwhile, both India and China have their own plans for Chabahar and bilateral relations with Iran.

India has an extensive history of engagement with the Chabahar port, as New Delhi views the port as an opportunity to strengthen India’s position as a regional and global power. India, having the second largest population in the world, the sixth largest economy in the world, and a long-standing bid for permanent U.N. Security Council membership, is a major contender for future global superpower status. It has sought to expand its market reach in Western and Central Asia to further consolidate this potential.

However, India has been severely hindered in establishing land-based trading with countries to its west, as virtually all of those routes would have to go through Pakistan, India’s archrival. Establishing a sea-based trade route to Western and Central Asia via Chabahar port would allow India to bypass Pakistan and establish trade networks with the countries in these regions.

Indo-Iranian collaboration on Chabahar port dates back to 2003. However, their joint effort only started to gain traction around 2016, when Prime Minister Narendra Modi of India and President Hassan Rouhani of Iran announced that India would invest $500 million into the development of Chabahar port. A major catalyst for their renewed cooperation stemmed from Chinese President Xi Jinping’s 2013 announcement that China would commence its massive Belt and Road Initiative (BRI) infrastructure project.

From India’s vantage point, China, with the world’s largest population, second largest economy, and prominent positions within the U.N., WTO, and other international organizations, was already its chief rival for superpower status. Furthermore, Chinese collaboration with Pakistan via the development of Gwadar port and the China-Pakistan Economic Corridor raised concerns over how the partnership of India’s two main adversaries could impact the country. India’s involvement with Chabahar port, then, serves as a key strategy to buttress its superpower status by widening its regional market presence and using an Indo-Iranian alliance to buffer China and particularly Sino-Pakistani cooperation.

India is not the only superpower that has a stake in Chabahar port, as China has also sought to strengthen ties with Iran to secure energy and mineral resource reserves and gain access to advantageous Eurasian trade routes. Chinese access to Chabahar port would immensely benefit these objectives, as China could connect the port to its own extensive maritime-based trade network. Considering China’s investment in Pakistan’s Gwadar port, another key driver of China’s interest in Chabahar port would be to block India from accessing routes to Afghanistan and Central Asia.

While China has yet to directly insert itself into the Chabahar port project, many analysts perceive the recently signed China-Iran 25-year cooperation program, in which China agreed to invest $400 billion into the Iranian economy in exchange for discounted and guaranteed energy prices and BRI project cooperation, as a way to gradually assert its presence in the port. While the scope of Sino-Iranian interaction in Chabahar port remains limited at this point, evidence of intensified Chinese activity with Iran suggests that it is attempting to compete with India for greater influence in the region.

Iran’s Balancing Act

Heightened Indian and Chinese involvement in Chabahar port has stirred debates among Iranian political circles on how to take maximum advantage of their competition while minimizing the risks to Iran itself. The economic and diplomatic opportunities presented by India and China could help Iran bolster its own great power ambitions, but asymmetrical power sharing and trade deals could render Iran as a junior partner or glorified resource appendage. Therefore, Tehran is trying to find ways to strategically balance India and China.

For example, Iran’s recent induction into the Shanghai Cooperation Organization (SCO) – an organization that also includes China and India – reflects its desire to form a coalition against Western hegemony while seeking to affirm a more active role in Central Asian and Middle Eastern affairs. Iran could use its membership in the SCO and other multilateral initiatives as a means to play India and China against each other: Iran could threaten to side more closely with one country if it doesn’t gain greater concessions from the other. Iran, therefore, could utilize Sino-Indian rivalry to its benefit to boost its own superpower status while maintaining its longstanding independent streak of not aligning itself too closely to “either the East or the West.”

However, a number of variables could disrupt the current trajectory of Chabahar port’s development. The Taliban seizure of Afghanistan has seriously reconfigured plans for establishing enhanced trade networks with the country and Central Asia – a major headache for India in particular. Meanwhile, the instability of the Iranian regime perpetually threatens to disrupt Iran’s long-term ability to pursue its regional and international interests. Nevertheless, Chabahar Port is shaping up to serve as a key battleground for China and India’s aspirations for leadership in South and Central Asia, and may play an instrumental role in Iran’s own desires to advance its own standing on the international stage.

Guest Author

Soroush Aliasgary

Soroush Aliasgary is a Ph.D. candidate in Coastal Engineering at the University of Tehran. His research interests are Middle Eastern affairs, emerging powers, U.S.- Iranian relations, the Iran nuclear deal, and Iranian politics.

Guest Author

Marin Ekstrom

Marin Ekstrom is a researcher involved with the Eurasian Research and Analysis Institute and its affiliated Central Asia Watch project. In 2020, she graduated from Central European University with an M.A. in International Relations. Marin’s research interests include Russia’s ambitions in the Asia-Pacific region, Eurasian integration, foreign policy analysis, and cultural rights.