India inks 10-year deal to operate Iran's Chabahar port

NEW DELHI (Reuters) -India signed a 10-year contract with Iran on Monday to develop and operate the Iranian port of Chabahar, the Narendra Modi-led government said, strengthening relations with a strategic Middle Eastern nation.

India has been developing the port in Chabahar on Iran's south-eastern coast along the Gulf of Oman as a way to transport goods to Iran, Afghanistan and central Asian countries, bypassing the port of Karachi and Gwadar in its rival Pakistan.

U.S. sanctions on Iran, however, slowed the port's development.

"Chabahar Port's significance transcends its role as a mere conduit between India and Iran; it serves as a vital trade artery connecting India with Afghanistan and Central Asian Countries," India's Shipping Minister Sarbananda Sonowal said in Tehran, after the signing of the agreement.

"This linkage has unlocked new avenues for trade and fortified supply chain resilience across the region."

U.S. State Department deputy spokesperson Vedant Patel, asked about the deal, told reporters that U.S. sanctions on Iran remain in place and warned that Washington will continue to enforce them.

"Any entity, anyone considering business deals with Iran - they need to be aware of the potential risks that they are opening themselves up to and the potential risk of sanctions," Patel told reporters.

The long-term deal was signed between Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran, authorities in both countries said.

Under the agreement, IPGL will invest about $120 million while there will be an additional $250 million in financing, bringing the contract's value to $370 million, said Iranian Minister of Roads and Urban Development Mehrdad Bazrpash.

IPGL first took over operations of the port at the end of 2018 and has since handled container traffic of more than 90,000 TEUs and bulk and general cargo of more than 8.4 million tonnes, an Indian government official said.

A total of 2.5 million tonnes of wheat and 2,000 tonnes of pulses have been shipped from India to Afghanistan through Chabahar Port, the official added.

"It will clear the pathway for bigger investments to be made in the port," Indian Foreign Minister Subrahmanyam Jaishankar told reporters in Mumbai on Monday.

(Reporting by Jayshree P Upadhyay, Sudipto Ganguly in Mumbai; Krishn Kaushik, Aditya Kalra and Shivam Patel in New Delhi; Daphne Psaledakis in Washington; Editing by Christian Schmollinger, Sonali Paul and Ros Russell)