Cabinet may clear $100 million support for Chahbahar port

NEW DELHI: The Union Cabinet is expected to clear an investment of $100 million in a crucial project to develop Iran's Chahbahar port this week. Foreign minister Salman Khurshid, who will be in Tehran on Friday, will work out the final details of the project with Iran. Khurshid will also work on a trilateral transit agreement with Iran and Afghanistan, since the latter is the most important beneficiary of the Chahbahar port.

Iran has promised to ramp up capacity of the port in five phases to 20 million tonnes by 2020. Although India has long promised the project, this has been complicated by several factors. US sanctions have made it very difficult to finance projects in Iran. The sanctions also spooked parts of the government like the shipping ministry which were unwilling to attract US sanctions. Similar reservations were expressed by the finance ministry as well.

It took much persuasion by the external affairs ministry and national security adviser Shivshankar Menon and a careful reading of US sanctions laws to get other parts of the government on board. The delay on India's part after pushing the project came in for criticism by the Iranians as well, who said they would be willing to do their bit for the project.

India had also mooted the idea of using Iran's Indian earnings (India pays for 45% of its oil buys from Iran in rupees which are accumulating in an account in UCO Bank). But this idea did not fly with Iran.

The idea of the project is to give India access to Afghanistan and Central Asia through Iran, because the Pakistan transit route is unavailable to India. Studies have shown that goods transported through Chahbahar cut transportation time by several days, which would mean huge savings for India and Afghanistan.

With Pakistan giving Gwadar port to China, Chahbahar has increased in strategic importance for India.