India and Iran have signed a long-term agreement on the operation of Chabahar Port on Iran’s south-western coast, strengthening the relationship between the two countries despite the threat of sanctions from the US. 

Overseen by India’s Ports and Shipping Minister Sarbananda Sonowal, the contract between Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran will last for 10 years. 

As part of the agreement, IPGL will also invest $120m into the port while the Indian Government will provide a loan of $250m for the development of a terminal. 

Sonowal said: “The agreement not only strengthens links between two great nations but also places India’s firm footstep in the global supply chain and maritime sector.  

“This is a realisation of Modi Ji’s vision of enhancing global trade by providing an alternate trade route to India for Iran, Afghanistan, Eurasia and Central Asian Republics.” 

The agreement will replace one signed in 2016 which covered IPGL’s control of the Shahid Beheshti terminal at the port and had so far been renewed on an annual basis. 

However, Indian interest in the port actually dates back to 2003 when its first attempts to further develop the site were thwarted by the wide range of US sanctions on Iran, which were later partially lifted for the port due to its importance to Afghanistan. 

Despite India’s positive outlook for the deal, the issue of sanctions could affect the latest agreement with the US State Department noting its interest in the deal. 

The department’s Principal Deputy Spokesperson Vedant Patel told reporters that while he would not comment on India’s goals with the investment, he warned that “as it related to the United States, US sanctions on Iran remain in place and we’ll continue to enforce them.” 

Patel also clarified that any entity engaging with Iran was opening itself up to sanctions from the US and there would not be an exemption for the Chabahar Port deal, despite the port previously being exempt from some penalties. 

Notably, the new deal comes at a time of heightened tension between the US and Iran around the situation in the region surrounding Israel and the Red Sea where Iranian attacks on ships have led to retaliation by US, UK and Israeli forces.