India ditches Iran under US Pressure

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India ditches Iran under US Pressure

ISLAMABAD - In April 2016, Iran, India and Afghanistan signed link an agreement to develop the Iranian port of Chabahar as a shipping hub with rail links that connected India to Afghanistan through Iran—and circumvented Pakistan. Chabahar is on the Gulf of Oman and is Iran’s only port with access to the Indian Ocean.

The Chabahar Agreement was designed to be an economic boon for all three countries. For landlocked Afghanistan, the Chabahar Agreement offered access to the international shipping trade. For Iran, it promised up to $500 million in investment and economic reintegration after years of punishing international sanctions were lifted. And for India, it offered a way to avoid being encircled by China in its own neighborhood. As part of the deal, Iran gave India control over day-to-day operations of the port.

[image: Chabahar Port] Chabahar Port in southeastern Iran

The Chabahar project was also meant to be a strategic game-changer. It offered India access to a port just 56 miles (90 kilometers) from Gwadar, the lynchpin of China’s investment in rival Pakistan and a key juncture in China’s Belt and Road Initiative.

But the Chabahar project was stymied after the Trump administration abandoned the Iran nuclear deal in May 2018. Twice, in November 2018 and May 2019, the U.S. issued waivers that allowed the port project to proceed, on grounds that it facilitated reconstruction in Afghanistan. But India was unable to find a partner company to run its operations inside Iran. Investors and port management companies feared getting caught up in U.S. sanctions in the future. The project also needed European equipment, but Western firms were reluctant link to sell port materiel for Chabahar’s development because of the Trump administration’s tough stance on Iran. [image: Map of Chabahar] The view from Delhi

The Chabahar project was initiated by India, which had been interested in access to the Iranian port since the turn of the century. New Delhi envisioned Chabahar as a regional trading hub that could connect India to emerging markets in Afghanistan and Central Asia. In 2009, India financed a major highway from Delaram in southern Afghanistan to Zabol on the Iranian border; the new road cut transportation time from 12 hours down to just two. From Zabol, an Iranian highway connected to Chabahar.

But India’s interest in Chabahar has also been geopolitical. Delhi has watched with trepidation as Beijing and Islamabad deepened ties over common political and economic interests. As part of its Belt and Road initiative, China invested $62 billion in Pakistan; significant funds went to develop the port city of Gwadar on the Gulf of Oman. Gwadar offered the link between China’s overland and oceanic commercial routes. In February 2013, a Chinese state-owned company took over link operational control of Gwadar’s port. In 2018, an estimated link one million tons of cargo passed through Gwadar annually.

Gwadar represented a major expansion of China’s influence in India’s neighborhood. Long-term, India feared being encircled by China physically, economically and strategically. For India, developing Chabahar was a strategic and economic imperative.

India’s earlier interest in Chabahar had been stymied, however, by international sanctions on Iran over its nuclear program. The trilateral Iran-Afghanistan-India working group created in 2012 made little progress. Movement on Chabahar had to wait until after sanctions were lifted in 2016 as Iran’s reward for limiting its nuclear program.

Tehran’s opportunity

For Iran, Chabahar offers a way to widen regional trade, reconnect with the global economy and break out of regional encirclement by Sunni-dominated governments. The election of President Hassan Rouhani in 2013 accelerated plans to develop Chabahar with India’s help. In 2014, Indian Prime Minister Narendra Modi pledged link $85 million for the project.

The 2015 nuclear deal, brokered with the world’s six major powers, opened doors previously closed. India signed a memorandum of understanding with Iran to develop Chabahar even before the Joint Comprehensive Plan of Action was finalized in July 2015. The lifting of international sanctions in January 2016 led to more concrete commitments from India. In May 2016, Modi visited Tehran and pledged $500 million in investment for Chabahar.

Rouhani said link the Chabahar Agreement was a “very big symbol of cooperation between the two great countries of Iran and India.” It would link “develop and strengthen the whole region.” For Tehran, the Chabahar Agreement represented the potential for reintegration into the global economy after the JCPOA.

Progress on the Chabahar continued in the first year of the Trump administration, albeit at a slower pace. Rouhani presided link over the official opening of the port in December 2017, and Tehran leased link control of the port to India in February 2018. However, Trump’s threats to withdraw from the JCPOA chilled private sector interest in the project.

link Hassan Rouhani ✔@HassanRouhani link link

With PM @narendramodi link & President @ ashrafghani link celebrating Trilateral Transport & #Chabahar link Transit Agreement. [image: View image on Twitter] link 726 link 1:25 AM - May 24, 2016 link Twitter Ads info and privacy link

370 people are talking about this link Chabahar under ‘maximum pressure’

In May 2018, the Trump administration pulled out of the JCPOA and signaled a tougher approach to Iran. In November 2018, the Treasury Department re-imposed sanctions on Iran’s oil and shipping sectors. Even though Chabahar was exempted link from the sanctions, the administration’s rhetoric made investors wary of the project. In April 2019, Secretary of State Mike Pompeo warned link that “the risks are simply not going to be worth the benefit” for any nation or entity interacting with Iran.

The economic impact of the U.S. “maximum pressure” policy on the Chabahar project has been severe. Delhi has repeatedly failed link to attract a private sector partner to operate cargo at the port. Western firms largely refused to invest in badly-needed equipment.

Uncertainty about Chabahar’s future has hurt India’s economic and strategic interests. What began as a plan to avoid encirclement by China has turned into a high-risk, high-cost investment with little return. Beijing has also capitalized link on the reluctance of Western companies to engage in the project by winning contracts to supply Chinese equipment to the port, a move that undermines Delhi’s original rationale behind the project. - The Iran Primer

By: Andrew Hana