“We believe that land-locked Central Asian countries can benefit immensely by connecting with India’s vast market. Unfortunately, many connectivity options are not open to them today due to the lack of mutual trust. Our investment in Iran’s Chabahar port and our efforts towards the International North-South (Transit) Corridor (INSTC) are driven by this reality,” the prime minister said.
In stating this, Modi was enunciating a decades-old wish of New Delhi to connect with the resource and fuel-rich Central Asian nations. Since the emergence of the Central Asian Republics as independent countries in the early 1990s, New Delhi has been trying to establish contacts with those countries and boost trade opportunities. Analysts have repeatedly spoken about the potential to collaborate in a variety of areas—from construction, sericulture and pharmaceuticals to IT and tourism. India’s trade with the five Central Asian Republics—Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan—was below $ 2 billion in 2018. Much of this trade was routed through Iran, Russia or the United Arab Emirates (UAE). In contrast, China’s trade with Central Asia was $50 billion-$60 billion in the same period, according to estimates.
The obvious advantage in China’s favour is geographical proximity. In India’s case, tensions with Pakistan mean there is no viable land route towards Central Asia. And New Delhi’s efforts to look for a circuitous route via Iran (and Afghanistan) have floundered due to US sanctions aimed at containing Tehran’s suspected nuclear weapons programme. It is in the context of this potential Iran-Afghanistan bypass route that recent events acquire broader geopolitical relevance for India.
The takeover of Afghanistan by the Pakistan-backed Taliban on 15 August has severely set back India’s plans in Central Asia—at least for now. “I think it’s a difficult road ahead for India. Connectivity with Central Asia has always been a challenge that has not been resolved easily,” said Harsh V. Pant, a professor of international relations at the London-based King’s College. “The road ahead in the short term is difficult as India doesn’t seem to have any real leverage to get the connectivity projects with Central Asia going. India has been negotiating with individual bilateral partners though,” he said.
Central Asia’s importance
While Central Asia is seen as fuel-rich and, hence, important for an energy-starved India, critics argue that with the world switching to greener sources of fuel, the region’s relevance would start diminishing in due course. But the Central Asian states are also mineral-rich, and Kazakhstan, for one, has been a source of uranium for India’s nuclear power plants.
“A country like India which is seen as a major economy has to have a presence in these markets,” said former foreign secretary Kanwal Sibal.
Another reason is that India can forge a common position on terrorism and radicalization, which is a matter of concern to the region as much as it is to India, said Ashok Sajjanhar, a former Indian ambassador to Kazakhstan. In recent years, New Delhi has engaged with Central Asian Republics in the defence sphere through military exercises. Political and economic engagement would also be important, given the imperatives of working together at a body such as the United Nations (UN), Sibal said.
“There is huge scope for collaboration in areas like building (power) transmission lines and contract farming; our people have set up universities there—Sharda and Amity are examples,” said an industry representative, who did not wish to be named. “There is scope for collaboration in the dairy sector too. Our people have been setting up pharmaceutical units in Russia that can serve these countries as well. There are plans to expand to the Central Asian states as well. IT and IT-enabled services are two other areas,” said the person cited above.
“There is a cultural connect. (Bollywood stars like) Raj Kapoor and Mithun Chakraborty are famous in these countries. It is this that we need to develop into stronger bonds of trade and commercial bonds which will be possible once the INSTC (international transit corridor between India and Europe via Iran, Central Asia and Russia) fructifies. We are hopeful this will happen soon,” the person added.
Ashraf Shikhaliyev, the ambassador of Azerbaijan to India, said he was “fully convinced that the INSTC is of utmost importance for Indian exporters as it offers a safe and cost-effective route to the EU (European Union) market.” “It additionally offers almost 50% time saving, which is extremely vital in today’s business (environment). In June this year, the first pilot train caring paper products from Finland, via the territory of Azerbaijan to Nhava Sheva port of India, has successfully reached its final destination,” he said.
Azerbaijan is one of the members of INSTC and though it is not counted among the five Central Asian Republics, it’s part of the broader Eurasian region.
Routes to Central Asia
In the 1990s, just years after the 1991 Soviet breakup, India explored a route through Iran’s Bandar Abbas port and Mashad—near the border with Turkmenistan—to Central Asia. This coincided with the first period of the Pakistan-backed Taliban in Afghanistan (between 1996 and 2001). But this project did not succeed.
In 2000, India, Iran and Russia agreed on a new route for trade that later came to be known as INSTC. It was aimed at cutting the costs and time in moving cargo between Russia and India. The pact was ratified in 2002 and the original multi-modal route linked Mumbai in India to Bandar Abbas and Bandar-e-Anzali in Iran, then across the Caspian Sea to Astrakhan, Moscow and St. Petersburg in Russia. Over the years, more countries joined the INSTC; the 7,200-kilometre multi-modal project with thousands of kilometres of all-weather highways now include Afghanistan, Azerbaijan, Central Asia, and Europe as offshoots of the original plan.
In 2003, India and Iran announced the development of the Chabahar port in the Sistan-Balochistan province. The idea was to find a route bypassing Pakistan to Afghanistan, said two people aware of the development. The original idea was that India would construct the road linking Zaranj, the capital of Afghanistan’s Nimroz province and on the Afghan-Iran border, with Delaram, which was part of the road linking Herat in the west to Mazar-e-Sharif (close to the Afghan-Uzbek border in the north). Once Chabahar was complete, this would serve as an alternate route to Central Asia. That was New Delhi’s calculation.
While India completed the Afghan road project in 2008, Indian officials said delays on the Iranian side resulted in New Delhi taking up the development of Chabahar as well to ensure that the project was completed. “This is a strategic project for us—to reach Afghanistan and then ahead to Central Asia,” said one of the two people familiar with the matter cited above. “It was planned to provide Afghan businesses (with) a channel to export their products to the outside world and ensure that Indian goods could reach Afghanistan unimpeded,” the person cited above said.
But repeated US sanctions on Iran for its suspected nuclear programme meant that Indian firms were reluctant to participate in the projects, leading to cost and time overruns. It was only after the Iran-US nuclear deal in 2015 that there was some movement on the Chabahar project. But the Donald Trump-led administration’s pullout from the nuclear pact in 2018 cast a fresh shadow over Chabahar. Though New Delhi had negotiated with the US to keep Chabahar beyond the purview of US sanctions, Indian firms were reluctant to join the project given Trump’s apprehensions vis-à-vis Iran.
“Sanctions on Iran have played a major role in slowing down the INSTC,” said Mumbai-based Shankar Shinde, who heads the Federation of Freight Forwarders’ Association. “Banks would not offer any guarantees to anyone who wanted to do business in Iran for fear of being blacklisted by the US. There is a lot of demand for Indian goods like machinery in Central Asia but sending it via Iran has been a problem for us,” he said.
Despite the hiccups, New Delhi pressed on with the INSTC. In 2018, New Delhi joined the Ashgabat agreement, that “would diversify India’s connectivity options with Central Asia,” an Indian foreign ministry statement said. The pact was signed in 2011 by Uzbekistan, Turkmenistan, Iran, Oman and Qatar and aimed at developing the shortest trade route between the Central Asian republics and Iranian and Omani ports.
The Pakistan-China factor
Cut to 2021, with the Taliban in power in Kabul, India’s “Connect to Central Asia” plans seem to have come undone again. With signs of friction within the Taliban and most of the commerce in the region being conducted by private traders, “there is room to watch the situation carefully,” said a person familiar with the matter. “Traders will use the easiest and cheapest route and not go by what one country wants,” said the person cited above, referring to possible efforts by Pakistan to channel all trade through its own Chinese-built Gwadar port. “Maybe the Taliban would not like to depend entirely on Pakistan for trade,” the person said.
With aid cut off by global donors after the Taliban takeover, Afghanistan’s revenues have plummeted, said Srikanth Kondapalli, a professor of Chinese Studies at the New Delhi-based Jawaharlal Nehru University. Quoting US government data, Kondapalli said the revenues of the current government in Kabul totalled some $2 billion—approximately $1.5 billion from the opium trade and $500 million from customs duties. “If the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline materializes, any government in Kabul could get transit fees worth around $400 million annually. That could be a good reason for them to agree to guarantee security for the pipeline to India,” he said.
For now, India is keeping out a Taliban-controlled Afghanistan from a quadrilateral grouping that has been proposed to discuss the use of Chabahar port. At this point, alternatives to Indian connectivity projects also seem to be taking shape. Pakistan, Uzbekistan, US and Afghanistan are expected to hold talks on a connectivity initiative announced in July 2021. Earlier this year, representatives of Uzbekistan, Afghanistan and Pakistan agreed to a road map for the Mazar-i-Sharif-Kabul-Peshawar railway project.
“Pakistan’s obstructionist attitude has played a big role in keeping India out of Central Asia,” said Dilip Sinha, a former Indian diplomat who was on the Pakistan desk in the Indian foreign ministry from 2005-07. “There was a plan to bring electricity from Tajikistan to India via Afghanistan and Pakistan. But Pakistan played spoilsport,” Sinha said. Against this backdrop, he doubted if Pakistan would allow the Taliban to do any business with India.
Given its close ties with China, Pakistan would likely push Afghanistan to join connectivity projects initiated by Beijing and not New Delhi, analysts said. According to Kondapalli, China has so far announced $100 million for improving connectivity in Afghanistan. “It seems China is playing a waiting game,” he said. “In the past 20 years, Beijing has made considerable inroads into the region, boosting trade and co-opting Central Asian states into its Belt and Road Initiative,” Kondapalli said. “There are four energy pipelines from Central Asia to China, one implemented and three in the final stages,” he said.
In this context, “India will be seen as competition to China. Central Asian states may want India there as a counterweight to China, which could be advantageous to us,” he added. With the Joe Biden-led administration taking office in US, and Iran and the International Atomic Energy Agency (IAEA) beginning talks to salvage the nuclear deal, analysts said that the INSTC could be India’s best option. Earlier this month, the UN’s atomic watchdog reached an agreement with Iran to solve “the most urgent issue” between them—the overdue servicing of monitoring equipment to keep it running, raising hopes of fresh talks on a wider deal.
“It’s still early days. India needs to see if it can get a working relationship with the Taliban going, whether Afghanistan will be stable in its own right,” Pant of King’s College said. “At this point, the INSTC with all its attendant problems seems to be the more workable option.”
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