In a significant development, just hours after India inked a decade-long agreement to manage Iran’s strategic port of Chabahar, the United States issued a stern warning on Monday, cautioning Indian companies about the potential for sanctions over investments in Tehran.
🚨 India and Iran sign a 10 year long term contract on Chabahar port in Tehran, Iran. 🇮🇷🇮🇳
Massive moment for India to get control over a port in the Middle East. pic.twitter.com/4P3lup49Yf
— Indian Tech & Infra (@IndianTechGuide) May 13, 2024
The Chabahar port, strategically positioned on the Gulf of Oman, holds immense importance as it provides India with a crucial gateway to transport goods to landlocked Afghanistan and Central Asia. This access is facilitated by the International North-South Transport Corridor, a project integrating road and rail networks, effectively circumventing Pakistan.
Earlier impediments due to U.S. sanctions on Iran, stemming from concerns over its nuclear program, had slowed down the development of the port. However, the recent signing of a bilateral 10-year contract between Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran marked a significant stride forward.
Speaking to reporters during a press conference, State Department spokesperson Vedant Patel underscored the risks associated with engaging in business deals with Iran, hinting at the looming specter of sanctions.
Under the terms of the agreement, IPGL is set to invest approximately USD 120 million, with an additional USD 250 million to be raised through debt financing. The pact was formalized 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.
This new agreement supersedes an earlier 2016 pact, expanding India’s operational scope beyond the Shahid Beheshti terminal in Chabahar port. Notably, Chabahar port served as a crucial conduit last year for India’s humanitarian aid shipment of 20,000 tonnes of wheat to Afghanistan, followed by the supply of environmentally friendly pesticides to Iran in 2021.
This marks India’s first foray into managing an overseas port, with potential ripple effects on trade dynamics among India, Iran, and Afghanistan, as efforts intensify to tap into the economic potential of Central Asia.
"Anyone considering business deals with Iran, they need to be aware of the potential risk of sanctions", US state dept on impact on Indian firms in the backdrop of signing of Chabahar contract. pic.twitter.com/FcokITx00W
— Sidhant Sibal (@sidhant) May 14, 2024
The Ministry of External Affairs (MEA) of India has allocated Rs 100 crore for the Chabahar Port for the fiscal year 2024-25, highlighting the nation’s commitment to bolstering connectivity projects with Iran.
This long-term bilateral contract not only underscores the strengthening of ties between India and Iran but also aims to enhance regional connectivity and facilitate trade, particularly among India, Iran, and Afghanistan. The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, played a pivotal role in facilitating the first consignment of exports from Afghanistan to India in 2019.
The signing of this 10-year lease agreement represents a significant milestone, enhancing bilateral relations while instilling confidence and trust within the trading communities of the region.
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