Chabahar Port Deal: India’s Strategic Gamble Amid US Sanctions

When India signed the Chabahar port deal with Iran for 10 years, it did not expect two occurrences: that the United States of America, which had supported India’s port deal from 2016-18, would threaten New Delhi with sanctions if it decided to go ahead with the Chabahar port deal; secondly, that two of the strongest advocates of the port deal would die so inexplicably and suddenly. Though the Iranian, US, and Israeli governments have not blamed anyone, calling it an accident, there are too many unanswered questions that suggest the deaths of the two leaders were not really normal.

Why did the helicopter carrying the President and Foreign Minister meet with an accident when the two other choppers were unaffected by the bad light, etc.? Was their death linked to Chabahar? This may sound preposterous, but some months ago, US President Joe Biden saw merit in the allegations that the Hamas attack on Israel had something to do with the IMEC deal after the G20 summit in Delhi. As the Indian foreign minister pointed out, “connectivity” corridors have become really big deals.

Indian Foreign Minister S. Jaishankar, who had traveled to Tehran earlier this year, recalled the contribution of the two leaders, President Ebrahim Raisi and his Foreign Minister, Hussein Amir-Abdollahian, in signing the deal, which could be a game changer in ties between the two countries. He claimed that this agreement was different from the trilateral deal signed in 2016 as it was limited to a terminal, Shahid Behesti. This agreement is unique as it pertains to India managing a port in a foreign land for the next 10 years, and the two deceased Iranian leaders had a big role to play in the agreement. Though the US has threatened sanctions, the Chabahar port has promised much to both the Asian countries and the region. India has committed to bringing in about 300 million US dollars to build the port and its infrastructure. Still, the deal is mired in problems that are more geopolitical in nature.

In 2016, when Prime Minister Modi signed the deal with Afghanistan and Iran, the world was waking up to a new reality where Tehran was slowly being embraced by the global community after signing the civilian nuclear agreement with the US and European powers. U.S President Obama was returning Iran’s frozen assets, and it seemed the Islamophobia of the past few years would be forgotten. India was encouraged to sign the Chabahar agreement as it helped to sidestep Pakistan and also challenge the Belt and Road Initiative (BRI) of China. The Chabahar agreement also allowed Indian imagination to soar as it promised to restore India’s links with Central Asia that had been severed by the partition of 1947.

India’s Chabahar Port Deal: Overcoming Financial and Geo Political Obstacles

India hastened slowly after the US elections as President Trump annulled the Iran deal. Though in 2018, the US government gave a waiver of sanctions on the Chabahar port deal as it was meant to help stabilise Afghanistan, issues of funding of the equipment at Shahid Behesti terminal remained a nettlesome issue. When this writer visited Iran and Chabahar (one of the first to do that after the signing of the agreement), he was told that the government and the company, India Ports Global Limited (IPGL), used different ways to fund the deal. The Russian government even at times came to New Delhi’s rescue to fund the project so that it did not die.

Despite these hiccups, the Iranian government did not hand over the project to China, which was controlling the neighbouring military port of Gwadar in Pakistan. Instead, it generated resources to build a 650 km railway line from Chabahar to Zahedan. This railway line, which is expected to be completed later this year, will connect Central Asia with the South Asian port. Besides, it was meant to provide a crucial eastern railway link to the International North-South Transport Corridor (INSTC).

In many ways, there were many possibilities inherent in the project, but obvious misgivings surfaced when the United States abandoned Afghanistan and allowed the Taliban to take over Kabul. This was in 2022. Since then, Indian voices that were opposed to entertaining the Iranians and investing in Chabahar have gained strength. Even countries like Saudi Arabia and the United Arab Emirates (UAE), that have been wooing the Indian government under PM Modi, have trenchantly expressed reservations about the Chabahar deal. They tried to sell the idea that India need not deal with Iran on many counts. Firstly, there were no new Indians working there unlike in the Gulf where millions used to send remittances back home; secondly, the Iranians had been destabilising the region; and lastly, India did not need to go there when all their commercial and geostrategic interests were being met from their region. In their reckoning, Iran merely represented an imagined interest and not a “real” one for India.

Despite these pressures, India kept Chabahar alive. It periodically sent consignments to the port that went to Iran as well as Afghanistan. In some ways, India was jogging in place without making significant progress on it.

The biggest challenge surfaced after the G-20 deal when India, along with some other countries, signed the India-Middle East-European Economic Corridor. The US was also a signatory to this deal, which was grandly declared as a “game changer” as it promised to connect India with UAE, Saudi Arabia, Israel, Europe, and the United States. Even when the ink was dry on the ambitious agreement, Palestinian Hamas attacked Israel on October 7, 2023. By doing that, it struck a death blow to the new connectivity corridor. The IMEC was resented by Iran, Egypt, Russia, and Turkey. Many of the connectivity corridors imagined by other countries in the region were to be hurt by IMEC.

Informally, though, the IMEC corridor came into existence when the Houthis of Yemen, resisting the Israel cargo moving from one place to another, began to fire missiles and torpedoes on the bulk carriers. To avoid that, cargo began to move from India’s Mundra to UAE’s Jebel Ali and then through Jordan to Israel’s Haifa. It was still an unstable route, but still an improvement on nothing. The IMEC was premised on the normalisation of ties between Israel and Saudi Arabia, but Riyadh refused to oblige until Tel Aviv declared a ceasefire in Gaza. Israel has not obliged, and neither has Saudi.

Last month, the Iranian publication Kayhan announced that IMEC has been put in deep freeze by the participating countries. Interestingly, there was no denial of this report. This corridor can come into existence only when there is peace in the region, but by its merciless attack, Israel has created circumstances where it may not be easy for any kind of détente to return soon, as more than 35,000 Palestinians have been killed in genocidal attacks. More than 70,000 have been wounded; hence the fatalities may increase even when the war ends.

It is in these circumstances that India decided to extend the Chabahar deal, which was greeted by threats of US sanctions. What does it really mean? Surely, the US does not want India to cozy up with Iran or take part in the Russia-backed North-South Corridor. The US also does not want India to do anything to do with BRICS thinking on de-dollarisation that could lower the profile of the US. More importantly, the US wants to leverage India’s huge market population to build a counterpoint to China.

It’s a challenging task, but India under Modi would be up for this challenge. It would also use its efforts to exercise its strategic autonomy by supporting Chabahar and other deals to wangle a better deal with the US. Iranians want to know—will India give up Chabahar Port? It all depends on how much pressure the US wants to impose on India. If it is manageable, then it would like to keep its interests alive with Chabahar and beyond. If the US is unrelenting on the Chabahar port, then expect more theatre in the coming days.

SANJAY KAPOOR is a Senior Journalist based out of Delhi. He is a foreign policy specialist focused on India, its neighbourhood and West Asia. He is the Founder and Editor of Hardnews Magazine. He is a Member of the Editors Guild of India (EGI) and, until recently, served as the General Secretary of EGI.