US removes sanctions waiver linked to Chabahar port of Iran — What does it mean for India?

The US government's decision to revoke the sanctions waiver linked to the strategic Iranian port of Chabahar in 2018 is likely to impact India, which is developing a terminal at the port.

According to a statement from the US Department of State, the sanctions exception granted in 2018 under the Iran Freedom and Counter-Proliferation Act (IFCA) for Afghanistan reconstruction assistance and economic development has been revoked, effective September 29, in line with US President Donald Trump's maximum-pressure policy aimed at isolating the Iranian regime, PTI reported.

"Once the revocation is effective, persons who operate the Chabahar Port or engage in other activities described in IFCA may expose themselves to sanctions under IFCA," the statement read.

How will the US government's action impact India?

The US government's decision may impact India, which is developing a terminal at the Chabahar port on the Gulf of Oman, according to a report by PTI. On May 13, 2024, India signed a 10-year contract to operate the port, which will help it expand trade with Central Asia.

This would be the first time India would take over the management of an overseas port. In 2003, India proposed developing the Chabahar port to provide a gateway for its goods to reach landlocked Afghanistan and Central Asia via the International North-South Transport Corridor, thus bypassing Pakistan.

US sanctions on Iran over a suspicion of developing a nuclear programme had slowed down the development of the port, the report added.

Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran signed the long-term agreement, which replaced an initial 2016 pact, which covered India's operations at Shahid Beheshti terminal in Chabahar port and had been renewed annually.

In 2023, Chabahar port was used by India to send 20,000 tonnes of wheat aid to Afghanistan. In 2021, the same was used to supply environmentally friendly pesticides to Iran.

The long-term bilateral contract on Chabahar Port Operation was signed between Indian Ports Global Limited (IPGL) of India and the Port & Maritime Organisation (PMO) of Iran, enabling the operation of Shahid-Beheshti in the Chabahar Port Development Project for a period of 10 years.

The Ministry of External Affairs (MEA) has allocated ₹100 crore for Chabahar Port in 2024-25, highlighting the country's emphasis on connectivity projects with Iran.

Why is Chabahar port important?

Chabahar is not only the nearest Iranian port to India, but also an excellent port from a nautical perspective.

Chabahar port, situated in Iran's southern Sistan-Balochistan province, is being developed by India and Iran to enhance connectivity and trade links. India and Iran have anticipated the port as a key hub for the INSTC project. The INSTC is a 7,200-km-long multi-mode transport project for moving freight among India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.

India has been working on a section of Chabahar Port, with discussions about its development going back to 2003, during Iranian President Muhammad Khatami's visit to India.

India promised to invest $100 million towards the development of Chabahar Port in 2013.

In May 2015, India signed a memorandum of understanding (MoU) for the development of Chabahar Port. The contract was executed on May 23, 2016, in Tehran (Iran) during Prime Minister Narendra Modi's visit to Iran.

(With inputs from PTI.)