Chabahar port development project: India has committed more than $500 million to develop the strategically located Iranian port of Chabahar, This project, which is already facing delays, could become a sticking point against India for the US, if New Delhi furthers investments in it. The port, located on the Gulf of Oman, only 85km from China’s Gwadar port in Pakistan, is important for India as it will allow it to bypass Pakistan in accessing Afghanistan and Central Asia. The Chabahar port will cut transport costs/time for Indian goods by a third. The port is likely to ramp up trade among India, Afghanistan and Iran in the wake of Pakistan denying transit access to New Delhi for trade with the two countries. The first phase of the Chabahar port was inaugurated in December last year. In February, India and Iran signed a pact that gives New Delhi operational control of a part of port for 18 months.
Price of oil: India is the world’s third-largest oil consumer with Iran being its third-largest oil supplier after Iraq and Saudi Arabia. The US decision to reinstate financial sanctions on Iran will not impact India’s oil imports from the Islamic Republic as long as European countries don’t follow suit, officials said today. India pays its third largest oil supplier in Euros using European banking channels and unless these are blocked, imports will continue, they said.
But, fresh US sanctions on Iran could well lead to oil prices skyrocketing, which will hit India – which was already feeling the price pressure before the US scrapped the deal – badly. As it is, even before the US action, the World Bank had projected a 20% jump in global prices of energy commodities, that is crude oil, gas and coal, this year. All of this will in turn pressure the rupee, push inflation higher and send GDP lower.
Regional influence: Whatever India decides to do vis-à-vis Iran it will be caught between a rock and a hard place. If it follows the US lead and draws away from Iran, it will leave a hole that China, and by association Pakistan, will be only too happy to fill. Already feeling encircled by China’s growing influence in the region – especially with Nepal, Sri Lanka and the Maldives – India will not want to lose what little edge it has in maintaining some sort of geopolitical balance. Already, anticipating Trump pulling out of the nuclear deal, Iran shocked India by inviting Pakistan and China to participate in developing the Chabahar port.