Arbitration matters related to Chabahar port to be referred to tribunal in Muscat: Official

India and Iran have agreed that matters requiring arbitration with regard to the operations of the strategically important Chabahar port will be referred to a three-member arbitration tribunal based in Muscat, a senior government official said on Tuesday. India on Monday signed a 10-year contract to operate the strategic Iranian port of Chabahar that will help it expand trade with Central Asia.

"Major concerns, including lack of consensus on an arbitral framework, have been addressed. As per the agreement signed on Monday, matters requiring arbitration with regard to operation of the Chabahar port, will be referred to a three-member arbitration tribunal based in Muscat in accordance with the Singapore International Arbitration Centre (SIAC)," the official said on condition of anonymity.

The Chabahar port on the Gulf of Oman - which New Delhi had proposed to develop way back in 2003 - will provide Indian goods a gateway to reach landlocked Afghanistan and Central Asia using a road and rail project called International North-South Transport Corridor, bypassing Pakistan.

The official further said that the work is also in progress for connecting the Chabahar port to Afghanistan through a railway line. US sanctions on Iran over its suspected nuclear programme and the Persian Gulf Nation's earlier stand of not agreeing to an international arbitration framework, citing the need for a constitutional amendment, had slowed the development of the port.

The long-term agreement was signed by Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran, an official statement said on Monday.

IPGL will invest about USD 120 million while another USD 250 million will be raised as debt.

The pact was signed in a ceremony attended by India's Ports, Shipping and Waterways Minister Sarbananda Sonowal and Iranian Transport and Urban Development Minister Mehrdad Bazrpash in Tehran.

It replaces an initial 2016 pact, which covered India's operations at Shahid Beheshti terminal in Chabahar port and had been renewed on an annual basis.

Chabahar port was last year used by India to send 20,000 tonnes of wheat aid to Afghanistan. In 2021, the same was used to supply environmentally friendly pesticides to Iran.

This is the first time India will take over the management of an overseas port that will also have a multiplier effect on trade among India, Iran and Afghanistan as efforts continue to directly tap the potential in Central Asia, bypassing neighbouring Pakistan.