US warns India of 'sanctions' over 10-year Chabahar port deal with Iran

Anyone considering business deals with Iran are opening themselves up to potential risk of sanctions, State Dept says

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A view of the Chabahar port in Iran. — The Economic Times
  • US will "continue to enforce" sanctions on Iran.
  • Risk of sanctions also applies to Indian firms.
  • India, Iran sign 10-year contract to operate port.

United States State Department has warned India with "potential risk of sanctions" after it inked a 10-year deal with Iran, taking over operations at the Chabahar port.

In a press briefing in Washington on Monday, State Department Spokesperson Vedant Patel said: "... 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."

He reiterated that the US's sanctions on Iran remain in place and Washington will "continue to enforce them".

Patel maintained that the risk of sanctions also applies on Indian firms.

The State Department's statement comes after India and Iran signed a 10-year contract to develop and equip the strategic Chabahar port in Iran on Monday.

The development took place as India seeks to grow trade in west and central Asia. The agreement will give India 10-year access to use the port, located close to Iran's southeastern border with Pakistan, according to Iran's Ministry of Roads and Urban Development.

The contract will in turn see India Ports Global Limited (IPGL) invest $370 million into “providing strategic equipment” and “developing the transport infrastructure of the port”.

Iran's urban development minister Mehrdad Bazrpash and India's ports and shipping minister Sarbananda Sonowal signed contract in the town of Chabahar, in a ceremony broadcast live on state media.

India in 2016 agreed to finance the development of the Iranian port as a trading hub for central Asia as Prime Minister Narendra Modi sought to revive economic ties with Tehran after the lifting of sanctions.

Modi and former Iranian president Hassan Rouhani oversaw the signing of a memorandum of understanding for the provision of a line of credit from India's EXIM Bank to develop the port.

The development of the port, however, stalled, despite waivers to sanctions that the US began reimposing in 2018 after withdrawing from a landmark 2015 nuclear deal with Iran.

"Chabahar can act as a focal point in the transit development of the region," Bazrpash said at the signing ceremony.

"We are pleased with this agreement, and we have full trust in India," he added. "Iran and India are seeking to develop Chabahar port as much as possible, taking into account the interests of the two countries for joint access to regional markets," the Indian minister said.

This "long-term contract symbolises the enduring trust and effective partnership between India and Iran," he added.

In 2019, before the outbreak of the COVID-19 pandemic, both countries agreed to speed up the project after a visit by India's external affairs minster Subrahmanyam Jaishankar to Tehran. Chabahar port is on the Indian Ocean about 100 kilometres (62 miles) west of the Pakistan border.