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Long-term agreement on Chabahar port by Iran and India

India and Iran will likely sign a long-term agreement by September in time for the Global Maritime India Summit 2023, which is slated to take place in New Delhi in October, regarding the construction of Iran’s Chabahar Port.

The Shahid Beheshti Terminal in the Chabahar port will be developed by India under a multi-year agreement that Delhi and Tehran are likely to sign after years of negotiations. A deal to develop the port was signed in 2016 between Iran’s Arya Banader and India Ports Global Ltd (IPGL).

But according to a port ministry official, the details of the long-term agreement will be worked out next month, and a contract will probably be signed in September.

For the time being, India and Iran are signing one-year contract extensions to continue building and operating the terminal at Chabahar Port. To provide security for investment and expansion plans for the port that India developed, India has been pleading with Tehran to sign a longer-term agreement. There may be an automatic renewal clause in a long-term agreement of ten years.

Conflicts over the arbitration clause in the agreement previously delayed negotiations on the long-term contract. Due to constitutional limitations on using foreign courts to resolve disputes, Iran previously had trouble with clauses involving international arbitration. The two parties are now prepared to come to a compromise agreement, allowing disputes to be brought before international arbitration courts in neutral locales like Singapore and Dubai. India had previously suggested either Dubai or Mumbai be used for arbitration proceedings.

Other points of contention, such Iran’s demand for a minimum traffic guarantee, will also be settled, clearing the way for the port’s infrastructure to be built quickly in order to attract shipping traffic to this key site.

Chabahar, located in southeastern Iran, was envisioned as a gateway for India to access Central Asian markets. The project’s roots date back to 2003, when both nations agreed to its development during then-President Mohammad Khatami’s visit to India. However, the initiative faced obstacles due to Western sanctions on Iran’s nuclear programme. In 2013, India pledged $100 million to develop the port, but matters progressed after the 2015 nuclear deal was struck between Iran and the Permanent Members of the UN Security Council, Germany and the European Union.

In 2016, during Prime Minister Narendra Modi’s visit to Tehran, India, Iran, and Afghanistan signed an agreement to develop Chabahar as a trade and transport corridor to bind their economies together. The resumption of US sanctions in 2019 and the fall of Afghanistan in 2021 have complicated matters and slowed work on the port. But last year, a team from India’s ports ministry, including minister Sarbananda Sonowal visited Iran, and negotiations for the development of Chabahar have gained pace again.

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