After 15 years as an observer, Iran acceded to the Shanghai Cooperation Organization (SCO), a Eurasian regional body on 16 September, 2022. The SCO is the largest regional body in the world in terms of population governed. It is rapidly emerging as a powerful force representing a more multi-polar and less West-centric world.
Since the Raisi administration took over, Iran’s policy has been “Pivot to the East”.
So much so, membership of the SCO is a diplomatic triumph for Iran. It demonstrated Tehran’s commitment to Asian multilateralism.
Besides playing a key role in the International North- South Transport Corridor (INSTC) as an economic hub, Iran provides SCO members with secure and stable transport routes and is committed to further infrastructure development, particularly on the strategically important Chabahar Port.
It is against this backdrop, the June 10 announcement of foreign minister, Hossein Amir-Abdollahian that India and Iran had agreed upon further investments in the Chabahar Port becomes significant. Both countries have also agreed upon banking mechanisms for the facilitation of trade. Trade in Indian Rupees is also on the agenda.
Primarily, the focus is to expand Chabahar infrastructure and capacity further to meet the trade volumes expected from the North-South Corridor with a surge in India – Russia trade.
Historically, India and Russia have maintained a relatively subdued volume of trade despite sharing a constructive and cordial relationship. This was because of the logistical and financial problems associated with the transport of cargo between the regions.
With a new pipeline and upgraded port facilities on the Southern Coast bordering the Gulf of Oman, Iran has decoupled its oil exports from dependency on the Strait of Hormuz.
This capability is integral to Iran’s long-term strategy for mitigating and bypassing the impact of the United States led sanctions that have for long crippled its economy and constricted its strategic leverage.
In the wake of on-going conflict in Ukraine, Russia is reorienting its trading strategy with a view to encouraging regional trade with SCO members. Tensions with Europe have culminated in Russia dramatically increasing its volume of trade with India in fertilizers, oil and coal.
These developments have benefited Iran creating the prospect of sustainable revenue from taxes on trade through the INSTC and income from the Chabahar Port.
The emergence of a regional consensus on developing INSTC would be a step towards cementing Iran as a regional trading hub. It would boost trading revenues as well as providing much-needed geopolitical security.
Iran has long suffered from the impact of American sanctions. These difficulties have informed Iran’s foreign policy which has been guided by the need to ensure its own strategic safety. Also, secure trade relationships.
Until recently Iran’s handicap was absence of reliable trading partners. And its very own geographical limitations in its oil exports. As already pointed out the development of pipelines has freed Iran from the need to use the Hormuz Strait. The potential closure of the Strait will no longer threaten Iranian revenues.
Like-wise, the renewed focus on INSTC and the Chabahar Port, sets the stage for Iran to become a significant transit and commercial hub reaping revenues. Both will overtime become Iran’s strategic leverage, protecting its core interests. And, also freeing Iran from the shackles of western sanctions.
Source: Policy Research Group (poreg.org).