Iran's Chabahar free zone awaits end of sanctions

By AFP
Published: June 4, 2015
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A partial view of the Kalantari port in city of Chabahar. Chabahar, located on the coast of Sistan-Baluchistan (south-east), is open to the Oman Sea and the Indian Ocean. PHOTO: AFP

A partial view of the Kalantari port in city of Chabahar. Chabahar, located on the coast of Sistan-Baluchistan (south-east), is open to the Oman Sea and the Indian Ocean. PHOTO: AFP

Hundreds of containers lie idle in the scorching sun that pounds Iran’s southeastern port of Chabahar, a free trade zone crippled by decades of international sanctions.

But against the backdrop of nuclear talks between Tehran and world powers, authorities hope foreign investors will finally wise up to the “golden opportunity” of doing business in Chabahar, Iran’s only gateway to the Indian Ocean.

Between 2006 and 2010, the UN Security Council adopted six resolutions, four of which imposed sanctions, over Iran’s nuclear and missile programmes.

Since 2012, the United States and the European Union have also applied a series of unilateral sanctions that specifically target the energy and banking sectors.

In early April, however, Tehran and six world powers reached a framework agreement aimed at paving the way for a final nuclear deal by the end of June.

Workers transfering goods from a cargo container to trucks at the Kalantari port in city of Chabahar on May 12, 2015. PHOTO: AFP

The deal is aimed at preventing Iran from developing nuclear weapons in exchange for an easing of the sanctions.

The United States, one of the six world powers negotiating with Iran along with Britain, China, France, Russia and Germany, has said sanctions would be lifted in stages as the deal is implemented.

For Chabahar Free Zone (CFZ), an accord cannot come soon enough.

The port is located in Sistan-Baluchistan province and provides countries in southeast and central Asia with a gateway to trade with Iran.

A brochure lists “the golden investment opportunities” of doing business here, such as 20 years of tax exemptions, reduced customs rights and a 100 per cent guarantee on invested capital and profits.

About 2,000 companies already have a presence in the free trade zone, which was first set up in 1994.

Workers walking near containers at the Kalantari port in city of Chabahar on May 12, 2015. PHOTO: AFP

Half of them are from Pakistan, Afghanistan and the Gulf, while 30 per cent are from China and other Asian countries. The remaining 20 per cent are from the West.

“Our policy is to have as many investors as possible,” said Saeed Moghadam, the CFZ executive director for investments.

Fifteen years from now Chabahar “will function as a megaport with a traffic capacity of 80 million tonnes”, said CFZ deputy chairman Ali Hamad Mobaraki.

There are plans to turn the zone into a hub for petrochemical activities as well as developing it into a tourist destination.

The CFZ already has a large commercial area where consumers can snap up goods that are 30 to 40 per cent cheaper than in the rest of Iran.

“People come from all over the country to buy,” said Nematollah Rastegar, manager of an electrical appliances shop in the CFZ.

“Life is getting better here. There is progress. They are building houses”.

Fishermen cleaning their catch in the southern port city of Chabahar. Chabahar, located on the coast of Sistan-Baluchistan (south-east), is open to the Oman Sea and the Indian Ocean. PHOTO: AFP

Yet activity in the port area has struggled to take off and there is still only one crane to unload containers.

“Many foreign companies left” after the West slapped international sanctions on Iran for relaunching its controversial nuclear programme in 2005, said Moghadam.

But the tide appears to have turned slightly since 2013, when Iran and world powers began talks aimed at a breakthrough on the nuclear issue.

According to Moghadam, 250 companies have made a “partial comeback” to Chabahar while “US, Canadian and French companies have shown great interest.”

“We have already begun to negotiate contracts” with interested partners, he said, adding that he expected deals to be signed quickly if a nuclear deal is finalised by its end-of-June target date.

In early May, India signed a multi-million memorandum of understanding with Iran to develop Chabahar port.

The move aims to provide India with access to Afghanistan that bypasses Pakistan, and help it compete with China, which is investing heavily in the Pakistani port of Gwadar.

And in an effort to reach their goals, authorities are trying to improve infrastructure in and around Chabahar.

Projects include the construction of a railway to link the port to provincial capital Zahedan, building a highway and hotels, as well as revamping the local airport.

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Reader Comments (11)

  • Khattak
    Jun 5, 2015 - 1:46AM

    Hype & exaggeration aside Chabahar could win the day if it start functioning first. It is only 72km away from Gawader & have better access to Afghanistan, CIS, Central & South Asia. If it establish operation first, all trade, business & investment will go there. We will left with singing songs of CPEC for next 20 years. Recommend

  • abreez
    Jun 5, 2015 - 6:33AM

    In early May, India signed a multi-million memorandum of understanding with Iran to develop Chabahar port.
    The move aims to provide India with access to Afghanistan that bypasses Pakistan, and help it compete with China, which is investing heavily in the Pakistani port of Gwadar.
    Distance from Kabul to Kandahar (498km), from Kandahar to Chabahar (1343km), and from Chabahar to Mumbai (1435km with 30knots), from Kabul to Mumbai (3276km)
    Distance from Kabul to Lahore (804km), from Kandahar to Quetta (242km), from Quetta to Gwadar (912km), from Quetta to Karachi (686km)
    How can India compete with China, even if India will have well-wishers in Pakistan like ET?Recommend

  • Meet
    Jun 5, 2015 - 7:20AM

    @Khattak: shows the nervousness coming out of pakistan leadership now a days criticizing India for disrupting cpec even before it’s started, Indians are way smarter than Pakistanis who are always over excited Recommend

  • Virkaul
    Jun 5, 2015 - 9:20AM

    @abreez: Not sure what kind of analysis are you doing. Chahbahar should be a good alternative to landlocked countries like Afghanistan, Uzbekistan, Turkmenistan, Tajikistan, Kyrgistan, Kazakhstan etc to Arabian Sea through a non hostile terrain. CPEC route is only for connecting China to warm waters not Central Asia or Afghanistan. Chahbahar should end hegemony of Pakistan that creates problems for these countries by imposing undue taxes and not allowing trucks to certain countries. Recommend

  • Talking. Point
    Jun 5, 2015 - 9:52AM

    @abreez: Answer is simple . Apart from distance , there are other enablers like peaceful conduit for goods ( imagine a peaceful transition of goods thru violence infested Baluchistan !) , simpler procedures and lesser custom corruption and pilferage. Overall safer and secure transport and timely arrival of goods . Recommend

  • aam shehri
    Jun 5, 2015 - 9:58AM

    @Meet how scared are you, Mr modi and their teams are begging in all over the world that CPEC will not be accepted, so who is nervous? Just be relaxed my dear neighbour.Recommend

  • Bharat
    Jun 5, 2015 - 10:15AM

    @abreez:

    India has become fastest growing economy in the world even higher than China.So open your eyes,grow upRecommend

  • Realist
    Jun 5, 2015 - 3:21PM

    If India is developing Chabahar port hen rest in peace this port. How can you compete with a Chinese built and operated Gwadar port with Indian built and operated Chabahar port. Iran should rather turn to Singapore for Chahbhar operation.Recommend

  • Jun 5, 2015 - 4:58PM

    an healthy competition is always a good sign. china is helping pakistan, india is helping iran. in both cases the ports are situated in most neglected provinces. so it is a golden chance for both pakistan and iran to develop these backward provinces and make them in line with the rest of the country. while in iran, the problem is sanction; in pakistan it is corruption and political friction. there is also a lack of interest of establishment to develop smaller provinces. after the unanimous decision to make the western route operation first, i see a complete ignorance to the CPEC project. hope our establishment wake up from slumber and start to think more about pakistan as a whole. Recommend

  • افغان ميهن
    Jun 6, 2015 - 1:05AM

    @ Atherkhanturi

    Ditto! Competition is healthy for the region and with that comes a relaxed environment where unfair tariffs and restrictions get an overhaul if one wants to be competitive.

    @ Abreez

    Afghans are already using Chahbahar and the Northern Distribution Network because they are tired of the thugs in Karachi.

    Proximity does not help a businessman when the cost of doing business becomes a liability and loss in profit margins.

    Afghans are moving on and Chahbahar is a win win situation for Afghans no matter how you slice and dice it.

    Afghans and Iranians share a common language and culture and businessmen don’t have to hire middlemen and translators to conduct business like they do in Pakistan.

    Unfortunately, Pashtuns in Pakistan are not in charge of ports and shipping and there is a huge language and cultural barrier between Afghans and the non Pashtun Pakistanis.Recommend

  • JSM
    Jun 6, 2015 - 12:08PM

    @abreez:
    India will upgrade Chahbahar by December 2016. The issue is not distance from Kabul to Mumbai. The issue is distance from Kabul to a port. giving Afghanistan an inlet/ outlet.

    Chahbahar will also be good for India for import of crude from Iran.Recommend

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