Iran Sanctions Threaten India's Plans for Chabahar Port

Chabahar (file image)

Published Aug 16, 2018 9:20 PM by The Maritime Executive

India's proposed $500 million investment at the port of Chabahar has already been delayed by negotiations over terms, but it now faces a larger threat: the reimposition of U.S. sanctions on Iran. 

Chabahar, a small Iranian port on the Gulf of Oman, could provide India with a new trade link to Afghanistan and Central Asia, bypassing the current routes through Pakistan. India's government expects that this would open up billions of dollars in trade, and it has committed $500 million to build two berths at the port, plus $1.6 billion for a 400-mile rail link from Chabahar to Afghanistan. An Indian-run port would also offset growing Chinese influence in Pakistan, where China operates the port of Gwadar.

In October 2017, India sent an initial consignment of wheat to Afghanistan through Chabahar, and in February it signed an initial lease for the port's operation. The 18-month contract was described as an interim measure until the Indian operator bought its own cargo handling equipment, but Indian officials allege that Iran has repeatedly changed the terms of the port deal.

Chabahar Port now faces a larger, external challenge. The Trump administration has withdrawn the United States from the Joint Comprehensive Plan of Action (also known as the Iran nuclear deal), and previously-lifted sanctions on Iran are entering into effect once more. An initial set of American sanctions were reimposed on August 7, and stricter measures targeting Iran's ports, shipping, shipbuilding and petroleum sectors will take effect again on November 5. 

If India cannot secure a sanctions waiver for the Chabahar project, it will have to halt work or risk a dispute with the United States. Cancellations or delays at the port would hurt not just Indian shipping interests, but also Afghan businesses and foreign aid recipients, and the government of Afghanistan is also in discussions about a U.S. waiver for Chabahar.

"The Afghan, Indian and Iranian governments have held several meetings over the past few months about Chabahar and work is ongoing regarding a specific plan and proposal to make sure that at least that section of the port, which is shared by these countries, is not affected by US sanctions against Iran," government spokesman Haroon Chakhansuri told Afghani outlet Tolo News. "There is some optimism around this."