Sole Iranian oceanic port Chabahar, which India believes could unlock export markets across Iran, Afghanistan, the South Caucasus and Central Asia, is to finally receive development financing from New Delhi.

Indian Minister for Road Transport and Highways Nitin Gadkari said on August 8 during a visit to Iran for the inauguration of President Hassan Rouhani's second term of office that India has cleared the way for $150mn of export-import bank financing to develop the port, located on the Gulf of Oman and providing clear access to the Indian Ocean.

In line with an existing MoU signed by Iran and India in May last year, India is to equip and operate two berths in Chabahar Port Phase-I with capital investment of $85.2mn and annual revenue expenditure of $22.95mn on a 10-year lease. Some shipping operations might begin as early as 2018, Gadkari said.

That comes as a relief to Iranian officials. They first started working on the proposed development more than a decade ago, but have since been dismayed at how international nuclear sanctions and lethargic Indian bureaucracy have reduced progress to a crawl. The latter hindrance caused a rift between Tehran and New Delhi but, with India having sent Gadkari to the August 5 second-term swearing-in of President Rouhani, something of a breakthrough in talks seems to have been achieved.

Gadkari discussed Chabahar with Rouhani and several ministers including Iranian Transport Minister Abbas Akhoundi. Subsequently the $150mn of Indian finance was announced as well as the Indian capital investment in Chabahar. India is also to set up a shipping company branch in Iran to expedite operations.

According to Akhoundi, the two sides also discussed the financing of the Chabahar-Zahedan rail link, with the Indian side agreeing to propose its form of participation in the project by next month.

“For increasing the competitive advantage of Iran's transit corridors to the north, we have agreed on a 50-percent discount on Indian goods,” said Akhoundi, adding that “of course, this is not a one-way discount, but a multilateral commitment between Iran, the Republic of Azerbaijan and Russia to better promote this corridor among other competing corridors.”

India hopes to use the Indian Ocean to Iran export route to gain access to Afghanistan, South Caucasian and Central Asian markets that would rival China's supply of those markets via its proposed One Belt One Road transportation corridors. Chabahar, which is not on the Persian Gulf and is easily accessible from India's western coast, can provide India with a sea-land access route to Afghanistan that bypasses Pakistan and its port of Gwadar, a facility China is investing in.  

Gadkari said that India would stay committed to its agreements with Iran even in the event of Washington stepping up its sanctioning of the Islamic Republic.