Abstract
The Chabahar Port, located on Iran's southeastern coast, represents a critical strategic asset for India. There is a geopolitical, economic, and strategic significance of Chabahar Port to India, considering its implications for regional connectivity, trade diversification. On the other side there is also a US factor in the development of Chabahar port. This research article examines how the fluctuating relations between the United States and Iran have impacted the development of Chabahar port and India’s diplomatic efforts to navigate these complexities while advancing its strategic interests.
Focus Areas: Diplomatic Strategy, US-Iran relations, International Sanctions, India’s Foreign Policy, Diplomatic Balancing Act
Introduction
Iran-US relations have mostly been on flame since the mid-70s and 80s. Like it always happens in International Relations, the rivalry between the two countries has impacted the third-party country. Similarly, Iran-US relations have also impacted India’s relations with the US as well as with Iran. Despite all this mess, India has always maintained and balanced its relations with Iran and the US as well by every means.
India was offered the development of Chabahar port in 2003 on the backdrop of an agreement signed between China and Pakistan for the development of Gwadar port which is a terminal end to China-Pakistan Economic Corridor built under Belt and Road Initiative (BRI).
Under this agreement, India committed a bulky investment in the development of infrastructure of Shahid Beheshti terminal of Chabahar Port. However, the progress of the development of the port was very slow due to United States’ sanctions over Iran.
In the case of Chabahar, the Iran government planned to build it as the mouth of a free trade zone (20-year tax exemption and duty-free import) with linkage to central Asia. As an OECD note prepared by the Afghanistan trade ministry notes Afghan investors are also expected to be present in the proposed free trade zone. To make some of those possible, India built the Delaram to Zaranj Highway for $135 million.
Chabahar port is very vital for not only India’s economic gains but also from a strategic perspective. India has four reasons to build Shahid Beheshti Terminal at Chabahar, first being there will be a direct trade route which will connect India to Afghanistan as well as the Central Asia bypassing Pakistan.
Second is, this port is a part of India’s broader efforts for the development of International North South Transport Corridor (INSTC) which aims to reduce transportation cost and time traded between India and Eurasia.
Third, the development of Chabahar port is crucial for ensuring India’s stable energy supplies. Before the re-imposition of U.S. sanctions in 2018, Iran was a key supplier of crude oil to India, ranking as the second-largest supplier with imports reaching about 457,000 barrels per day. Presently, India maintains a position of zero imports of Iranian oil in compliance with the U.S. sanctions.
Fourth, the development of Chabahar port is also seen as a strategic counterbalance to China’s influence in South Asia and the Indian Ocean region, particularly through its investments in Pakistan’s nearby Gwadar port under the China-Pakistan Economic Corridor (CPEC). (India and Chabahar: Navigating the Tides of US Sanctions, n.d.)
That is why recently India and Iran have signed a 10-year long term agreement for the development of Chabahar port.
Origin of Sanctions on Iran by US:
The United States has since 1979 applied various economic, trade, scientific and military sanctions against Iran. United States economic sanctions are administered by the Office of Foreign Assets Control (OFAC), an agency of the United States Department of the Treasury. Basically, the causes of sanctions are Iranian Nuclear Programme, Iranian support to Hezbollah, Hamas, Palestine Islamic Jihad which are considered as terrorist organizations by the United States. Iran also supports Shia militia in Iraq and the Houthis in Yemen are also in contention.
There is a legal basis for these US sanctions which is like; United States sanctions can be imposed under the National Emergencies Act (NEA) of 1976, the International Emergency Economic Powers Act (IEEPA) of 1977 and the Iran and Libya Sanctions Act of 1996 (ILSA, later renamed to Iran Sanctions Act (ISA)). Declarations under NEA and IEEPA must be renewed annually to remain in effect. Another sanctions law is the Countering America's Adversaries Through Sanctions Act of 2017.
Timeline of US sanctions against Iran:
1. 1979: United States under Jimmy Carter presidency-imposed sanctions against Iran after radical students seized the US embassy in Iran and took hostages, after the US permitted the exiled Shah of Iran to enter the country for medical treatment. The US also imposed a trade embargo. Sanctions were lifted in January 1981 as a part of Algier Accords which was a negotiated settlement of hostages’ release.
2. 1983: United States president Ronald Reagon imposed an arms embargo to Iran, including United States military spare parts to the military during Iran-Iraq war.
3. 1987: An embargo on Iranian goods and services was imposed in 1987 again in Reagon’s presidency itself, in response to Iran's actions from 1981 to 1987 against the United States and other vessels in the Persian Gulf and because of Iran's support for terrorism.
4. 1995: In Bill Clinton’s presidency, the USA again imposed sanctions on Iran in response to Iran’s Nuclear programme and its support to some of the terrorist organizations like Hezbollah, Hamas and Palestine Islamic Jihad etc which the US considered as terrorist organizations. These sanctions prohibited the US from trading oil with Iran. Iran’s trade with the USA, which was growing since the end of an Iran-Iraq war, ended abruptly.
5. 1996: Iran-Libya sanctions act (ILSA) was signed by President Clinton. This act targeted both American and non-American businesses that make investments over $20 million in Iran for the development of petroleum resources in Iran. If they do not comply with the rules, then they could possibly face imposed sanctions against them two out of seven possible penalties by the United States.
ILSA was extended several times under the presidency of George W. Bush, and on December 1, 2016, it was extended under President Barack Obama, before vacating office, for a further ten years.
6. 2004: Under the presidency of George W. Bush, the United States department of the treasury ruled against editing and publishing scientific manuscripts from Iran and stated that American scientists collaborating with Iranians could be prosecuted.
7. 2005: Iranian president Ahmadinejad lifted the suspension of Uranium enrichment that has been agreed with EU3 and International Atomic Energy Agency (IAEA), and reported Iran’s non-compliance with its safeguards agreement to the United Nations Security Council(UNSC). The United States then began pushing for sanctions against Iran over its Nuclear Programme. In the same year, President Bush issued an executive order which consists of freezing assets of individuals connected with Iran’s Nuclear Programme.
Iranian financial institutions are barred from directly accessing the U.S. financial system, but they are permitted to do so indirectly through banks in other countries.
8. 2006: The United States government-imposed sanctions on Bank Saderat Iran, barring it from dealing with U.S. financial institutions, even indirectly.
9. 2010: The United States Senate and House of Representatives passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), signed into law by President Obama. The CISADA greatly enhanced restrictions on Iran, including the rescission of the authorization for Iranian-origin imports for articles such as rugs, pistachios, and caviar.
10. 2014: US put sanctions against third parties.
11. 2015: US senate agreed to cancel most of the US sanctions under JCPOA against Iran with some safeguard provisions, in return for limitations on Iran’s Nuclear Programme.
12. 2017: The Countering America's Adversaries Through Sanctions Act (CAATSA) was enacted. CAATSA requires the President to impose sanctions against:
(1) Iran's ballistic missile or weapons of mass destruction programs.
(2) the sale or transfer to Iran of military equipment or the provision of related technical or financial assistance.
(3) Iran's Islamic Revolutionary Guard Corps and affiliated foreign persons. The President may also impose sanctions against persons responsible for violations of internationally recognized human rights committed against individuals in Iran and can waive the imposition or continuation of sanctions.
13. 2018: The United States President Donald Trump announced an intention to withdraw from the Joint Comprehensive Plan of Action (JCPOA or Iran nuclear deal), and subsequently imposed several new non-nuclear sanctions against Iran. In the same year, the International Court of Justice (ICJ) ordered the United States government to revoke sanctions against Iran on the basis of the 1955 US-Iran 'Friendship Treaty’. In response, the US withdrew from two international agreements with Iran.
14. 2019: Trump imposed sanctions on Iranian Supreme Leader Khamenei, his office and those closely affiliated with his access to key financial resources and also in the same year placed sanctions against Iran's then Foreign Minister.
15. 2020: the United States imposed new sanctions on Iran Shipping Lines (IRISL) and its Shanghai-based subsidiary, E-Sail Shipping Company Ltd (E-Sail).
16. 2022: The United States Department of the Treasury announced sanctions against the Iran Morality Police as well as seven senior leaders of Iran's various security organizations.
17. 2023: The United States sanctioned a procurement network involving seven individuals and six entities in Iran and the People's Republic of China (PRC) for supporting the activities of the Ministry of Defense and Armed Forces Logistics, Parchin Chemical Industries, and key actors in Iran's ballistic missile program.
18. 2024: India signed a 10-year long term agreement with Iran for the development of Chabahar Port. US Threatened sanctions on ‘anyone’ engaging their business with Iran. After this, in September 2024, the US imposed sanctions on 12 Iranian officials for human rights abuses. The sanctions targeted members of Iran's security forces involved in suppressing protests, prison officials linked to torture and executions, and operatives involved in targeting dissidents abroad. (Wikipedia Contributors, 2024)
Shadow of US on Indo-Iran Relations:
First of all, talking about Indo-Iran relations which have always shared some positive aspects and challenges alike. Bilateral ties have been somewhat warm and Strategic. Both countries have been on opposite sides throughout history as during the cold war, India leaned towards the USSR and Iran was an ardent supporter of the west. And also, India did not support the Islamic Revolution in Iran which happened in 1979. Now, Iran is ruled by pro-Islamic rulers.
But strategically looking at the entire scenario, Iran has developed poor relations with the US due to continuous imposition of sanctions against them and restrictions of trade. This compels Iran to develop cordial relations with the rest of the powerful countries.
India's ties with Iran have become an irritant in the India–US relationship. Several scholars have alleged that the US is influencing India's Iran policy. Discussing cases like the Iran-Pakistan-India (IPI) pipeline, India voted against Iran at the International Atomic Energy Agency, and RBI’s guidelines which stopped oil payments to Iran through the Asian clearing Union.
Taking the case of Iran-Pakistan-India (IPI) pipeline, it is a natural gas pipeline between India, Iran and Pakistan. The notion of constructing this pipeline is that this would carry the Iranian product both overland to the Pakistani market and through Pakistan to the Indian market. The projected IPI pipeline would stretch about 2,775 kms. (Sanati, 2013)
For American Strategic thinking, progress on the IPI pipeline would be a major setback for its sanctions policy against Iran. It would produce a significant precedent of open defiance to the US led sanctions. But more significantly, it would create conditions where US sanctions against Iran would be eroded by economic dependence of India and Pakistan on Iranian natural gas. Therefore, the systematic opposition of the US and its allies had long been seen as a greatest hurdle in the completion of the IPI pipeline.
Similarly, the US has influenced India’s stance in 2006 as India voted against Iran in the International Atomic Energy Agency (IAEA), because it said that India is against a nuclear Iran in the neighborhood but has held the position that Tehran should develop its civilian nuclear programme under IAEA and UNSC guidelines. However, the US officials who see Iran as a threat to international security, have sought to link American cooperation in the Indo-US nuclear deal to Indian assistance in curbing Iran’s nuclear ambitions. Hence, India had to choose between the US and Iran.
In 2010, India’s central bank, the Reserve Bank of India had stopped oil payments to Iran through the Asian Clearing Union (ACU). Under the ACU mechanism, imports by the nine nations which are members of ACU, are settled every two months with every member paying for imports after netting out its exports among the union. Until 2008, payments under the ACU mechanism were done in US dollars but after the United States imposed sanctions against Iran over its suspected nuclear programme, the currency shifted to Euro. Here the US has indirectly impacted the RBI’s move to stop oil payments to Iran like, European Central Bank (ECB) asked the RBI and other central banks of the union to provide certificates that the euro is being used to import the products that are not on the US sanctions list. (PTI, 2010)
Development of Chabahar Port: India’s Diplomatic Balancing Act
As we have seen, the United States has many times influenced India’s foreign policy with Iran. The development of Chabahar Port also has a US shadow over it. As a recent 10 year long agreement signed between Iran and India over the development of Chabahar Port, the US has threatened India about sanctions, but in counter India India’s External Affairs Ministry restated that all the investments made by India Ports global Limited (IPGL) are in line with Iran Freedom and Counter-Proliferation Act, 2012(IFCA) and serve broader regional interests. The Trump administration’s “maximum pressure” campaign aimed at cutting off Iran’s revenue from oil exports and pressuring it to renegotiate the nuclear deal and curb its regional activities. (India and Chabahar: Navigating the Tides of US Sanctions, n.d.)
At that time, India managed to secure some exemptions related to the development and operation of the Chabahar port due to its strategic importance in supporting Afghanistan’s development and enhancing regional connectivity. The exception covered “three principal activities,” which included the development and maintenance of Chabahar port along with its railway link to Afghanistan, the import of refined petroleum products such as gas, diesel, and liquefied petroleum gas by Afghanistan from Iran, and the transit of non-sanctioned goods through Chabahar port to Afghanistan. India has complied with these rules, creating a plausible case for continued exemptions.
The United States cannot threaten India to deal with Iran for so long because of its own national and strategic interests. Exempting India from certain sanctions could be a strategic move by Washington to support its regional ally to counter Chinese influence in the region. There is a prevailing concern in Washington that if India were to abandon the development of the Chabahar port, China would likely step in to fill the void.
Conclusion
Tehran is strategically important to New Delhi as it helps India circumvent Pakistan. The Chabahar port’s location in the Arabian Sea means India will be able to skirt any challenges posed by developments in the Persian Gulf and the Strait of Hormuz. India’s investment in Chabahar port is driven not only by economic and strategic imperatives but also by New Delhi’s vision of regional stability and development.
The broader implications of the latest developments in India-U.S. relations vis-a-vis India-Iran relations hinge on diplomatic negotiations and mutual strategic interests. Continued exemptions under the IFCA are possible but require careful diplomatic maneuvering to ensure India’s engagements with Iran do not undermine its relations with the United States. India has to do the same diplomatic act with the US as it did with Israel which is a sworn enemy of Iran in the region.
In the last 10 years, India has shown its strategic strength by balancing between the rival nations using its optimistic and practical diplomatic strategy upholding its own national interests.
Middle East watchers are amazed at how India has held all her relations in the region in such a fine balance. But still, we must look forward to continuously changing geopolitical dynamics and act at a fast pace as the world is constantly on a hot flame.
References
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Vaid, M. (2024, May 30). Chabahar Conundrum: India’s Path Amid Geopolitical Storms. Thediplomat.com; The Diplomat. https://thediplomat.com/2024/05/chabahar-conundrum-indias-path-amid-geopolitical-storms/
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