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Business News/ News / World/  Did US take U-turn on exemptions related to India-Iran Chabahar port deal? Can sanctions be imposed? All you should know

Did US take U-turn on exemptions related to India-Iran Chabahar port deal? Can sanctions be imposed? All you should know

After the latest Chabahar port deal between India and Iran, the US cautioned that anyone considering business deals with Iran need to be aware of the “potential risk of sanctions”. Six years ago, the US had granted a waiver specifically for the Chabahar port.

Chabahar port deal: Officials during the signing of a contract between India Ports Global Ltd. & Ports and Maritime organisation of Iran for the operation of the Shahid Beheshti Port in Chabahar, Iran. (PTI)Premium
Chabahar port deal: Officials during the signing of a contract between India Ports Global Ltd. & Ports and Maritime organisation of Iran for the operation of the Shahid Beheshti Port in Chabahar, Iran. (PTI)

The United States warned of "potential risk of sanctions" against “anyone considering business deals with Iran" after India and Iran signed a 'long-term main contract" for the development of Shahid Beheshti Port Terminal in  Chabahar city of Iran. 

The US' reaction is widely seen as a policy-reversal move. Under a 2018 policy, the US exempted India from certain sanctions for the development of the Chabahar port.

The latest contract between India Ports Global Ltd and the Ports and Maritime Organisation of Iran “will give a boost to regional connectivity and India's linkages with Afghanistan, Central Asia and Eurasia," the Ministry of External Affairs said on May 13.

According to Iran's Ministry of Roads and Urban Development, the deal will give India 10-year access to use the port, located close to Iran's southeastern border with Pakistan.

The contract will, in turn, see India Ports Global Limited (IPGL) invest $370 million into "providing strategic equipment" and “developing the transport infrastructure of the port", news agency AFP reported.

What did the US warn about?

Following the India-Iran Chabahar Port deal, State Department Deputy Spokesperson Vedant Patel said the US was aware of reports that Iran and India have signed a deal to operate the Chabahar port.

Patel said, "I will let the Government of India speak to its own foreign policy goals vis-à-vis the Chabahar port as well as its own bilateral relationship with Iran. I will just say, as it relates to the United States, US sanctions on Iran remain in place and we’ll continue to enforce them."

On whether that includes sanctions against "Indian firms, potentially", the US official said, “You’ve heard us say this in a number of instances, that 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."

"So there’s not an exemption for this specifically?" Patel answered this question in the negative.

Did the US take a U-turn?

In November 2018, the US had exempted India from certain sanctions for developing of the Chabahar port and the construction of a railway line connecting it with Afghanistan. The US State Department’s 2018 policy had granted a waiver specifically for the Chabahar port.

The US, however, imposed several conditions on Indian entities and companies. If the conditions were not fulfilled, the Indian entities may be "exposed to sanction risks".

In a statement released in 2019, the US State Department statement informed that in 2018, the administration granted a narrow exception under section 1244 of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) to allow a limited number of activities that support the reconstruction and development of Afghanistan, a key US national security interest.

The statement noted the IFCA exception applied with respect to the reconstruction of Afghanistan and to the operation and development of Chabahar port.

What was allowed? 
This exception allowed for "three-principal activities" – that included development and maintenance of Chabahar port and an associated railway link to Afghanistan; Afghanistan’s imports of refined petroleum products from Iran including gas, diesel, and liquid petroleum gas; and the shipment of non-sanctioned goods through Chabahar port to Afghanistan.

What was not allowed? 
The exception didn't allow for the import or export of Iranian crude. It did not allow transactions with individuals or entities designated under US counter-terrorism or non-proliferation authorities, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and its officials, agents, and affiliates.

No entity with which Indian companies engage should have direct or indirect ties to the IRGC. Any financial transactions must not involve the Central Bank of Iran. "Current or future financial transactions that involve the Central Bank of Iran could expose Indian companies and individuals to sanctions risk," it said.

The State Department added that other sanctions would still be applicable to entities engaging in certain activities at Chabahar, including the sale, supply, or transfer to or from Iran of materials that could be used by the country's construction sector.

Can US impose sanctions on India ?

Iranian ambassador Iraj Elahi said on Tuesday that the “importance of India" will prevent any country from imposing sanctions on India over its cooperation with Iran. He told the Hindustan Times that any US sanctions would harm the trade interests of numerous countries that are looking at Chabahar as a transit hub.

As per the report, Elahi responded to a specific question on whether there was an exemption for the new India-Iran agreement by saying: “No."

Meanwhile, former Indian Foreign Secretary Kanwal Sibal said in a post in X that earlier, the US had excluded Chabahar from sanctions "as desirable alternative route to Afghanistan. (sic)"

"[The] US handed over Afghanistan to Taliban. Why publicly threaten sanctions? Crude diplomacy . Could have said the US is in touch with India on this issue and leave it at that. Will just put our backs up, (sic)" Sibal said.

Why the U-turn on Chabahar port?

The 2018 policy aimed to support Afghanistan by allowing the development of the port and its associated railway, and facilitating the transport of non-sanctionable goods for Afghanistan’s reconstruction and economic development.

Several reports speculated that the real change in US stance on Chabahar may have come in August 2021, when the US officially ended its military presence in Afghanistan. "The US exit from Afghanistan could be the reason why it no longer views the Chabahar port project favourably," Business Standard reported.

Besides, the relationship between the US and Iran has strained over time. In April this year, the US military operating from undisclosed bases had shot down a number of Iranian drones in Sweida and Deraa provinces in southern Syria near the Jordanian border, security sources told Reuters.

What is the Chabahar deal?

The development of the Chabahar Port Project is an India-Iran flagship project. Chabahar hold significance as it is seen as a gateway for trade with Afghanistan and broader Central Asian countries.

According to the Indian government's statement in 2020, India is developing the 1st Phase of Shahid Beheshti Port at Chabahar. The Trilateral Transit Agreement (Chabahar Agreement) was signed by transport ministers of India, Iran and Afghanistan in the presence of PM Modi, President Rouhani and President Ashraf Ghani in May 2016.

The contract on the Shahid Beheshti port of Chabahar involved the investment of $85 million for procuring equipment of the port.

"The contract also comprises of provision of a line of credit of approximately $150 million for the development of the port. After operations began at the Chabahar port in December 2018, the port has handled more than 8200 TEUs and 1.28 million tonnes of bulk cargo," the government said.

India had taken over the operations of a part of Shahid Beheshti Port, Chabahar in Iran during the Chabahar Trilateral Agreement meeting held there on the 24th of December 2018.

Chabahar port is on the Indian Ocean about 100 kilometres (62 miles) west of the Pakistani border. Pakistan, India's historic rival, is developing its Gwadar port with the support of China.

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Published: 15 May 2024, 06:49 AM IST
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