TEHRAN (Staff Report) – India is planning to open a $500-million line of credit to develop Iran’s Chabahar port into a regional trading hub in an apparent bid to compete with Pakistan’s Gwadar port project.

In a joint statement issued on Monday, Indian PM Narendra Modi and Iranian President Hassan Rouhani said both the countries can improve their economic co-operation.


“Based on mutual contracts, the development of Chabahar (southeast) and its infrastructure, and allocating $500 million of credit from India in this regard, will be the cornerstone of this major action,” PM Modi said at a televised news conference with President Rouhani in Tehran.

“Undoubtedly, this deal will lead to economic progress and growth of the region,” Modi said. “We are determined to make these contracts operational as soon as possible.”

Afghan President Ashraf Ghani also flew in to Tehran on Monday for the signing of a tripartite agreement between Iran, India and his country to turn Chabahar into a transit hub between the three countries, bypassing Pakistan.

Rouhani said Iran and India had decided to transform their trading links to the level of “comprehensive economic relations”.


He and Modi witnessed the signing of 12 memorandums of understanding, two of them on Chabahar port, on the Gulf of Oman.

They include a deal between Iran’s Maritime and Ports Organisation and India’s EXIM bank to work out the details of a line of credit to develop Chabahar.

“With India’s investment in the development and equipping of Chabahar port and also the credits intended from this country for Chabahar, this port can turn into a great symbol of cooperation between Iran and India,” Rouhani said.

Modi arrived in Iran on Sunday on a visit aimed at boosting trade following the lifting of international sanctions under Tehran’s nuclear deal with world powers.

He is also set to meet the Islamic republic’s supreme leader, Ayatollah Ali Khamenei.

India has signed a contract with Iranian port company for development of two terminals and five multi-cargo berths in Phase-1 of the Chabahar port project. Indian investment in phase-1 will be about $500 million. An MoU to develop the port was signed in May 2015 between Indian and Iranian ministers.


Chabahar is in southeast Iran and the port will help India to bypass Pakistan and open up a route to Afghanistan with which New Delhi has developed close security and economic interests.

The existing Iranian road network can link Chabahar port to Zaranj in Afghanistan, about 883 km from the port. The Zaranj-Delaram road constructed by India in 2009 can give access to Afghanistan’s Garland highway, setting up road access to four major cities of the country including Herat, Kandahar, Kabul and Mazar-e-Sharif.

According to Indian officials, the port will be used to ship crude oil and urea, saving India transportation costs. The country intends to lease two berths at Chabahar for 10 years.