The development of the Shahid Beheshti Port Terminal in Chabahar city of Iran has been a long-term main contract between India and Iran. However, the United States has warned of potential risk of sanctions to anyone considering business deals with Iran. This is a policy-reversal move by the US, as India was previously exempted from certain sanctions for the development of the Chabahar port under a 2018 policy.
The latest contract involves India Ports Global Ltd and the Ports and Maritime Organization of Iran. It will grant India 10-year access to the port, which is strategically located near Afghanistan, Central Asia, and Eurasia. India Ports Global Limited (IPGL) will invest $370 million into providing strategic equipment and developing the transport infrastructure of the port.
The US, through its State Department Deputy Spokesperson Vedant Patel, has made it clear that US sanctions on Iran remain in place and will continue to be enforced. This includes the potential for sanctions against Indian firms. Patel stated that any entity considering business deals with Iran is opening themselves up to potential risk of sanctions. This suggests that there is no specific exemption for this deal.
The US had previously exempted India from certain sanctions for the development of the Chabahar port and the construction of a railway line connecting it with Afghanistan in November 2018. The 2018 policy granted a waiver specifically for the Chabahar port, but it imposed several conditions on Indian entities and companies. Failure to fulfill these conditions could expose Indian entities to sanction risks.
The 2018 State Department statement highlighted that the exemption applied to the reconstruction of Afghanistan and to the operation and development of Chabahar port. It allowed for three principal activities: reconstruction projects in Afghanistan, Afghanistan’s imports of refined petroleum products from Iran, and the shipment of non-sanctioned goods through Chabahar port to Afghanistan.
The exception did not allow for the import or export of Iranian crude. It also prohibited transactions with individuals or entities designated under US counter-terrorism or non-proliferation authorities, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and its officials. Any financial transactions must not involve the Central Bank of Iran, as such transactions could expose Indian companies and individuals to sanctions risk.
Despite the warning from the US, Iranian ambassador Iraj Elahi believes that the importance of India will prevent any country from imposing sanctions on India over its cooperation with Iran. He argues that any US sanctions would harm the trade interests of numerous countries that are looking at Chabahar as a transit hub.
Former Indian Foreign Secretary Kanwal Sibal criticized the US’s public threats of sanctions, suggesting that it could have simply stated that the US is in touch with India on this issue. He believes that such threats will only serve to damage relations between the two countries.
The change in US policy towards the Chabahar project is speculated to be related to the US military’s withdrawal from Afghanistan in 2021. The US had previously supported the development of the port as a way to support Afghanistan. With the US withdrawal, the strategic importance of the port has diminished.
The Chabahar deal is a key part of India’s efforts to expand its trade with Afghanistan and Central Asia. The port is seen as a gateway for trade with these regions, and India has invested heavily in its development. The US warning of sanctions could complicate India’s plans for the port, but it remains to be seen whether the US will actually impose sanctions or if it will grant another exemption to India.
