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India and Iran Sign 10-Year Deal to Operate And Develop the Strategic Port of Chabahar; U.S. Threatens Sanctions

India and Iran have signed a 10-year contract to develop and operate the Iranian port of Chabahar, which Tehran envisages as an expansion of trade through its only port with direct access to the Indian Ocean, and which New Delhi envisages as a strategic trade route to landlocked Central Asian republics, allowing it to bypass rival Pakistan. The port will also play a larger role in the projects of the International North South Transport Corridor (INSTC), the Indian-Iranian-Russian plan for a vital new 7,000 kilometer (4,350 mile) trade route.

Within a day of the May 13 Indian-Iranian signing, the U.S. State Department issued a bully threat to India telling it to back off or else face the wrath of sanctions. On May 14, State Department principal deputy spokesman Vedant Patel said, “Any entity, anyone considering business deals with Iran, they need to be aware of the potential risk they are opening themselves up to and the potential risk of sanctions.” He warned, “US sanctions on Iran remain in place and we’ll continue to enforce them.”

India, which very much seeks the deal, is putting significant money into it. To overcome three years of delay, Indian Ports and Shipping Minister Sarbanada Sonowal travelled to Tehran, where he met Iranian Minister of Roads and Urban Development Mehrdad Bazrpash, where on behalf of their respective countries, they signed the Long-Term Bilateral Contract. This is in effect a state-to-state deal. To date, New Delhi has furnished the Chabahar port with six mobile harbor cranes and additional equipment valued at $25 million. During the duration of this decade-long new lease agreement, the Indian state-owned Ports Global Limited (IPGL), the agency which will operate the port, committed to investing approximately $120 million to enhance the port’s facilities. Additionally, India has extended a window of $250 million for collaborative projects that focus on enhancing the infrastructure associate with the port.

The port is a critical part of the Indian-Iranian-Russian-advocated International North-South Transport Corridor, which is designed to connect the Indian Ocean and Persian Gulf to the Caspian Sea through Iran, and further extend to northern Europe via St. Petersburg in Russia. It is functionally part of the BRICS’ process.

India has dreamed of the Chabahar port project since 2003, and Washington has blocked it. On May 18, 2018, the Trump administration unilaterally withdrew the U.S. from the Joint Comprehensive Plan of Action (JPCOA) agreement, and brandished the threat of sanctions against any country that dealt with Iran, in particular, India.

India is likely clear-eyed that the U.S. would threaten to sanction it, if it signed this deal. Were the U.S. so rash as to apply sanctions against India for this project, the U.S. would be scuttle any pretense or chance it has of making an alliance with India.