With the recent re-imposition of US sanctions on Iran, the government of the Islamic Republic has doubled down on development of the Chabahar Free Trade Zone.
The southeastern Iran port would provide landlocked Central Asia with access to shipping. The project is being undertaken with close cooperation with India and Afghanistan.
A 2016 agreement between Iran and India to develop Chabahar just became operational earlier this month. India will invest $85 million, and India Ports Global Private Limited, a government instrumentality, will equip and managing two of the port’s terminals.
Under a bill the Iranian government recently submitted to parliament, the Chabahar Free Trade Zone will expand by over 250 square miles. The development of the free trade zone will be accompanied by the industrial development the country’s southeastern Makran coast. The Shahid Beheshti dock in Chabahar has already received $334 million from the government to increase its capacity. The Chabahar development project envisions a hub for manufactured goods with a focus on steel and petrochemicals.
If the Makran steel complex comes to fruition, it will significantly increase the country’s steel production. Iran produced 22 million tons of steel in the year ended March 20, 2018, while Makran is anticipated to produce 10 million tons of steel in the next decade.
A planned petrochemical hub in Chabahar would be the country’s third largest. Construction has been underway since 2012, and is expected to be completed in three phases by 2022.
Iran’s private automotive sector has proposed turning Chabahar into Iran’s third automobile manufacturing center.
Whatever the plans for the region, it’s clear that they will become more challenging once the reinstated US sanctions against Iran kick in. Ironically, the Chabahar project would appear to align with the US administration’s Indo-Pacific strategy, as it would strengthen India, a key US ally in South Asia.