Chabahar and Gwadar: A Tale of Two Ports

The geopolitical equations and rivalries over control and cooperation over trade routes are gathering momentum in Asia. The focus in this twenty-first century trade (route) war are two ports situated in the Arabian Sea – Gwadar in Pakistan and Chabahar- just a couple of kilometers away in Iran. The saga of these ports involves foreign connections, investments, and greater plans that come attached with the same. While Gwadar is a port being built in Pakistan by China, as a part of the Belt Road Initiative (BRI), Chabahar is a port in Iran which has been built with Indian assistance. There is significant stake for China in Gwadar and India in Chabahar. These ports are likely to be game changers in terms of trade and economic security for the two of the most populous states in the world. However, there is much more to look out for in the prospects of these two cities than mere markets. The models of development of these two cities provide two very different models of international investment and cooperation which is of immense importance to policy makers, academics as well as enthusiasts of international relations.

Over the past couple of decades or so, China has emerged as an economic powerhouse in the world.  Today, the People’s Republic of China is the world’s second largest economy. It is also the world’s most populous state with a massive industrial base which it has acquired over decades of modernisation since the days of Deng Xiaoping. However, such a juggernaut of an economy also guzzles a lot of oil (among other products). This is where much of China’s geopolitical anxieties lie. China is dependent on oil imported from West Asia which needs to sail around the Indian Ocean, pass through the straits of Malacca all the way up the South China Sea to reach the Chinese coast. This is not only expensive and time consuming but also fraught with a large number of vagaries and risks that international politics can throw up. For example, a single conflict or embargo in South East Asia can wreck havoc for the Chinese whose supply of petroleum can get stopped bringing their entire economic apparatus to a standstill.

It is with this (among other) concern that China has sought to build a port in Pakistan, their ‘all weather’ friend. This port is to be complemented by roads which would directly connect Gwadar to Western parts of China. Thus, Gwadar and the proposed CPEC – China Pakistan Economic Corridor – would provide China with a lot of savings in terms of trade items – especially oil supplies. It would also do the same in terms of goods imported from and exported to Africa. Not only would costs be reduced and connectivity become faster, it would also act as an insurance against disruptions in trade due to war or other politics problems in South East Asia. The CPEC is also a part of the global BRI which seeks to enhance connectivity and trade (read Chinese economic presence and power) across the world. Among other things, the fully functional Gwadar connected with the CPEC would also accrue economic gains to the Western parts of China including Xinjiang which is among the least developed regions in a country where the coast still much more developed than the fringes. The CPEC could help China bring some economic benefits to these areas and alleviate some problems and allay popular discontent in an area afflicted by separatism and militancy.

The CPEC has been boosted by the Kingdom of Saudi Arabia – another key supporter of the Pakistani state. The Saudis have pledged to build a refinery in Gwadar for which they have committed to an investment of $8 billion. Thus, the Gwadar project, when completely underway, does have expectations from a number of powers.

Similarly, Chabahar holds the key to the possible solution of some of India’s key international economic ambitions. India’s trade with Central Asia has always faced great difficulty due to connectivity issues. Similarly, the Central Asian republics have also faced difficulties in trade due to their landlocked disposition which creates inhibitions in trading with countries which are not in the immediate neighbourhood. The Chabahar port, which is operated jointly by the India Ports Global Private Limited (IPGPL) and Aria Banader Iranian, is slowly but steadily set to change this predicament. The Chabahar port is a part of the International North South Trade Corridor (INSTC) which connects Iran with Russia and the Central Asian Republics. The INSTC was set up by India, Russia and Iran in 2000 for establishing multi-modal connection between states which would connect ports and cities from the Indian Ocean and the Persian Gulf to Central Asia and Russia via the Caspian Sea.

The Chabahar Port has also got some great prospects for Afghanistan – another landlocked country which is plagued by chronic economic crisis along with the persistent internal conflict. India is one of Afghanistan’s major trade partners. The Indian government has also supported the Afghan regime since the ouster of the Taliban in 2001. However, due to connectivity issues (no direct border and not the most cordial relations with Pakistan) it has been difficult for India to connect with Afghanistan and vice-versa. As India receives its first shipment from Afghanistan via Chabahar, this is set to change. With the US withdrawal from Afghanistan, the country faces a rather uncertain future. A well functioning Chabahar port might go a long way in playing a positive role in the future of Afghanistan and bringing some prosperity to it.

The present political situation finds Iran in a mixed disposition. While the fallout of the disastrous US invasion of Iraq- read creation of the ISIS and its aftermath has boosted Iran’s position as a major power in the region, renewed sanctions by the United States doesn’t augur too well for the Iranian economy. At this juncture, the port of Chabahar can be Iran’s pivot to prosperity. It must be noted that not countries have applied sanctions on Iran after Donald Trump decided to re-impose them last year.

India is among the eight countries which have a ‘waiver’ to trade with Iran and not face American reactions for the same. The INSTC can help Iran keep its economy running and also gain prosperity. This also provides India with added opportunities to increase trade and investment in Iran. India is in a position to provide Iran with a lot of products and services which may be hard to find for her from other sources. Medicines, technical cooperation, IT services can be some areas where India can help alleviate Iran’s ordeal and also improve the relations between the two countries. Access to the Iranian market also opens India’s access to Iraq and Syria which are close to Iran and in desperate need for reconstruction after the devastation caused by the wars with ISIS. India can play a significant, constructive role in rebuilding the infrastructure in Syria and Iraq. India has the capacity to provide highly skilled human capital (engineers, architects etc) which is needed for this.  This situation can also help Iran become a more ‘responsible’ power in the region which would desist from conflagration of regional conflicts.  It can also act as a balance on the powers of the Gulf monarchies.

The question to which all attention ultimately narrows down to is whether Chabahar and India’s investment in it can compete with the well funded, Chinese built and also China owned Gwadar. The answer needs to be explored in a nuanced manner. It is indeed true that the amount of money which the BRI and its adjunct projects have at their disposal is much more than what India has invested in Chabahar. By simple projections and estimates, Gwadar is to be a much greater success when it becomes fully operational as a deep sea port as $500 million cannot compete with $46 billion. However, international politics is not simply a matter of raw financial calculations. The sections above have argued why the Chabahar project holds much prospect for a number of countries which need access to a warm water port. For Afghanistan, Chabahar is a closer and better (given Afghanistan’s relations with Pakistan) alternative. It is a much more logistically feasible option for the Russians and the Central Asian Republics. The INSTC has much better and shorter connection prospects to Central Asia, the Caucasian region and Eastern Europe than the CPEC.

The CPEC/BRI on one hand and the INSTC on the other also represent two fundamentally different ways of international investment. This is also a likely factor in improving the prospects and of the INSTC. International investments and economic cooperation are always contentious issues. This is especially true when a much larger economic power is entering into a deal with a smaller power. It is quite natural that the latter would be wary of the former’s economic clout. Economic deals have often had rather detrimental consequences on the economy and sovereignty of smaller nations. In case of the CPEC or any project involving Chinese money, these concerns seem to be rather pertinent as some countries like Sri Lanka and Kenya among others have discovered. Chinese money and investment come with rather stringent terms and conditions. It is true that China splurges a lot of money very efficiently over a quick space of time in countries wanting in infrastructure. This has a seductive charm which few governments, desperate for cash, can resist. However, Chinese money is often used to build white elephant projects for which the interests have to be paid failing which the Chinese take over key infrastructure in that country.

Another major problem with Chinese investment is that of labour and demographics. In a large number of Chinese projects, the labour force is chiefly supplied by China. Thus, an important amount of Chinese money invested actually goes back to Chinese hands. Moreover, these Chinese labourers often get into altercations with locals who are denied employment opportunities in their own lands. Chinese firms and companies also purchase huge amounts of assets in countries where they invest. This can also lead to conflicts like it has in Kazakhstan where huge tracts of land have been purchased by Chinese investors. The BRI in general and the CPEC in particular also involves some of these factors. The BRI passes through territories which are disputed, like that of Pakistan administered Kashmir. In many places that the CPEC is passing through, there have been a number of disputes with locals including altercations and protests in the Balochistan area inside Pakistan.

According to Dr. Jabin Jacob, Associate Professor of International Relations, Shiv Nader University and a Sinologist,  Chinese investments in other developing countries must always be taken with a pinch of salt as  to an extent, Chinese assurance of development and benefits of such projects is propaganda. Dr. Jacob also pointed out  that a lot of the money that China invests actually goes to regimes which are not democratic or are marginally so. In those states it is the government and its allies which benefit from these investments. Due to the (sometimes de facto) authoritarian nature of these states, the government is immune from electoral consequences. However, these projects cause a lot of discontent with the people.

In fact, there have also been concerns with the CPEC from within Pakistan  itself. Noted Pakistani political economist S. Akbar Zaidi  created controversy after he expressed fears that the CPEC might turn Pakistan into a Chinese colony. The CPEC has also been a rather uncomfortable chapter with the current government of Prime Minister Imran Khan.  Financial problems and other geopolitical goals of Pakistan ensures the dependence on the ‘all weather’ friend that China is, but despite these structural restraints, Khan’s government has on a number of occasions expressed dissatisfaction with the CPEC. It was only a few days ago that reports appeared that the Pakistani government has diverted around $171 million from CPEC related projects to others which are overseen by Pakistani legislators. A few months ago, his government shelved another major CEPC project. While a number of bilateral meetings and strategic dialogues reiterate the commitment to continue and protect CPEC from all detractors, a sense of unease remains.

Contrast this with the INSTC. While every economic deal has its fair share of speculation and apprehension, there is nothing that India has or can do akin to what has been written above. Neither does India pump in enormous amount of money in terms of loans with usurious levels of interest nor does India deploy significant numbers of Indian workers to these projects. Almost all of the labour force for the construction of Chabahar was local. Chabahar also has a significant amount of multi-lateralism involved. Japan for instance, has interests in Chabahar. Even China (which also has good relations with Iran) trades through it.

The argument is not that the Indians are essentially more generous or considerate as a people as compared to the Chinese. However, the fact of the matter is that India has not imposed such conditions.  This renders it a much safer partner in economic terms. A deal between India and a Central Asian country cannot be anything but that of mutual respect and prosperity. India’s slow and bureaucratic way of functioning is problematic in many ways but one positive aspect of this is that deals involving India also take into account these apprehensions of the other partners. Moreover, India is not a littoral state with any of these countries. Thus, India’s limits of capacity, its foreign policy, as well as its soft power make her a safer and more lucrative trading partner for many countries.

All said, it cannot be denied that as of now, China is much ahead of India in terms of finances at disposal for investment. Added to this, China’s authoritarian regime provides great efficiency to the process of investment which India’s ponderous bureaucracy lacks. However, Chinese funds come with strings attached which Indian cooperation agreements don’t. India is one of the only countries in Asia which is in a position to provide technical know-how and build infrastructure in other Third World countries without such terms and conditions. This has the potential to make India a preferred investment partner for many countries. This and the multi-lateral aspects gives Chabahar port and the INSTC a certain edge over Gwadar.

(The author teacher political science at New Alipore College and Vivekananda College for Women, both affiliated to the University of Calcutta.)

Aditi Bhaduri

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