March 11, 2019
Last month, Afghanistan took a detour to ship goods to India. Instead of using a land route via Pakistan, the inaugural convoy of 23 trucks left for the Iranian port of Chabahar for a shipment across Pakistan’s waters.
In 2017, India dispatched its maiden shipment carrying 1.1 million tons of wheat to Afghanistan through the Persian port which it had leased. A year ago, Islamabad’s three neighboring capitals signed a pact establishing a Transit and Transport Corridor with the Chabahar Port as the central point.
Currently, India Ports Global Limited Company is responsible for operations at the Shaheed Beheshti port in Chabahar.
The Indian vessels ferry goods from the ports of Khandala, Mumbai, and Mundra, while the provisions of the Transports Internationaux Routiers Convention govern the cargo’s movement.
Now, President Ashraf Ghani is making the Afghans and foreign observers believe that his country “is no longer landlocked”.
Though it makes for a good soundbite for the media to consume, the statement leaves much to be proven and desired.
There are quite a few elephants in the room with the topmost being the Iran-US relationship and the impending renewal of exemption from sanctions in April.
The atmospherics suggest otherwise. With the widening of the rift between Iran’s Revolution Guards Corps and President Hassan Rouhani’s government (resulting in the resignation of Foreign Minister Javad Zarif as a mark of protest), Washington will seek to press the pedal harder in terms of imposing punitive economic measures.
That aside, it all boils down to the cost of trade with New Delhi. Kabul benefits from using the historic land route via its eastern neighbor — rather than taking a detour via Iran — to ship the goods to India.
The trio are planning a study which is aimed at recommending measures to make the route more attractive, cut the cost of logistics, and make the process hassle-free.
For its part, India aspires to boost its trade with the Central Asian states — which are an overwhelming market for Chinese products — while also being its export partners. New Delhi’s trade with Central Asia accounts for merely $1.5 billion, which is miniscule when compared to its fledging trade with any other region in the world.
Chinese competition notwithstanding, the logistical challenges and the cost involved is overwhelming to say the least.
Theoretically speaking, Chabahar is connected to the International North-South Transport Corridor, but is not quite up-to-date on the ground.
The worn-out infrastructure within Iran and Afghanistan requires billions of dollars to renovate, which is a far cry for India if around $100 million, which was used on just two berths of Chabahar port’s phase-I, are anything to go by.
For a rail-link from Chabahar to Zahedan, India is committed to spending $1.6 billion. However, Indian investment usually takes far longer to materialize than that which is pumped in by China.
Therefore, Indian Prime Minister Narendra Modi’s options are limited. If India has to encircle Pakistan, create a dependency of Afghanistan and compete with China, the funds must flow and profitability of trade must become a secondary or even a tertiary priority.
Its ambition of developing a petrochemical and fertilizer industry-centric Chabahar Free Trade Zone might not be able to trump a similar Saudi-Emirati investment in the port of Gwadar in the Balochistan province of Pakistan.
New Delhi aspires to invest $20 billion through its public as well as private sectors. The Iranian port city is embedded in India’s geopolitical psyche to access the Russia-influenced Eurasian region.
That being said, the projection of Chabahar and an Indo-Afghan trade network without Pakistan becomes blurred in the wake of two parallel channels.
While Islamabad is fencing its border with Afghanistan to check the movement of militants as well as smugglers, it seeks to keep the Torkhum border open for round-the-clock trade.
Pakistan’s government has also prioritized the removal of bureaucratic and political barriers to kick-start commercial ties with its western neighbor.
Taking advantage of the right time and price is one thing, connecting with the Central Asian markets is another — especially for Pakistan’s decision-makers who are struggling to emerge from a severe balance of payment crisis.
While India and Iran face challenges of the frequency of traffic and volume of shipments at Chabahar, Gwadar stands out as a more reliable option, not only for Afghanistan but for Central Asian states, too.
Beijing has persistently worked to realize it’s road and rail link from Gwadar to Kashgar as part of the China Pakistan Economic Corridor project.
So far, it has not paid heed to Iran’s offers to invest in the port for it makes little business sense. Tehran is sufficiently dependent on Beijing for oil exports as well as support in the UN Security Council.
India also faces a formidable challenge from the existing Chinese trade with Afghanistan with which it shares a border-corridor — one which is equipped with a road and railway line.
Besides, China has also been maintaining air cargo bridges with Afghanistan.
The most telling story of its impact on the Afghan market is the
skyrocketing prices of pine nuts after the Chinese purchase last year.
The symbolic trade caravan from Afghanistan can translate into a trilateral win-win for all, especially it it succeeds in overcoming quite a few ‘ifs’, such as the sanction-waiver, maritime safety in the north Arabian Sea and security challenges facing Iran in the Sistan-Balochistan province.
The movement of India and Iranian submarines and other naval vessels cannot go unnoticed by Pakistan or China alike. Afghanistan will not be able to ship goods to lucrative markets in the GCC through the Chabahar port. The Gulf states prefer Afghan trade to take place from Pakistan’s Karachi, Port Qasim and Gwadar as part of the bilateral trade and transit agreement.
Therefore, the Iran-India logistical corridor creates an alternate channel for Afghan trade but not a primary one. With the pilot project in place to guage the route’s viability, its higher political and economic costs could determine its fate.
In the meanwhile, Islamabad and Beijing can iron out the irritants which are acting as hurdles in luring Afghanistan towards Gwadar.