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26.05.2016 | India-China rivalry in South Asia heats up

India hopes its development of the Iranian port of Chabahar will open up trade with Afghanistan and Central Asia and counter China’s increasing influence in the region.

In talks with Iranian President Hassan Rouhani in Tehran this week, India’s Prime Minister Narendra Modi agreed to invest $500 million in the construction of a deep-water port at Chabahar, close to the border with Pakistan.  The talks also resulted in cooperation agreements in aerospace, biotechnology, nanotechnology and counter-terrorism.

With the lifting of nuclear related sanctions against Iran earlier this year, India has been keen to invest in – and trade with – its neighbour.  The Chabahar project signals New Delhi’s intent and provides a welcome fillip for Iran’s reformist President, who has been under pressure from hardliners critical of his failure to bring large-scale foreign investment into the country since the international embargo was removed.

The port agreement, which has been mooted for a number of years, would enable India to ship goods via Iran to Afghanistan and Central Asia, bypassing its regional rival Pakistan, which has long denied New Delhi a transit route.  Increasing Chabahar’s capacity will at the same time help Iran boost exports to Asia, as it moves to reintegrate into the global economy.

Perhaps more significantly, India sees the port development, and the trading opportunities it will create, as a counterweight to China’s growing regional presence, mainly in the form of the so-called China-Pakistan Economic Corridor, which represents a direct challenge to India.  A long-time ally of Pakistan, Beijing has begun to spend some of the $46 billion it has pledged to invest in the country’s roads, railways, power-generating capacity and industrial infrastructure, as part of the much touted Silk Road project, an economic and trading conduit linking China with Europe.  Several big projects are under way, notably the development of the Pakistani port of Gwadar, which Beijing regards as a key transport hub that would markedly reduce shipping times to European destinations.

India, however, has been unnerved by China’s encroachment, and has protested over its role in the building of a highway through the Pakistan-controlled part of Kashmir, which New Delhi views as occupied territory.  It also worries that Gwadar, together with the Chinese-financed Sri Lankan port of Hambantota and other ports in the region earmarked for investment, could serve as Chinese naval bases in the future.  Many Indian government officials reportedly view the Chabahar development as a means of “breaking free” of what they perceive as China’s strategic encirclement.

But while India may have grounds for concerns over China’s growing influence in the region, it could also serve its own interests by acting as a stabilising force.  Beijing’s investment in Pakistan may help to curb Islamic militancy by providing economic opportunities while its recent involvement in the Afghan peace process might prove to be critical, if it is able to persuade Islamabad to rein in the Taleban.