Chabahar Port: US gives ‘written’ assurance to India facilitating banks to fund $85 mn equipment purchase

Business Line

P Manoj 

The port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia. In a big breakthrough, the United States has given a written assurance to India that will help facilitate global banks to fund the purchase of equipment worth $85 million to be erected at Chabahar port which India is developing in Iran. In November 2018, the United States granted a waiver to the port from the sanctions it has imposed on the Persian Gulf nation.

“We have to procure equipment for running the port, but because of the US sanctions, we are not able to procure,” a government official briefed on the issue said. “We have placed the orders for equipment, some as long as two years ago, but we are not able to open a letter of credit (LCs). Banks are not coming forward. The US had earlier given verbal assurances (on the waiver fine print) but were very reluctant to give anything in writing, and the banks insist on the document. Now, after the recent visit of Foreign Minister S Jaishankar, they have given us something in writing, and we are trying to go ahead,” the official stated.

“The payments are in dollars. We need some banks which deal in dollars or euros, so we have to hit the international banking system and there if the word Iran comes, no bank is prepared to stick its neck out,” he stated. India Ports Global (a 60:40 joint venture between Jawaharlal Port Trust and Deendayal Port Trust) and Aria Banader Iranian Port signed a deal in May 2016 to equip and operate the container and multi-purpose terminals at Shahid Beheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $ 22.95 million on a 10-year lease. Cargo revenues collected will be shared by India and Iran as per an agreed formula.

Located in the Sistan-Baluchistan Province on Iran’s South-eastern coast (outside the Persian Gulf), Chabahar port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia. India Ports Global has ordered four rail-mounted quay cranes (RMQCs) for a combined $29.8 million from Chinese port crane maker Shanghai Zhenhua Heavy Industries Co Ltd (ZPMC) and 14 rubber-tyred gantry cranes or RTGCs for about $18 million from Finnish crane maker Cargotec OYJ for erecting at Chabahar port. It had also placed orders for purchasing mobile harbour cranes at Italy’s Italgru SRL.

“The payments for the equipment can only be made when LCs are opened. Once you open the LC, the other party knows that the bank assures the money. And then, they start making the equipment. That is the whole purpose of LC. Then, the bank releases the money as per the stages/timelines specified in the contract,” the official said. Because of the delay in opening the LCs, the equipment delivery will also be delayed, he added.

The delay in installing the equipment has, in turn, delayed India’s plans to hire an Indian manage, operate and maintain (MOM) contractor for the port. “If the equipment is not there what will we do by having an Indian MOM operator; that is for the full ten-year contract. Currently, we are making short contracts until the issues are sorted out. Because of the sanctions, everything has been spoiled,” he added.



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