India and Iran signed a long-pending contract for 10 years, according to which India Ports Global Ltd. (IPGL) will invest about $120 million to equip and develop the Chabahar port terminal that India has been working on thus far as a means to build a trade corridor via Iran to Afghanistan, Central Asia and on to Russia. The agreement signed in the presence of Indian and Iranian shipping Ministers in Tehran on Monday formalises the original framework agreement signed in 2016 during Prime Minister Narendra Modi’s visit. It could also possibly revive plans for India to help Iran with rail connectivity from Chabahar, which were earlier shelved due to New Delhi’s hesitation over U.S. sanctions against Iran. Iran’s Ambassador to India Iraj Elahi spoke on the significance of the agreement.
What are the highlights of the Chabahar agreement being signed, and how do they differ from the earlier agreement signed in 2016?
The agreement that was signed in 2016 defined the general framework of cooperation between Iran and India in Chabahar. But in order to implement it, it was necessary to have a long-term legal contract that includes technical and financial details. We refer to this operational agreement as the “main cooperation agreement” in Chabahar. Unfortunately, the differences between two sides on some provisions of the main contract, including arbitration, prevented signing. For this reason, a one-year short lease was inked between the two countries to speed up the start of cooperation until the main contract was completed and signed. The process of finalising the main contract was prolonged, and the two parties extended the short lease four times to resolve the legal and technical issues of the port operation. Fortunately, all the technical and legal issues of the original contract have been resolved, and it will be signed today, and there is no need to extend the short lease.
Q: How have the two sides worked out the issue of arbitration, which had become a sticking point in negotiations?
Arbitration was one of the most important disputes [between Indian and Iranian negotiators]. In this context, the two sides reached a formula that would provide for both their interests. In short, I can say that according to the contract, any dispute should be resolved in the atmosphere of mutual trust and the will of the heads of the two countries. The legal details of this issue are available in the contract.
Q: Do you see other stalled agreements like the railway agreement and plans for an SEZ to go forward now?
We believe that the signing of this contract will create a new and serious energy in all sectors of relations and will restart stalled projects. Transit and ports are the main pillars of Iran-India relations. So with this contract and its implementation, cooperation will be developed in all sectors. Chabahar can act as the driver of relations. We expect that the investment of the Indian companies in energy and industry projects in Chabahar will increase. By investing in Chabahar they can enjoy cheap energy, land and labour, and manufacture their products and export them to the Iranian market or to other countries via Iran.
The agreement between Iran and India for the development of Chabahar port was signed years before China’s One Belt One Road project and based on the common interest of two countries. We do not consider this agreement and cooperation in Chabahar to be in conflict with any economic plans and obligations of Iran towards other countries. The economic benefits of Chabahar and the International North-South Transport Corridor (INSTC) are clear to everyone and all countries will enjoy these benefits.
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