India-Iran Port Deal
A file photograph of the port of Kalantari in the city of Chabahar, 300km east of the Strait of Hormuz Reuters

India has struck a deal to develop a strategic port in southeast Iran.

Indian Shipping Minister Nitin Gadkari and his Iranian counterpart Abbas Ahmad Akhoundi have signed a memorandum of understanding (MoU) to develop the Chabahar Port on the Gulf of Oman, near Iran's border with India's arch rival Pakistan.

India's interests

With India being Afghanistan's fourth-largest aid donor, the advantage of a container and cargo terminal at Chabahar is that it provides landlocked Afghanistan with access to the sea, reducing its reliance on Pakistan.

In addition, Indian exporters hope to gain access to a free-trade zone being developed near Chabahar to export more to the Commonwealth of Independent States (CIS), Mumbai-based Khalid Khan, regional head of the Federation of Indian Export Organisations (FIEO), told Reuters.

Rupee-denominated trade with Iran, started in 2012, has almost doubled Indian exports to Tehran to $4bn (£2.63bn, €3.52bn) over the past two years.

US concerns

However, the US has expressed concern that India was moving too fast and that New Delhi's move could weaken a sanctions regime imposed on Iran to bring it to the negotiating table and sign a final nuclear accord.

Washington has said there was no guarantee that a final nuclear deal with Tehran will be secured by the 30 June deadline.

The Indian government said in a 6 May statement: "Indian firms will lease two existing berths at the port and operationalise them as container and multi-purpose cargo terminals."

Earlier, Richard Verma, the US ambassador to India, told the news agency: "Sanctions won't solve the problem, but they certainly will continue to bring Iran to a final agreement."

India recently sent a delegation to Iran to explore trade, energy and infrastructure deals, in the wake of the provisional 2 April deal over Tehran's nuclear programme.

India and Iran agreed to develop the Chabahar port in 2003, but the project made little progress owing to Western sanctions tied to Tehran's disputed atomic programme.

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