The Israel-Iran Conflict Threatens to Disrupt India’s Plan to Upgrade the Chabahar Port in Iran
India’s long-term strategic plans for the Chabahar port in Iran have been thrown into uncertainty due to the escalating tensions between Israel and Iran. The conflict not only threatens to destabilize the West Asian region but also places India’s investments and future operations at Chabahar in jeopardy. In May, India signed a 10-year agreement with Iran to develop and upgrade the Shahid Beheshti terminal at the Chabahar port, a critical trade and transport hub that offers an alternative route for goods destined for Afghanistan and Central Asia, bypassing Pakistan. The mounting tension between Israel and Iran, however, is creating severe concerns about the port’s security, operational viability, and its broader geopolitical and economic consequences for India.
Chabahar Port: A Strategic Asset for India
The Chabahar port holds immense strategic value for India. It provides the country with direct access to Afghanistan and the Central Asian Republics (CARs), circumventing the need to rely on ports in Pakistan like Karachi and Gwadar. This is particularly crucial given India’s complicated relationship with Pakistan, which often leads to challenges in trade and logistics through Pakistani territories. Chabahar offers a more secure and reliable route, opening up new markets and avenues for Indian exports.
Moreover, the Chabahar port is a counter to China’s influence in the region, particularly through the China-Pakistan Economic Corridor (CPEC) and Gwadar port, which form critical parts of Beijing’s Belt and Road Initiative. India’s involvement in Chabahar allows it to assert its presence and deepen its ties in the region, competing with China’s expanding geopolitical influence. However, the rapidly escalating conflict between Israel and Iran may undermine India’s strategic investments and its ambitions in West Asia.
The Rising Threat to Chabahar’s Security
As tensions flare between Israel and Iran, there are increasing fears about the security of strategic assets like the Chabahar port. Israel and Iran have been involved in numerous proxy conflicts across the Middle East, and any escalation could lead to attacks on key infrastructure, including ports, oil facilities, and military installations. Chabahar, being a key port in Iran, may become a target if hostilities extend beyond the current scope of proxy warfare.
Biswajit Dhar, acting president and distinguished professor at the Council for Social Development, emphasized the importance of monitoring the situation closely. “In any conflict, strategic interest areas are often bombed. With Iran now deeply involved in this conflict, India needs to closely monitor the developments in and around the Chabahar port. It is a significant gateway for India’s exports and holds potential for expanding India’s footprint in the Central Asian Republics.”
Furthermore, Iran is a critical player in the oil market, and any disruption to its ability to export oil could lead to economic instability, both domestically and internationally. With the port’s security in question, it is unclear whether India will be able to continue operating the Shahid Beheshti terminal at full capacity or at all, raising concerns about the future viability of its investment in the project.
Geopolitical and Economic Impacts on India
India stands to lose not just strategically, but economically, from any disruption at Chabahar. The port’s development has been a cornerstone of India’s broader goals of enhancing regional connectivity and strengthening trade ties with Afghanistan and Central Asia. If Chabahar becomes a casualty of the Israel-Iran conflict, India will face significant delays and obstacles in achieving these goals.
In addition to the potential loss of trade opportunities, the conflict has already led to a rise in global crude oil prices, which directly impacts India’s economy. As a major importer of oil, India is particularly vulnerable to fluctuations in global oil markets. Any sustained increase in oil prices will ripple through various sectors of the Indian economy, from transportation to manufacturing, causing inflationary pressures and higher costs for businesses and consumers alike.
Oil prices have already risen by approximately $4 per barrel since the conflict escalated. This has increased India’s oil bill, and there are fears that further price hikes could worsen the situation. Ram Singh, professor and head at the Indian Institute of Foreign Trade, warned that the conflict could have several immediate consequences for India: “The escalation in conflict in the region would have five immediate impacts — a spike in crude prices, disruption in trade, increased logistics costs, airspace diversions leading to higher risk and costs, and Indian products becoming costlier and less competitive in global markets. The impact on the Chabahar port is one that India needs to follow closely.”
Broader Implications for Global Trade
The conflict between Israel and Iran, if it continues to escalate, could have far-reaching consequences beyond the immediate region. Iran is a major player in the global oil market, and any interruption in its oil production or exports could lead to a significant supply shortage, driving up prices further. This would have a cascading effect on the global economy, particularly for countries heavily reliant on oil imports.
The director-general of the Federation of Indian Export Organisations (FIEO) echoed these concerns, stating: “The Iran-Israel conflict has the potential to impact world trade and the global economy significantly. Iran is a significant player in the oil market, and any escalation in conflict could disrupt oil supplies, leading to higher prices, which would impact global economies, especially those reliant on oil imports.”
In addition to oil prices, shipping costs and logistics could become more challenging. With increased security concerns in the region, insurance premiums for shipping companies could rise, and delays caused by disruptions in major shipping routes could further complicate global trade. The potential for a broader conflict involving other regional powers could also exacerbate these issues, making it even more difficult for India and other nations to maintain their trade routes and supply chains.
India’s Role in De-escalation
Given its close ties with both Israel and Iran, India finds itself in a delicate position. It must carefully navigate the situation to protect its strategic and economic interests, while also playing a constructive role in promoting peace and stability in the region.
Biswajit Dhar highlighted the potential for India to take on a more active diplomatic role, suggesting that the Modi government could use its influence to help de-escalate tensions. “The Modi government, given its strategic and humanitarian interest in the West Asian region, could play a larger role in de-escalating tensions. Diplomacy should be given priority over military conflict.”
India has traditionally maintained a neutral stance in the Israel-Iran rivalry, balancing its relationships with both nations for its own geopolitical and economic benefit. However, as the situation in West Asia continues to deteriorate, India may need to reconsider its approach and increase its diplomatic efforts to mediate between the two sides, or at the very least, ensure that its interests, particularly regarding the Chabahar port, are safeguarded.
Conclusion
The escalating Israel-Iran conflict presents a serious challenge to India’s plans for the Chabahar port and its broader ambitions in the region. With the port’s security at risk and rising oil prices threatening the Indian economy, the stakes are high for New Delhi. In addition to monitoring the situation closely, India will need to engage diplomatically with all parties involved to protect its strategic and economic interests, while also advocating for peace and stability in the region. If the conflict continues to escalate, the consequences for India, both in terms of its trade operations and its geopolitical standing, could be profound.
