Why India’s work on Iran’s Chabahar Port is stalled despite US exemption

European, Chinese suppliers of equipment are reluctant to deliver as they fear adverse impact on their business with US after it imposed sanctions on Iran.

Moushumi Das Gupta 24 June, 2019

Chabahar port | Commons

New Delhi: Uncertainty looms large over the future of the strategically-important Chabahar Port that India is building in Iran’s Sistan-Baluchistan province.

Despite India getting exemption for the development of the port from the sanctions imposed by the United States on Iran last November, the European and Chinese suppliers who had won the bid to supply equipment for the port are now reluctant to deliver, fearing adverse impact on their business with the US, senior government officials familiar with the matter said.

The US imposed the sanctions in November 2018 after pulling out of the nuclear deal it signed with Iran in 2015. ThePrint reported Saturday that the US Secretary of State Mike Pompeo is likely to reiterate his government’s stand to exempt India from sanctions on the use and development of the Chabahar Port during his visit next week.

Critical Equipment

The suppliers in question include Cargotec OYJ, the Finnish crane maker, which won the bid last year to supply 14 rubber-tyred gantry cranes, and Chinese crane maker Shanghai Zhenhua Heavy Industries Company Limited, which is to supply four rail-mounted quay cranes.

“Though the US has said that the Chabahar Port is exempted from sanctions, there is nothing in writing. These are big companies and don’t want to jeopardise their business for operating in Iran, and that too for this one project,” a senior shipping ministry official who did not wish to be identified told ThePrint.

“These heavy-duty equipment are critical for developing the port, and are manufactured mostly by European and Chinese companies. We cannot source them locally.”

Arun Kumar Gupta, managing director of the government-owned India Ports Global Private Limited (IPGPL), which is implementing the Chabahar project, added: “The two companies have not started supply of equipment so far. They have informed us that they have applied for exemption from sanctions before doing business in Iran.”


Also read: How the US and Iran arrived on the brink of war


India rewriting tender terms for the third time

It’s not only the equipment supply that has got stuck because of apprehension about sanctions. Officials said private players are also reluctant to come forward to develop the port, forcing the government to rewrite the terms and conditions of the tender to manage, operate and maintain (MOM) the container and multi-purpose terminal for the third time.

Last year, when the government invited bids for developing the port, none of the three companies that won the technical bid — Adani Ports and Special Economic Zone Limited, JSW Infrastructure Limited and KM Baxi group — participated in the financial bid on the grounds that the bid parameters were very stringent. These included parameters requiring the successful bidder to pay US $8.52 million upfront as premium.

“To save time and make the bid attractive, we have now decided to ease the terms of the tender and also club the technical and financial bids together,” the shipping ministry official quoted above said.


Also read: India to seek Iran oil waiver when Pompeo visits, US is hoping to foil S-400 missile deal


Significance of the Chabahar Port

India had signed a Memorandum of Understanding with Iran in May 2016, according to which it will equip as well as operate the two terminals with a capital investment of US $85.21 million and an annual revenue expenditure of $22.95 million on a 10-year lease.

But pending procurement of the equipment and finalisation of the long-term MOM operator, India signed a short-term lease contract to start interim operations on the part of the port where work is complete.

India has selected Kaveh Port and Marine Services, an Iranian company, for running the interim operations that started in December 2018.

The development of the Chabahar Port has huge strategic importance for India as it would allow India to bypass Pakistan and give it to access to markets in Afghanistan and Central Asia. India is also developing a rail link connecting Iran to Afghanistan to help facilitate connectivity.

The Chabahar Port is located some 90 km from the China-sponsored Gwadar Port in Pakistan.

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