U.S. withdraws exemption regarding economic restrictions on Iran's Chabahar Port, potentially creating obstacles for India.
The Chabahar Port, a significant project for India and Iran, has faced a potential setback following the US's decision to revoke the sanctions exception. The move, in line with President Donald Trump's 'maximum pressure policy' against the Iranian regime, could impact India's plans for the port's development.
The Chabahar Port, located in the Gulf of Oman, has emerged as a vital gateway for India's regional activities. In 2021, the port enabled the shipment of environmentally friendly pesticides to Iran, marking a milestone in the port's operation.
An Indian-state run company is engaged in the development of a terminal at the Chabahar port. New Delhi offered a credit window worth $250 million for infrastructure development at the port in May this year, as part of the May agreement. The Indian company operating on the Chabahar Port is considering expanding its capacity, with the port's current capacity being increased to 500,000 TEUs.
The capacity expansion and railway construction projects, expected to be completed by mid-2026, are significant steps towards enhancing the port's capabilities. Construction of 700 km of railway tracks connecting Chabahar to Zahedan is also underway.
The Chabahar Port has been used for India's regional outreach and humanitarian efforts. In 2023, India sent 20,000 tonnes of wheat aid to Afghanistan through the port. The port's strategic location makes it a crucial hub for India's trade and connectivity initiatives in the region.
In response to the revocation of the exemption, the Indian government announced plans to continue the operation and development of the Chabahar port by working through alternative financial channels and diplomatic efforts to circumvent U.S. sanctions. In May this year, India and Iran signed a 10-year agreement linked to the Chabahar Port operations.
However, the US State Department's release states that persons who operate the Chabahar Port or engage in other activities described in the Iran Freedom and Counter-Proliferation Act (IFCA) may expose themselves to sanctions under IFCA.
Despite the challenges, the Chabahar Port continues to hold significance for India's regional ambitions. The port's potential for trade, connectivity, and humanitarian aid makes it a crucial asset in India's strategic landscape.
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