'Potential Risk Of...': US State Dept Warns Of Sanctions After India, Iran Ink Chabahar Port Deal

India signs 10-year contract to develop Chabahar port, enhancing trade with Central Asia, despite US sanctions risks. Boosts regional connectivity

Hours after India signed a 10-year contract to operate the strategic Iranian port of Chabahar, the United States said Monday that Indian companies risked sanctions over investment in Tehran, following the signing of a bilateral 10-year contract to develop the Chabahar port.

The strategically important Iranian port on the Gulf of Oman will provide Indian goods a gateway to reach landlocked Afghanistan and Central Asia using a road and rail project called the International North-South Transport Corridor, bypassing Pakistan. Earlier, US sanctions on Iran over its suspected nuclear programme had slowed the development of the port.

 

“Any entity — anyone — concerned with business deals with Iran, they need to be aware of the potential risks that they’re opening themselves up to and the potential risk of sanctions,” State Department spokesperson Vedant Patel told reporters during a press conference. Earlier on Monday, the long-term agreement was signed by Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran.

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.

READ MORE: Five Reasons Why The Chabahar Port Is Of Strategic Importance To India

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.

The contract was signed by India Ports Global Ltd (IPGL) and Iran’s Port & Maritime Organisation (PMO), in the presence of Ports, Shipping and Waterways Minister Sarbananda Sonowal. “The long-term bilateral contract on Chabahar Port Operation was signed between Indian Ports Global Limited (IPGL) of India and the Port & Maritime Organisation (PMO) of Iran, enabling operation of Shahid-Beheshti in Chabahar Port Development Project for a period of 10 years,” the statement said.

Located in Sistan-Balochistan province on the energy-rich Iran’s southern coast, the Chabahar port is being developed by India and Iran to boost connectivity and trade ties. India has been pushing for the Chabahar port project to boost regional trade, especially for its connectivity to Afghanistan. This is the first time India will take over the management of an overseas port.

“This agreement aims to enhance regional connectivity and facilitate trade, particularly between India, Iran and Afghanistan,” the statement said. The Ministry of External Affairs (MEA) had allocated Rs 100 crore for Chabahar Port for 2024-25, underlining India’s focus on connectivity projects with Iran. The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, facilitated the first consignment of exports from Afghanistan to India in 2019.

The statement said the operations continued through short-term contracts while negotiations on the long-term agreement picked pace with the visit of Sonowal to Chabahar in August 2022.

 “This 10 years long term lease agreement further strengthens the bilateral ties between the two countries while bolstering confidence and boosting trust of trading communities from the region,” the statement said.