Managing ties with US, signing deal with Iran The Statesman 21 May 2024 Maj Gen Harsha Kakar


Managing ties with US, signing deal with Iran

Managing ties with US, signing deal with Iran The Statesman 21 May 2024

          Recently India and Iran signed a ten-year contract to develop and operate the Iranian port of Chabahar. For India the port offers access to landlocked Central Asian Republics as also Afghanistan, bypassing Pakistan, which denies India use of its land routes. Located about 170 Kms west of Pakistan’s Gwadar, a port under development by China, it has major strategic significance.  

India and Iran first agreed to develop the port in 2003 but it was stalled due to sanctions imposed on Iran. In May 2016, India signed an agreement to develop one of the berth’s by constructing a container handling facility. It also despatched equipment to enable the port to function.

          In Oct 2017, India’s first shipment of wheat was despatched to Afghanistan through this port. In Dec 2018, India took over the management of the port. The port has been handling container and normal traffic. It has moved over 2.5 million tonnes of wheat and pulses for Afghanistan as also environment friendly pesticide for Iran.

          India’s shipping minister, Sarbananda Sonawal, mentioned after the signing ceremony, ‘Chabahar Port’s significance transcends its role as a mere conduit between India and Iran. It serves as a vital trade artery connecting India with Afghanistan and Central Asian countries.’ Iran’s urban development minister, Mehrdad Bazrpash, who also inked the agreement, mentioned, ‘We are pleased with this agreement, and we have full trust in India.’ India is expected to invest USD 120 million as also offer Iran a USD 250 million line of credit.

          Chabahar will be connected to the INSTC (International North South Transport Corridor), emanating from Russia for onward connectivity with India. The initial agreement for the INSTC was signed between India, Russia and Iran and subsequently included ten other Central Asian nations including Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, and Oman.

It would be a mix of rail and sea transportation challenging the Chinese BRI (Belt Road Initiative) and CPEC (China Pakistan Economic Corridor). If the US considers sanctions, it would be impacting multiple nations which have signed for the project, an act it would seriously need to consider.

Afghanistan, which was thus far dependent on Pakistan for all its trade recently made an announcement to also invest USD 35 million in Chabahar. The investment includes the construction of an economic development zone in Chabahar for Afghanistan. This investment would reshape regional dynamics as Kabul would largely eliminate its dependency on Pakistan, thereby reducing the little influence Islamabad has over it.

It would counterbalance China’s development of Gwadar. Chabahar would make the Chinese plan to extend the CPEC to Afghanistan partially redundant. Hence sanctioning of the port will need deliberation.   

Pakistan and Iran had signed an agreement to build an Iran-Pak gas pipeline in 2009. Iran has already completed the pipeline in its territory, while Pak has yet to commence. Failure to do so in the coming months would imply a USD 18 billion penalty to Pak. Pak’s delay rises from fear of imposition of US sanctions which could block funding from global institutions.

Hence Pakistan mentions requesting US for a waiver. On its part, the US warned Pak, ‘we always advise everyone that doing business with Iran runs the risk of touching upon and coming in contact with our sanctions, and would advise everyone to consider that very carefully.’

Simultaneously, the US has been renewing quarterly sanction waivers enabling Iraq to import electricity from Iran. Payment for it is deposited in a bank account in Oman which Iran converts into Euros for essential procurements from Europe.

          The announcement of India signing the agreement also led to a possible warning of sanctions from the US. US state department spokesperson, Vedant Patel, when quizzed on the agreement mentioned, ‘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.’ His statement was broad based.

India had developed the port when sanctions were relaxed on Iran in 2016 post the Iran nuclear deal also termed as the Joint Comprehensive Plan of Action from which Trump withdrew in May 2018. Trump had exempted India’s development of Chabahar project due to its investments in Afghanistan’s reconstruction.

There is no doubt that India was aware of ongoing US sanctions as also downward spiral in US-Iran relations, over its support to its proxies currently targeting Israel, shipping in the Red Sea as also its providing drones and ammunition to Russia, when it signed the agreement. Delhi also knows that there could be a change in guard at the White House early next year.

Jaishankar appeared confident of handling US sanctions. In an interaction he mentioned, ‘I think it’s a question of communicating, convincing, and getting people to understand that this is actually for everyone’s benefit. I don’t think people should take a narrow view of it. They (US) have not done so in the past.’ He added, ‘If you look at the US’ own attitude towards the port in Chabahar, the US has been appreciative of the fact that Chabahar has a larger relevance…we will work at it.’

Jaishankar was referring to the US not sanctioning India earlier as the port was benefiting Afghanistan. Evidently, US imposes sanctions based on a case-by-case basis. India has faced threats of sanctions on multiple occasions including on its procurements of S 400 missile systems as also oil from Russia. It was able to convince the US on ignoring these procurements.  

Further, the US needs India’s support in multiple regions including its handling of Chinese aggressiveness. As its spokesperson stated while commenting on Indian elections, ‘(The US considers India as) the single most important country for it for the next 35 years.’ It cannot antagonize a major ally.

India is also not Pakistan which can be compelled to bow down. Comments by the US Spokesperson could be only a threat or a general warning to nations considering trade with Iran and not India specific. The US is aware that losing an ally like India could be disadvantageous in the long term.

We need to wait and watch if diplomacy, partnerships and logic prevail over irrational decisions of Uncle Sam. Sanctions on Chabahar will impact many nations, including US allies.