Iran, Italy Mull Establishment of Chabahar-Venice Shipping Route

EghtesadOnline: Iran and Italy are planning to launch a direct shipping route from Iran’s southeastern Chabahar Port to Italy’s northern port city of Venice.

News ID: ۷۴۸۵۸۷

01 October 2019

The plan was discussed in a meeting between the head of Iran Ports and Maritime Organization, Mohammad Rastad, and Secretary-General of Venice Maritime Cluster Paolo Malaguti in Tehran on Sunday, the news portal of the Ministry of Roads and Urban Development reported.

“After conducting research and studies, the high potential of Chabahar Port and Chabahar Free Trade Zone caught our attention … We hope that Venice Maritime Cluster can be a bridge connecting Italy and Iran. The dry and mechanized port of Padua, 40 kilometers from Venice, is connected to all parts of Europe and has provided excellent facilities for cargo transportation from the port of Venice to elsewhere in the continent,” Malaguti said.

The Venice Maritime Cluster, a major transportation group, is the first such cluster established in Italy. It is an independent, non-profit association, according to Financial Tribune.

Once the shipping route is launched, added the official, goods can be transported from Chabahar Port to all parts of Europe and from the port of Venice to the Persian Gulf littoral countries and Central Asia.

Rastad said PMO would do all it can for this shipping route to be launched as soon as possible, noting that the organization will lend its full support to this project.

“Chabahar Port’s throughput capacity currently stands at 8.5 million tons [per year]. Expansion projects are being carried out in the port and soon this capacity will reach 50 million tons [per year],” he said.

Rail Connectivity

The PMO chief noted that the rail project to connect Chabahar Port to the city of Zahedan in Sistan-Baluchestan Province, near Iran-Afghanistan border, is underway. Once the two points are connected, trade between countries bordering the Sea of Oman, the Indian Ocean and Central Asia will experience an upsurge.

The Cabinet recently decided to allocate €300 million needed to complete the railroad project connecting the southeastern port city of Chabahar to the eastern city of Zahedan near the border with Afghanistan and Pakistan, both in Sistan-Baluchestan Province, from the National Development Fund of Iran, the country’s sovereign wealth fund.

The decision came after the authorization of the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.

The 610-kilometer railroad project from Chabahar to Zahedan got off the ground in the fiscal 2010-11, only to come to a halt for three years due to lack of resources. The execution of the project resumed in the year ending March 2015, after a change of contractor.

However, the project has made less than 40% progress, according to Abbas Khatibi, the deputy head of Construction and Development of Transportation Infrastructure Company of Iran.

“So far, 17,000 billion rials ($149.12 million) have been invested in the railroad. A total of 40,000 billion rials ($350.87 million) are needed to complete the project,” Khatibi said.

“The project, which includes the Zahedan-Khash-Iranshahr-Chabahar rail route, will be completed in four years and become operational, provided resources are allocated as per scheduled.”

His comments come as earlier this month, Minister of Roads and Urban Development Mohammad Eslami vowed to inaugurate the project by March 2022.

The railroad to Zahedan is crucial, as it is vital for connectivity to landlocked Afghanistan via Chabahar. The port in Iran’s Sistan-Baluchestan Province is strategically important for India too, allowing it access to Afghanistan while bypassing Pakistan.

After connecting Chabahar to Zahedan, the railroad will be linked to Zaranj in Afghanistan. Hence, when the Afghan cargo arrives in Zahedan, it can be transported by a 1,380-km railroad to Chabahar and then shipped to India.

Vast Potential

The first phase of the Chabahar Port development was inaugurated in December 2017 by the Iranian President Hassan Rouhani, opening a new strategic route connecting Iran, India and Afghanistan.

The opening of the first phase of Shahid Beheshti Terminal (out of five phases defined for the project), which has tripled its capacity to 8.5 million tons (equal to that of all the northern ports of the country), allows the docking of super-large container ships (between 100,000 DWT and 120,000 DWT) and increase India’s connectivity with Afghanistan.

India, Iran and Afghanistan signed a pact in May 2016 to establish a transit and transport corridor linking the three countries using Chabahar Port as one of the regional hubs for sea transportation, besides the multimodal transport of goods and passengers across the three nations.

India Global Ports Limited has been tasked with administering and running the terminal of the first phase of Beheshti at Chabahar. The entity is planning to invest $500 million over the next 10 years in the port, according to the representative of the Iranian partner of IGPL, Alireza Jahan.

Currently, only 10% of the capacity of Chabahar Port are being utilized, according to deputy minister of industries, mining and trade for commercial affairs, Hossein Modarres Khiyabani.

"This is while Chabahar has the capacity to host vessels weighing more than 80,000 tons. The port also boasts a wide range of port equipment, including grain suction machines and giant cranes," he was quoted as saying by ILNA, adding that Chabahar Port has the potential to become a major trading hub in Iran.

"Plans are underway to divert ships carrying essential goods to Chabahar to give impetus to the strategic port’s throughput," he said.

To incentivize traders to use Chabahar, according to Khiyabani, who doubles as CEO of the Islamic Republic of Iran Shipping Lines, merchants and businesspeople who use Chabahar's Shahid Beheshti Terminal will enjoy a 30% discount in customs duties.

Khiyabani was recently quoted as saying that the government has made it mandatory for two major state-run companies to unload and transport their import cargoes via the facilities at Shahid Beheshti Terminal instead of their traditional destination at Imam Khomeini Port in southwest Iran.

Lying along the Sea of Oman, Chabahar is considered a gateway to golden opportunities for trade, especially by India, Iran and Afghanistan with Central Asian countries.

Chabahar has recently extended its loading and unloading operations to a round-the-clock basis, to handle the unprecedented bulk of cargo ships docking at its wharves

Last November, the United States announced that it would grant a sanctions waiver for the Iranian-Indian port project at Chabahar. The exemption from the new round of the US sanctions is an opportunity for the development of transit via this port.

The Chabahar Port project, being developed by India in Iran, will not be impacted by US President Donald Trump's decision not to renew exemptions that let eight countries, including India, buy Iranian oil without facing American sanctions, a US State Department official said.