The recent agreement between Iran and India to lease out operation control of part of the strategic Iranian seaport of Chahbahar to New Delhi is a significant development in the region and would have implications for Pakistan, in particular the China-Pakistan Economic Corridor (CPEC).

Chahbahar port, located just 90 km from the China-sponsored Gwadar port of Pakistan, is considered as a transit route between India, Iran and Afghanistan, bypassing Pakistan. India has been trying to develop Chabahar as a way to gain access to the markets of Central Asia as well as Afghanistan. India has been especially interested in Chahbahar because Pakistan has not been allowing New Delhi to use its territory to have an ingress into Afghanistan and beyond into Central Asia. Islamabad has been considering its adverse security relations with India more important compared to its economic ties with Delhi. However, there is a cogent economic justification for Pakistan not to allow India use its territory to reach Afghanistan and Central Asia.

Afghanistan, which is a landlocked country, has been largely dependent on Pakistan for its imports and its miniscule volume of exports. In case Pakistan gave access to India to Afghan and Central Asian markets, Islamabad would lose its own share of exports to Afghanistan. In fact, Pakistan has already lost a lot of its exports to Afghanistan and the recorded volume of bilateral trade has come down to less than one billion dollars. One of the key reasons for this declining Pak-Afghan trade is that after part of the Chahbahar port has been made operational much of Afghan trade has been diverted to Iran. There has been criticism against Pakistan from Afghanistan, and India as well, that by denying India access to Afghanistan and Central Asia and Kabul to India, Islamabad has mismanaged the situation which has ultimately inflicted heavy losses on Pakistan. There may be some substance in this criticism, but denying India access to Afghanistan has been Pakistan’s compulsion. Anti-Pakistani sentiments in both Afghanistan and India have also played a significant part in diverting the Afghan trade away from Pakistan to Iran.

India may have economic reasons to seek and get control of part of the Iranian port of Chahbahar so as to reach Afghanistan and Central Asian markets. However, Indian’s more important motive is strategic. China got operational control of Gwadar so as to develop the gateway to the CPEC, which starts from the city. There may be some strategic interests of China to have control over Gwadar but these are not more pronounced than its economic interests. Gwadar and CPEC are part of China’s grand design One Belt One Road (OBOR) initiative of linking the Eurasian landmass by resurrecting the ancient trading Silk Route. But on its part, India thinks of China’s control over Gwadar in completely strategic terms. New Delhi considers that after control over Gwadar, China would be at a great strategic advantage to challenge India’s naval superiority in the Indian Ocean. Rather China’s presence in Gwadar would place Beijing along with India’s arch-rival Pakistan in an advantageous position to impose a naval blockade against India during war and could stop its much-needed oil supplies from Gulf Arab countries. This fear has been compelling India to somehow get control of Chahbahar which is very close to Gwadar, to off-set the Chinese presence and, thus, strategic advantage in Gwadar.

India’s strategic interests in Gwadar can be gauged from the fact the New Delhi has a rivalry not only with Pakistan but also China. Although China and India have increased the volume of their bilateral trade manifold, still they remain strategic competitors. India, therefore, has been completely against the CPEC as it would not only economically stabilize Pakistan but would also give, in its perception, “undue” advantage to both the rivals strategically.

On its part, Iran by giving India operation control over Chahbahar, has possibly made a grave mistake. Both China and Pakistan are not going to accept this move by Iran and the relations of both the states with Tehran could be severely affected by Chahbahar’s handing over to India. Pakistan is a very important neighbour of Iran while Beijing is an important trading partner of Tehran. Against this backdrop, Iran’s provision of space to India, a rival of both Islamabad and Beijing, on its soil, close to the CPEC and Gwadar would have grave consequences for Iran’s ties with Islamabad and Beijing. Nevertheless, Iran must have calculated its costs and benefits after giving operational control of Chahbahar to India. Here one aspect of the situation is quite important: in US President Donald Trump’s South Asia policy, India is of significant importance. Iran knows this and Tehran also is cognizant of the fact that Washington may revoke the Iranian nuclear deal and the sanctions once again may be fully in place against Tehran. With sanctions on the one hand and several hostile states in the Arab-Gulf region, Iran would be hemmed in. In this situation, India, which is an important buyer of Iranian oil and gas, would be of vital importance. However, Iran seems to have made a strategic miscalculation. If the Iranian nuclear deal is revoked by Washington and sanctions re-imposed on Tehran, no country would be able to withstand the international pressure against having a large-scale economic engagement with Iran. Already India has some apprehension about developing Chahbahar because of fear of international pressure within the context of sanctions on Iran. On its part, Tehran has been trying to rope India into the region. Together with India, Tehran thinks, it could dominate Afghan trade and provide an alternative route of integration of South and Central Asia. This scheme of things obviously aims at bypassing Pakistan. Tehran may not have overtly opposed Pakistan, but it has had its reservations on Islamabad’s role in Afghanistan which Tehran thinks has been against Iranian interest. Therefore, Iran would like to counter Pakistan’s role and influence in Afghanistan. Iran for the last few years has had developed working relations with the Afghan Taliban, considered as Pakistan protégés.

The handing over of operation control of Chahbahar to India by Iran would also not be liked by the Arab-Gulf states as it would be seen as a strategy to divert business away from their seaports.