The motive behind exempting the Iranian port of Chabahar from sanctions by the US is being attributed to its desire to bolster its ally India. Although, ostensibly the rationale espoused is that the Afghan economy being a continuous drain on international assistance requires a trading route through Iran. Despite deployment of relatively successful cyber technology warfare and wanting to extricate itself the US remains entangled since almost 16 years in the Afghan quagmire.The current set of US sanctions, reimposed after the US this year unilaterally withdrew from the Iran nuclear settlement, target the financial, banking and oil and gas sector of Iran.
The US perception appears to be that China may exploit the delay in developing Chabahar port by India. Indian claims are limited to publicized wheat exports from India to Afghanistan through the port after itsinaugurationin2017.Iran stands to gain by offering the port’s development to lure Chinese investment and at the same time place it in an envious strategic position emphasizing its role in the competition between China and the US for dominance in CentralAsia. From a military perspective it can be utilized as a complementary coastal infrastructure reducing its dependence on the shipping hubs in the Persian Gulf which as the past shows renders it vulnerable to aggression.
India has remained deprived of serious investment initiatives in stark contrast to Chinese ventures in Pakistan culminating in the China Pakistan Economic Corridor (CPEC). The earnestness on the Chinese side is amply demonstrated by the USD 50 billion allocated by the Chinese for CPEC, against India allocating a paltry amount of USD 500 million for Chabahar.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is connected to over 10,000 banks and cross border transactions constantly backed by 239 banks from 15 countries forming a secure electronic service of 26 million financial messages daily and common standards to facilitate international disbursements. The management comprises of 25 of the world’s largest banks including Citigroup
The US sanctions seem to be hurriedly cobbled together to prevent a Chinese commercial and financial foray into development of these two ports, located within almost 80 km of each other, accessing a swath of 640 km in the Strait of Hormuz. Analysts in the US may be having flashbacks to the era of Soviet occupation of Afghanistan. Besides it is imperative to keep at bay an adversary like China from hovering near the proven hydrocarbon reserves in Iran and Central Asia and as Iran does not have the financial capacity nor proprietary technology to develop. Iran currently relies upon China to purchase one third of its energy production as well as a significant portion of its international trade.
The US unilaterally withdrew from the Joint Comprehensive Plan of Action (JCPOA) commonly referred to as the Iran nuclear deal and announced two deadlines to wind down commercial dealings with Iran and the second deadline expired in November after which Iran stands barred from dealing in US dollars. The US is poised to regulate European dealing with Iran and at the same time unilaterally granting exceptions to sanctions which is a contradiction.
Afghanistan upped the ante in 2016 when Afghanistan, Iran and India initialed agreements that ensured India’s investment in the Chabahar port project and operation of berths with a capital investment of USD 85 million and annual expenditure of USD 22 million leased for 10 years. India has reportedly channeled USD 2 billion into projects in Afghanistan to gain influence. Iran has designs to link the port by railway up to Mashhad adjoining borders with Afghanistan and Turkmenistan with aspirations that a railway project will facilitate Indian trade with Central Asian countries bypassing Pakistan.
The European Union is developing a mechanism known as a Special Purpose Vehicle (SPV) to facilitate business transactions with Iran. The SPV would operate like an exchange allowing European and Iranian businesses to settle accounts with one another at an EU clearing house obviating the need for international transactions conveniently sidestepping US scrutiny as it operate in euros.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is connected to over 10,000 banks and cross border transactions constantly backed by 239 banks from 15 countries forming a secure electronic service of 26 million financial messages daily and common standards to facilitate international disbursements. The management comprises of 25 of the world’s largest banks including Citigroup. Despite claiming political nonalignment in the past it buckled to US influence blocking transactions to Cuba and Iran.
Chinese state owned enterprises are now investing a staggering USD 2.3 trillion a year, close to 43 percent of China’s entire investment in infrastructure, and this is the opportune moment for Pakistan to capitalize. The eastern coast of China is densely populated and houses the industrial and service sector and goods will have to traverse the breath of China to access the Strait of Hormuz. Gwadar port is a strategic and ideally located trading hub for impetus to China’s drive for economic expansion. By design or default Pakistan and China are inextricably linked in development of China’s Belt and Road initiative with Gwadar port.
The writer has done Bachelor’s from London School of Economics and Political Science
Published in Daily Times, November 24th 2018.