December 15, 2016 3:00 pm JST
Raj Kumar Sharma

Iran port tie-up marks strategic milestone for India and Japan

Chabahar project should make partners bigger players in Central Asia

Indian Prime Minister Narendra Modi and his Japanese counterpart, Shinzo Abe, meet the press in Tokyo on Nov. 11.

The geopolitical jostling over Asian infrastructure development has further intensified, now that India and Japan have teamed up to work on Iran's port of Chabahar amid China's vigorous promotion of its Belt and Road Initiative.

Indian Prime Minister Narendra Modi and his Japanese counterpart, Shinzo Abe, directed their aides to hammer out a plan for the Chabahar project when they met in Tokyo last month. The push to develop the port on the Gulf of Oman highlights the growing convergence of Indian and Japanese interests when it comes to infrastructure development, regional integration and other strategic factors.

India aims to connect landlocked Central Asian countries and Afghanistan to South Asia through Chabahar, bypassing Pakistan. New Delhi has signed a trilateral agreement with Iran and Afghanistan and intends to invest $500 million in the port, which is linked to Afghanistan and Central Asia by the Zaranj-Delaram highway.

Japanese technical expertise should help India complete the project in a timely manner. It was announced in 2003, and further delays could hit New Delhi's strategic interests in the region. 

Japan, meanwhile, has long sought to bring the landlocked countries in question into the maritime fold, according to Tomohiko Taniguchi, a special adviser to Abe's cabinet. He suggested Japan and India would pool their experience in building tangible infrastructure to help Afghanistan and Central Asia overcome their suffocating geography.

Japan sees its Partnership for Quality Infrastructure program enhancing regional connectivity, and potentially rivaling China's Belt and Road.

Abbas Akhoundi, Tehran's minister of roads and urban development, has welcomed Japan's cooperation with India over Chabahar, saying it will accelerate the port's development.

India and Japan have similar interests in Iran and Central Asia, and the Chabahar tie-up could further cement their presence in the area. 

Energy security

Iran plays a big role in the energy security of both India and Japan. It is Japan's fourth-largest supplier of crude oil, accounting for 8.7% of total imports. In the January to August period, Japan's imports of Iranian oil surged 26% on the year -- a reflection of last year's nuclear deal between Iran and world powers, which lifted sanctions.

The post-sanctions Iranian energy market is rich in opportunities, and Japan is keen to further step up energy cooperation. The two sides have already signed a bilateral investment treaty to end discriminatory restrictions against each other's companies. It would also allow Japanese companies to develop oil fields in Iran.

Japan is likely to develop the South Azadegan oil field, which is estimated to be the world's third-largest and often described as the crown jewel of Iran's oil projects.

In the coming months, Abe is expected to become the first Japanese prime minister to visit Iran in 38 years. Major investments in energy and infrastructure projects are likely to be announced during his visit.

India, meanwhile, is also looking to boost its energy ties with Iran. Modi visited Tehran this past May.

Like Japan, India imports the bulk of its oil -- almost 80%. Most of it comes from West Asia. Iran accounted for 10.7% of India's crude imports between April and August, touching pre-sanctions levels and making it the third-largest supplier. 

India plans to invest up to $20 billion in Iranian facilities for petrochemicals, fertilizers and liquefied natural gas.

There is an opening for India and Japan to form joint ventures with Iranian companies to invest in Tehran's energy market. Apart from energy security, Iran is also critical to Indian efforts to connect with Russian, Central Asian and European markets through the International North South Transport Corridor and the Chabahar-Zaranj-Delaram link.

New Delhi and Tokyo lack direct access to Central Asian markets, hampering their trade. Successful implementation of the Chabahar agreement could increase their economic footprints in a region that is increasingly coming under China's sway -- also giving Central Asian countries a welcome counterweight to Beijing.

The port of Chabahar has the potential to connect Central Asian economies with not only South Asia but also Southeast Asia.

Modi and Abe last year became the first prime ministers from their respective countries to visit all five Central Asian countries on single tours. India had announced its Connect Central Asia policy in 2012, while Japan has a Central Asia plus Japan mechanism to interact with the region.

Both countries also provide assistance to Central Asia in critical areas like health care, education, regional connectivity and trade. They are among the top providers of aid and assistance to war-torn Afghanistan. 

India and Japan rely on their soft power to engage with Central Asia. India shares civilizational links with the region, while Japan's lack of an imperial history there makes it more accessible to Tokyo.

Chabahar vs. Gwadar

Just 72km away from Chabahar is the port of Gwadar, developed by China in Pakistan's Balochistan Province. There is a clear element of competition here, with both ports aimed at providing Central Asia with access to the sea. 

Gwadar is a meeting point of China's Silk Road Economic Belt and Maritime Silk Road, jointly known as the Belt and Road Initiative. This is China's big push to develop regional infrastructure and connectivity in Eurasia.

China did not want an Indian presence at Chabahar and made serious overtures to Iran to develop the port itself. India had to stave off the Chinese to seal the deal.

It is worth noting that Chabahar has better commercial potential than the Gwadar port, where the draft is only 14.5 meters. Major commercial ports allow a draft of 20 meters, enabling cargo ships to dock and shift goods to smaller vessels. As a result, Gwadar's potential as a transshipment hub is limited.

In addition, Gwadar has only three berths at present, while Chabahar has 10 and a planned deep-water berth would handle some of the biggest tankers, known as Very Large Crude Carriers. Gwadar faces serious security issues as well, due to the insurgency in Balochistan. Water shortages in the Gwadar area are an obstacle to local industrial development.

Recent news reports suggest Pakistan would allow China to deploy its naval ships at Gwadar, which shows the project was always strategic in nature -- rather than economic. This would pose a major security challenge for the Indo-Pacific region.

Converging interests

China's increasing assertiveness in Asia and uncertainty over America's regional role are pushing India and Japan closer together. Together, New Delhi and Tokyo want to increase their regional profile and play a balancing role in Asia's security architecture.

Unlike China's amorphous and unilateral approach to infrastructure projects under its Belt and Road program, India and Japan aim to promote a collaborative and multilateral approach, having agreed in 2015 to work toward peace and prosperity in the Indo-Pacific region.

Co-development of the port at Chabahar marks the beginning of India-Japan cooperation at the regional level, on top of ongoing cooperation at the bilateral and multilateral levels. The two countries are also discussing the possibility of a "Pacific, Indian Ocean" corridor for joint development of infrastructure and capacity-building projects, with a special focus on Africa.

For New Delhi, Chabahar is a launch pad for establishing reliable regional partnerships with friendly countries, enhancing its economic and political profile, and achieving multipolar security architecture in Asia.

Raj Kumar Sharma is a research fellow at the United Service Institution of India, New Delhi, and holds a doctorate from Jawaharlal Nehru University. The views expressed here are those of the author.

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