India and Iran are on the verge of a new Chabahar Port deal, long-term deal expected soon

India and Iran are moving fast to sign a long-term deal detailing New Delhi’s investments in the strategically located Chabahar port. Most of the pressing port-development issues that arose between India and Iran were resolved earlier this month after high-level officials and diplomats from both sides held intense talks. However, some issues remain, but they are expected to be fixed in the coming weeks. Indian officials are expected to visit Iran in the coming weeks to resolve these remaining issues.

“Things are moving fast, both sides are working to resolve issues that have hampered work on the project,” a source told India Narrative.

Given the changing geopolitical realities and China’s advances, India is keen to step on the gas as soon as possible once the port in southern Iran is completed. The port will also be connected to the International North-South Corridor.

According to Iranian media, Ali Akbar Safaei, head of the Ports and Maritime Organization of Iran, said talks on existing disputes over the port’s development took place between June 12 and 16.

After all the issues are resolved, the long-term contract to develop the port is signed. The strategically located port offers Mumbai a direct connection to the landlocked countries of Central Asia. The Port of Chabahar’s location has an advantage for development as a transshipment hub, being close to some of the world’s busiest trade routes.

Several issues arose between the two countries, causing a delay in the construction of the port.

“Under the Memorandum of Understanding between Iran, India and Afghanistan, Iran has so far been pledged an initial investment worth US$25 million, which will be used for port development,” Safaei said.

Notably, National Security Advisor Ajit Doval paid a visit to Tehran in May and met Iranian President Ebrahim Raisi.

Raisi stressed the need to take India-Iran relations to a “new level”, particularly with an emphasis on economic and commercial engagements.

After some difficulties, India and Iran resume relations. Recently, India even sent wheat to Afghanistan via the Chabahar port. “This reflects the restart of India-Iran ties,” said one analyst.

Meanwhile, last year the Reserve Bank of India agreed to use the rupee payment method for sanctions against Iran. India halted its imports from Iran in 2019 after the US again imposed sanctions on the oil-rich country.

“We are considering a long-term rupee trade not only with Russia but also with Iran,” Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council, previously told India Narrative.

In 2018-19, bilateral trade between New Delhi and Tehran was US$17.03 billion. After a steady decline — the amount dropped to $1.9 billion in 2021-2022 — the two countries are now aggressively trying to boost non-oil trade.

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