India’s recent agreement with Iran to construct the strategic Chabahar Port has raised concerns in the region. It has also redefined India’s ties with the United States besides implications on regional power dynamics. This agreement between India Port Global Limited (IPGL) and Iran’s Ports and Maritime Organization (PMO) includes a decade-long commitment from India to invest US$370 million in the port infrastructure of Iran. This is being hailed by Indian officials as a critical step towards improving regional connectivity and strengthening ties with Afghanistan, Central Asia, and Eurasia.
Chabahar Port, located in the southern Sistan-Baluchestan province on the Gulf of Oman, consists of two separate ports: Shahid Kalantari and Shahid Beheshti. According to a recently concluded deal, India would administer a terminal in Shahid Beheshti while investing US$120 million in its construction. India will also offer, US$250 million as a bank credit facility for the related port developments, thus taking the contract value to US$370 million, cumulatively.
Chabahar Port’s strategic location, approximately 140 kilometres west of Pakistan’s Gwadar Port, which is part of China’s Belt and Road Initiative (BRI), emphasises its importance. In December 2017, the first cargo of Indian wheat headed for Afghanistan successfully transited through Chabahar, establishing an alternate route that bypassed Pakistan in East-West Connectivity.
However, the agreement has prompted criticism from Washington, which has warned of the “potential risk of sanctions” for businesses doing business with Iran. This strong warning differs from the 2018 policy, in which the US offered India waivers for Chabahar-related operations aimed towards Afghan rebuilding and humanitarian relief.
This shift raises probing questions about the future trajectory of India-US relations and underlines the complexities of geopolitical alliances in a swiftly evolving global panorama. As India highlights the broader regional benefits of the Chabahar port agreement and stresses the necessity of long-term commitment to enhance the Port’s operations, the US remains resolute in its enforcement of sanctions against Iran.
The journey to opportunities in Chabahar Port has been long. Talks between India and Iran on the project began in 2003, but progress was halted, owing to a succession of US sanctions against Iran. After the 2015 Iran nuclear deal resulted in a lifting of sanctions, Tehran and New Delhi resumed talks. This renewed collaboration also included Afghanistan, which was looking for other economic routes to circumvent Pakistan. During Indian Prime Minister Narendra Modi’s visit to Iran in 2016, the three nations signed an agreement to develop Chabahar Port. As part of this arrangement, India pledged US $500 million to rebuild a Container Handling Facility and establish Chabahar as a key transit hub.
The consequences of the Chabahar port agreement for India-US ties are numerous and require careful examination. How will India’s sustained involvement with Iran, in defiance of US sanctions, affect its relationship with Washington, a key ally? What problems occur when defining the parameters of the Indo-Pacific framework in light of the US departure from Afghanistan and India’s strategic choices, including engagement with Russia?
Furthermore, India’s reactivation of the International North-South Transport Corridor (INSTC) between Iran and Russia complicates US efforts to isolate Iran and put pressure on Russia. Could India’s expanding economic and geopolitical weight in a multipolar world, redefine its position inside the US Indo-Pacific framework, changing the dynamics of India-US relations?
The looming question persists: Can the US impose sanctions on India for its cooperation with Iran, and what repercussions might this hold for India’s positioning within the Indo-Pacific framework? While Iranian ambassador Iraj Elahi contends that India’s global trade significance may act as a deterrent, the specter of sanctions casts a shadow over India’s strategic calculus. It underscores the intricate balancing act; it confronts in navigating competing geopolitical interests.
Despite a history of sanctions (1974 and 1998) and its independent stance on such measures, India’s relationship with the US has blossomed into a strategic partnership. Although India maintains a stance that it does not officially recognize sanctions unless approved by the UN, it has generally complied with US-led sanctions against Iran. For example, after the US re-imposed sanctions on Iran in 2018, India stopped buying Iranian oil but secured exemptions for the Chabahar Port project due to its strategic importance for Afghanistan.
Currently, India’s ties with Iran, especially amid heightened US sanctions related to Hamas, put New Delhi in a challenging position. The port is a lifeline for India’s regional ambitions—access to Afghanistan, Central Asia, Asia Pacific, and the Middle East. Renewed US sanctions on Iran, particularly if they target entities involved in the Chabahar project, may create problems for India.
However, considering the US’s current focus on the containment of China, broad sanctions against India are unlikely. India’s growing economic and military might be crucial for the US strategy in the Indo-Pacific. Sanctions would not only damage this partnership but could potentially push India closer to China, a scenario Washington desperately wants to avoid.
Past US sanctions on Iran have already hampered India’s infrastructure development and oil supply stability. Yet, India’s commitment to Chabahar and its growing confidence as a major power may lead to a stronger pushback this time. This potential resistance by India could signal a shift towards a more independent foreign policy, with significant implications for future alliances in the Indo-Pacific region.
In addition, the strategic importance of Chabahar Port goes beyond trade. It is considered a counterweight to China’s massive Gwadar Port project in Pakistan. India’s choices regarding Chabahar Port will have a cascading effect on the complex regional dynamics and global geopolitics.
Can India utilize Chabahar Port to outmaneuver China’s Belt and Road Initiative, leaving Pakistan’s Gwadar Port in the dust? Or will the United States, trapped between its growing cooperation with India and its Iran policy, put a wrench in the works? The conclusion of this high-stakes game will not only redefine the Indian Ocean chessboard. But also send shockwaves across the Indo-Pacific architecture, potentially reshaping the global alliance structure. India’s autonomous foreign policy and daring engagement with Iran through the Chabahar Port Agreement, provide useful lessons for other countries navigating the dangerous seas of international diplomacy. The success or failure of the transaction will be keenly observed by both global powers and regional players, as it will surely have an impact on the geopolitical balance in one of the world’s most strategically important areas.
