Will India ring fence Chabahar port deal if US sanctions on Iran return?

Published: May 8, 2018 - 21:20

If the US brings back the claustrophobic sanctions against Iran, it would have serious implications for many countries that had started to do business with Tehran after the nuclear deal was signed


On May 12, US President Donald Trump will decide the fate of the Iran nuclear deal or Joint Comprehensive Plan of Action (JCPOA) by either ratifying it or withdrawing from it. Unless he surprises the likes of Israeli Prime Minister Bibi Netanyahu and Saudi Arabia’s Crown Prince Muhammad Bin Sultan, there is a growing view that Trump will walk the talk and withdraw from the deal. And this would have serious implications not just for Iran, as the US will bring back the claustrophobic sanctions against the country and its people, but also for many countries that started to do business with Tehran after the nuclear deal was signed in 2015.

India is one such nation. It has been given the management contract to run Iran’s South-Eastern Chabahar, besides being deeply invested in it. India signed the trilateral connectivity deal during Indian Prime Minister Narendra Modi’s visit to Tehran in May 2016. The deal allows India to trade directly with Afghanistan, bypassing Pakistan. For long, Pakistan had prevented India and Afghanistan to use its land route to trade directly. Afghanistan President Abdul Ghani had threatened Islamabad that his country would not allow its buses and trucks to transit to Central Asia till Indian trucks were given similar freedom. Pakistan did not demur for a reason.

Not too far away from Chabahar, Pakistan, funded by China, is building a deep-water port in Gwadar, which will be the starting point for the ambitious China Pakistan Economic Corridor (CPEC). China has invested US$53 billion in this expansive project which endeavours to realign Pakistan with Central Asia away from South Asia. China’s presence in Baluchistan region, where both Chabahar and Gwadar are located, is giving a new spin to this great contestation taking place between India, Pakistan and China.


The Indian government has shown investment in Chabahar and its success in bypassing Pakistan as a major achievement of Prime Minister Narendra Modi’s foreign policy. Though the pace of the execution of the project is glacial, India has not looked shaky in its commitment to Chabahar and growing Iran ties. Iranian authorities want the project to move faster. But due to problems in transferring funds to Iran — as the banking channels haven’t thawed after the JCPOA — there has been little progress in finalising the project.

 

The Indian government has shown investment in Chabahar and its success in bypassing Pakistan as a major achievement of Prime Minister Narendra Modi’s foreign policy. Though the pace of the execution of the project is glacial, India has not looked shaky in its commitment to Chabahar and growing Iran ties. Iranian authorities want the project to move faster. But due to problems in transferring funds to Iran — as the banking channels haven’t thawed after the JCPOA — there has been little progress in finalising the project. Till the time of writing this story, the two sides were still trying to ascertain how the next Indian tranche could be transferred to Iran. There have been proposals like payment in local currency as it is taking place between Iran and Turkey and Russia. Iran was also supposed to set up its bank in India for funding its projects. Here again, the pace of execution is very slow, feeding Iran detractors to claim that Iran is upset with the slow project execution and is willing to pass on the port to the Chinese. Till now the Chinese have not shown interest, but that has not prevented the speculation on the fate of the port to rage. Indians pay Iran for its oil in hard currency- Euros. 

Even Iranians are deeply concerned about the implications of Trump’s proposed withdrawal on the Chabahar deal. They have watched with trepidation Netanyahu lobby with India to dump Iran and are hoping that New Delhi will display maturity and ring-fence the Chabahar and the International North-South Corridor (INSTC) agreement with India and Russia from any harm. Iranian government sources claim that they can make these projects immune to any external pressure after the return of sanctions if the Indian government makes serious provision for funds for these projects. Till that happens, these projects will remain vulnerable and the Modi government’s efforts to show its strategic independence will look overblown.

 

Editor of Delhi's Hardnews magazine and author of Bad Money Bad Politics- the untold story of Hawala scandal.

Read more stories by Sanjay Kapoor

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