India has agreed to a 10-year contract to develop and manage Iran’s important Chabahar Port as New Delhi looks to enhance trade connections with Afghanistan and Central Asian countries, bypassing ports in neighboring Pakistan. “It [the port] acts as a crucial trade route linking India with Afghanistan and Central Asian Countries,” declared India’s Shipping Minister Sarbananda Sonowal, as New Delhi aims to strengthen relations with a significant Middle Eastern nation. However, the agreement has triggered a thinly veiled warning of sanctions from the United States, with whom India has built close economic and military ties in recent years. “Any entity, anyone considering business deals with Iran, they need to be aware of the potential risk that they are opening themselves up to and the potential risk of sanctions,” said US State Department spokesman Vedant Patel to reporters. Indian authorities, on the other hand, have downplayed the tensions, with Foreign Minister Subrahmanyam Jaishankar stating to reporters on Wednesday that New Delhi would “communicate the benefits” of the deal to the US and urge countries not to “take a narrow view of it”. Here’s why the port deal is important, what the sanctions threat entails, and what we should anticipate: A truck carrying goods from Afghanistan to be exported to India is pictured at Shahid Beheshti Port in the southeastern Iranian coastal city of Chabahar, on the Gulf of Oman, on February 25, 2019 [Atta Kenare/AFP] What is the Chabahar port agreement about? India Port Global Limited (IPGL) and the Ports and Maritime Organization (PMO) of Iran have signed the long-term contract, which will enable New Delhi to upgrade and operate one terminal at Chabahar port over a span of 10 years. Situated in southeastern Sistan-Baluchestan province and overlooking the Gulf of Oman, Chabahar Port comprises two separate ports – Shahid Kalantari and Shahid Beheshti. India will manage a terminal in Shahid Beheshti, and as per the agreement made on Monday, will invest $120 million in equipping it. An additional $250 million loan credit facility for related projects in the port brings the contract’s total value to $370 million. The two countries initially began discussions on the project in 2003 but a series of US sanctions targeting Iran hindered any real progress. Tehran and New Delhi resumed discussions after Washington eased sanctions under the 2015 Iran nuclear deal. The two countries, along with Afghanistan, which was seeking alternative routes away from Pakistan, signed a tripartite agreement to develop the port during Indian Prime Minister Narendra Modi’s 2016 Iran visit. At that time, New Delhi promised to invest $500 million to reconstruct a 600-meter long container handling facility as part of its efforts to develop the deep-sea port as a transit hub. Chabahar is situated approximately 140 km west of Pakistan’s Gwadar Port, which has been developed as part of China’s Belt and Road Initiative (BRI). In December 2017, the first shipment of Indian wheat to Afghanistan passed through Chabahar, providing an alternative to land routes passing through Pakistan. In 2018, former US President Donald Trump withdrew from the nuclear deal and reintroduced “maximum pressure” sanctions on Tehran, which limited operations at the Chabahar Port. Indian Prime Minister Narendra Modi, right, with former Iranian President Hassan Rouhani release a postal stamp commemorating growing economic and trade ties between the two nations in New Delhi, India, February 17, 2018 [Manish Swarup/AP] Why is Chabahar significant? India, with its thriving $600 billion manufacturing industry, aims to trade more closely with its inland neighbors to the west, but strained relations with Pakistan make a land route for exports a challenging prospect. With the Chabahar Port, India avoids dealing with Pakistan and can transport goods first to Iran, and then onwards via rail or road networks to Afghanistan and resource-rich landlocked countries like Uzbekistan and Kazakhstan. One Indian official has even mentioned reaching as far inland as Russia. For India, Chabahar is “one of the centrepieces of its neighborhood policies” — a sort of golden gate to more investment opportunities in West and Central Asia — said Kabir Taneja, a fellow at the New Delhi-based Observer Research Foundation think tank. “The port already forms a key part of the region’s ongoing International North-South Trade Corridor (INSTC) project that aims to connect big cities like the Indian financial hub of Mumbai and Baku, the capital of Azerbaijan, via Iran over a patchwork of ship, road and rail routes,” Taneja added. The INSTC, which offers India a cheaper and faster route to trade with Central Asia, has also been impacted by US sanctions on Russia and Iran. Some analysts say the Chabahar deal is additionally a bulwark against rival China’s dealings with Pakistan. Just four hours east of the Chabahar Port is Pakistan’s Gwadar Port which is partly controlled by Chinese developers who have pumped some $1.62 billion into upgrading it since 2015. India and China have troubled relations and, in recent years, have had a series of border clashes. Can the US sanction India over the deal? The US has imposed limited sanctions on India’s science establishment twice in the past — in 1974 and 1998 — after New Delhi carried out nuclear tests. But since the end of the Cold War, India and the US have strengthened relations significantly, and today count each other as among the closest of strategic partners. Even though India officially does not recognize any sanctions imposed on nations unless they have been approved by the United Nations, it has played along, for the most part, with US-led sanctions against Iran. Until a few years ago, India counted Iran among its top oil suppliers. However, since 2018, when then-US President Donald Trump pulled out of the Iran nuclear deal and reimposed tough sanctions on Tehran, India has avoided buying any Iranian oil. Yet, back in 2018, New Delhi successfully lobbied Washington to secure specific exemptions to the sanctions related to Chabahar because of the promise that the transit route could help Afghanistan, a key security interest for the US at the time. An under-construction railway link connecting the Chabahar Port to Afghanistan was also exempt from the sanctions. But India’s friendship with Iran now, when Tehran’s backing of Palestinian armed group Hamas in Gaza has invited even more US sanctions, puts New Delhi in a tight spot. Afghanistan has also ceased to be a key interest for the US since it pulled out of the country in 2021, some analysts point out. Still, experts do not anticipate sweeping sanctions against India. “Sanctioning the Indian economy on such a minor issue is highly unlikely,” said Gulshan Sachdeva of New Delhi’s Jawaharlal Nehru University. “In the worst case scenario only entities involved in the Chabahar Port deal may come under some sanctions,” he told Al Jazeera. Workers on a cargo ship wave as they sail during an inauguration ceremony of new equipment and infrastructures at Shahid Beheshti Port in the southeastern Iranian coastal city of Chabahar, on the Gulf of Oman, on February 25, 2019 [Atta Kenare/AFP] What would US sanctions on India mean? India is one of the world’s fastest-growing economies. But any US sanctions on the country will likely be contained and will not affect global trade, analysts say. US sanctions on Iran have already hit India hard before. The Chabahar Port exemptions under Trump did not extend to infrastructure initiatives that would have allowed India to connect up with Central Asian nations located further inland, for instance, hampering India’s ambitions. India’s decision to avoid buying Iranian oil to avoid the risk of US sanctions has also left it more vulnerable to price pressures from other suppliers. But if the US does try to play tough over Chabahar, some analysts believe that India will push back harder than it has in the past. “Chabahar is more important, and New Delhi is willing to work to keep it alive for the long run,” said analyst Taneja. If India pushes ahead despite a real threat of US sanctions, that would be a signal to Washington, said Sarang Shidore, director of the Global South Program at the Quincy Institute for Responsible Statecraft, a Washington-based think tank. “Global South states will continue to pursue their own interests despite Washington’s preferences to make them align with its strategic objectives,” he said. “Washington ought to re-evaluate its policies that force choices on the Global South that can alienate them and limit US opportunities in this vast, largely unaligned space.” \” and translate to B2 level…
