Exporters have suggested shifting cargo movement from Bandar Abbas port to the Chabahar port in the wake of Iran-Israel conflict, stating any further escalation in the war would severely impact trade with Afghanistan, Central Asia, and Russia. The air freight rates have already seen a 15 per cent rise, and traders expect both air and sea freight costs to increase further if the conflict escalates. This was suggested during a meeting convened by the commerce ministry on assessing impact of the war on India’s trade. It was chaired by Commerce Secretary Sunil Barthwal.
While there has been no immediate impact on shipments to Iran, disruptions are likely if the situation worsens. If Bandar Abbas port doesn’t function, it will affect exports not only to Iran but to Afghanistan and Central Asia also. We have been informed that there is adequate capacity at Chabahar, and this needs to be explored urgently.
The secretary assured that the feasibility of shifting operations to Chabahar port would be examined. A Federation of Indian Export Organisations (FIEO) official said that they would soon hold a meeting with Chabahar port authorities on the issue of shifting the movement of consignments.
If Strait of Hormuz gets impacted due to the war, “we have to look at Fujairah port in UAE and Oman port. FIEO flagged that as of now, Iran’s Bandar Abbas port is operational and being used for cargo movement to Afghanistan and other CIS (Commonwealth of Independent States) countries, including Russia.
However, if the conflict continues beyond, the route may be impacted. In case ship movement in the Persian Gulf is blocked, exports to Gulf and Mediterranean countries will also suffer. Currently, buyers have put orders on hold, and exporters are delaying shipments due to concerns that goods may get stuck at ports, leading to heavy demurrage.
Although certain factors remain beyond control, in the current circumstances, focus on Chabahar Port — an Indian-managed port in Iran — could help the industry. There is connectivity via Dubai and direct linkage from Kandla Port.
Due to the conflict, Basmati rice exports to Iran have reportedly stopped, and shipments to the Middle East have become expensive. An exporter said there is a need to improve Chabahar’s connectivity to Uzbekistan by engaging local players who may otherwise lose business if Bandar Abbas operations are affected.
As per the exporting community, freight has risen by USD 500-600 per 20-feet container. Ocean freight from Indian ports to EU and Mediterranean ports has surged by USD 1,000 per TEU (twenty-foot equivalent unit). The meeting was attended by senior officials from the petroleum, commerce, shipping, and financial services, revenue departments, along with representatives from shipping lines, cargo handlers, and airport authorities.
While the Red Sea route remains unaffected and 90 per cent of Indian cargo currently moves via the Cape of Good Hope, concerns were raised about potential disruptions at the Strait of Hormuz. This narrow waterway, only 21 miles wide at its narrowest point, handles nearly a fifth of global oil trade and is indispensable to India, which depends on imports for over 80 per cent of its energy needs. Meanwhile, the exchange of strikes between Iran and Israel has entered the second week on Friday even as President Donald Trump weighed US military involvement and new diplomatic efforts appeared to be underway.
At the same time, Iran’s foreign minister is in Geneva for holding talks with his counterparts from France, Germany and the UK and the European Union’s foreign policy chief. It is the first face-to-face meeting between Western and Iranian officials since the start of the conflict.
