US sanctions waiver, Chabahar Port set to commence operations

A speed boat passes by oil docks at the port of Kalantari in the city of Chabahar

Decks have been cleared for India to commence operating the Chabahar port in Iran by the end of November after the US granted exemptions to the port from the sanctions it had imposed on the Persian Gulf nation from Sunday.

“We are targeting to commence operations at Chabahar by the end of the month,” a Shipping Ministry official said, ending months of uncertainty over the fate of the India-funded project.

The waiver has also re-opened the possibility of paying Iran in Euros, stated the official, who declined to be named.

India has picked Bandar Abbas-based Kaveh Port and Marine Services company to run the port on a temporary arrangement for 18 months till a full-time manage, operate and maintain (MOM) contractor is finalized by India Ports Global Pvt Ltd, the Indian state-owned entity that is implementing the project.

The commencement of commercial operations at Chabahar has been delayed because of difficulties in paying Kaveh Port and Marine for the services due to banking matters on the transfer of funds.

“To overcome this hurdle, Iran had agreed to accept payment in rupees. But, with this changed scenario, whether they will insist on taking payment in Euros, we’ll have to see and discuss that with Iran and sort it out. Giving payment in Euros should not be a problem now since Chabahar has been exempted from the sanctions; so banking transactions should not be an issue,” the official said.

“The waiver granted by the US will allow us to ask Kaveh to start operations; this is the first step,” the official said.

The fine print of the US waiver terms will also assist India to decide whether to dilute the tender conditions for selecting a full-time Indian MOM contractor to run Chabahar.

India Ports Global (a 60:40 joint venture between Jawaharlal Port Trust and Deendayal Port Trust) and Aria Banader Iranian Port signed a deal in May 2016 to equip and work the container and multi-purpose terminals at ShahidBeheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease. Cargo revenues collected will be given by India and Iran as per an agreed formula.

Situated in the Sistan-Baluchistan Province on Iran’s South-eastern coast (outside the Persian Gulf), Chabahar port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia.

The first phase development of Chabahar port will have a container terminal with two berths of 640-meter quay length and a depth of 16 meters and a multi-purpose terminal with a quay length of 600 meters and draft of 14 meters. The port has a total backup area of 70 hectares.

India Ports Global has ordered four rail-mounted quay cranes (RMQCs) for a combined $29.8 million from Chinese port crane maker Shanghai Zhenhua Heavy Industries Co Ltd (ZPMC) and 14 rubber-tired gantry cranes or RTGCs for about $18 million from Finnish crane maker Cargotec OYJ for erecting at Chabahar port.

Chabahar will grant India the much-denied connectivity to enhance trade with landlocked Afghanistan and Central Asian nations.

India’s participation in the development of Chabahar Port will give India an alternative and reliable access route into Afghanistan utilizing India’s earlier investment in Zaranj-Delaram road construct in Afghanistan, and also a reliable and more direct sea-road access route into Central Asian Region.

Chabahar Port has the potential to become a regional transit hub for Afghanistan and eastern Central Asian Countries. It is expected that the volume of trade will increase substantially on the starting of operation at Chabahar Port, the Ministry official said.

It will enhance bilateral trade with Iran — currently pegged at $16 billion — and provide an opportunity for Indians to avail low-cost energy for various industries in the free trade zone in Chabahar.

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