India to develop Iranian port with $150m

India’s government Thursday cleared $150million of Exim Bank credit to further develop the Iranian Port of Chabahar, in the Gulf of Oman.

The agreement pertains to a Memorandum of Understanding (MOU) signed by Shipping Minister Nitin Gadkari in May 2015, two months before Iran struck a deal with the West to reduce its nuclear capabilities. Under the MOU, India will invest $85million to develop two berths at Chabahar Port Phase 1, leasing them for 10 years at $22.95million per year.

Ownership of Indian-supplied equipment will transfer to Iran once the lease period is over. Partially developed by India in the 1990s, Chabahar’s strategic location, situated in a designated free-trade zone, would allow India to trade with Iran’s landlocked neighbour Afghanistan while bypassing Pakistan, with which it has a difficult relationship. The MOU stipulates that the new berths enter operation no later than 18 months after the signing of the contract.

Much delayed, the agreement follows drawn-out negotiations over the price of gas imports to India from Iran. Crude oil trades with India, which incorporated a rupee-based payment mechanism to circumvent Western sanctions, has been a crucial revenue stream for the country, second only to China.

Iran, meanwhile, will be in a stronger position as an exporter with the relief of Western sanctions. Four of the first tankers of Iranian crude are currently heading to European ports, loaded at the Kharg Island terminal off southwest Iran.

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