US overrides sanctions for funding Chabahar port

India-Iran Chabahar Port: US gives ‘written’ assurance to India facilitating banks to fund $85 million equipment purchase!

The port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia.

In a big breakthrough, the United States has given a written assurance to India that will help facilitate global banks to fund the purchase of equipment worth $85 million to be erected at Chabahar port which India is developing in Iran.

In November 2018, the United States granted a waiver to the port from the sanctions it has imposed on the Persian Gulf nation.

Iran’s Chabahar port and its proximity to Pakistan’s Gawadar port

“We have to procure equipment for running the port, but because of the US sanctions, we are not able to procure,” a government official briefed on the issue said.

“We have placed the orders for equipment, some as long as two years ago, but we are not able to open a letter of credit (LCs). Banks are not coming forward. The US had earlier given verbal assurances (on the waiver fine print) but were very reluctant to give anything in writing, and the banks insist on the document. Now, after the recent visit of Foreign Minister S Jaishankar, they have given us something in writing, and we are trying to go ahead,” the official stated.

“The payments are in dollars. We need some banks which deal in dollars or euros, so we have to hit the international banking system and there if the word Iran comes, no bank is prepared to stick its neck out,” he stated.

India Ports Global and Iran’s Aria Banader Port signed a deal in May 2016 to equip and operate the container and multi-purpose terminals at Shahid Beheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $ 22.95 million on a 10-year lease. Cargo revenues collected will be shared by India and Iran as per an agreed formula.

Located in the Sistan-Baluchistan Province on Iran’s South-eastern coast (outside the Persian Gulf), Chabahar port is of great strategic importance for the development of regional maritime transit traffic to Afghanistan and Central Asia. The strategic Chabahar port is being considered a gateway to golden opportunities for trade by India, Iran and Afghanistan with central Asian countries. The port will overwhelmingly reduce the dependence of Kabul and New Delhi on Karachi port to do business with each other.

Last words regarding Chabahar, is how SCF understand it is that Chabahar is primarily for transit trade to Afghanistan and Central Asia, while CPEC will serve as the shortest route to Kashgar/ China for faster delivery of raw materials to Chinese industry. So both of these ports may not be viewed as rivals to each other, rather complimenting to each other. While Gawadar port has already been made functional as far as SCF know, Chabahar is still marred by budgetary constraints and indirect sanctions. Only time will tell.

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