Eye on the Middle East | On Chabahar and US sanctions, a litmus test for New Delhi and Washington

Chabahar is arguably a litmus test for how well the US recognises India’s value in deterring China and in increasing Iran’s own stakes in regional stability

On May 13, India and Iran signed a 10-year ‘Long Term Bilateral Contract on Chabahar Port’, following up on the agreement reached during the external affairs minister’s January visit to Tehran.

Chabahar Port(HT File)

On May 14, the US State Department warned that “any entity considering business deals with Iran need to be aware of the potential risk of sanctions.” The Department’s spokesperson further clarified that there were no planned exemptions for Chabahar specifically.

target="_blank" href="https://www.hindustantimes.com/india-news/us-warns-of-sanctions-after-india-iran-chabahar-port-agreement-101715649651130.html">Commenting on these developments, India’s EAM S Jaishankar asserted that the port’s development would benefit the entire region and that a “narrow view” should be avoided, adding a reminder that Washington itself had appreciated India’s role in Chabahar in the past. Evidently, as the India-US relationship touched new heights across 2023, New Delhi has carved out a special position for itself in Washington’s foreign policy, drawing greater comfort in its multi-alignment.

Among the key triggers to this has also been the United State’s increasing focus on countering China geopolitically, and India’s vital role in that endeavour as a front-line state. In light of the recent State Department comments, this piece focuses on how the United States has navigated India’s relationships with Russia and Iran. The constant in both cases is that the United States has invested in crucial partnerships with India, with the Quad holding special prominence.

The variable has been the third country (hostile to the US) whose partnerships with India trigger the sanctions debate – how much is Washington willing to compromise on the coercive tools it deems essential to influencing the actions of these third states?

Among the main tools, is the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA), which lists entities primarily in Russia, China, and Iran, among others.

On Russia

As the war in Ukraine has progressed since February 2022, the Russia-US relationship has grown proportionately worse, on the back of already degrading ties since Russia’s alleged involvement in the 2016 US Presidential elections.

Hence, the incentive only increases for Washington to press CAATSA even more on entities doing business with Moscow; Turkey was sanctioned in 2020 for its purchase of the Russian S-400 air defence system. India, however, secured a CAATSA waiver in 2022 for its own 2018 deal with Russia for five S-400 systems. As was evident in the remarks of the lawmaker proposing the waiver, “The United States must stand with India in the face of escalating aggression from China”. Several other lawmakers have echoed this reasoning, across the past year.

More recently on April 4th, as Indian oil imports from Russia increased amid the war in Ukraine, a US Treasury official stated that “once Russian oil is refined, from a technical perspective it is no longer Russian oil.” Significantly, she clarified that Washington had not asked India to stop importing Russian oil and was not considering sanctions.

The United States’ inclination to provide India-specific waivers to its sanctions regime targeting Russia is a function of where the India-Russia bilateral is currently placed. For Washington, yielding to India’s needs on Russia is not a compromise, especially when the former is set on diversifying its defence imports and looking to gradually undo its lopsided reliance on Russia for arms and spares. In Washington’s eyes, New Delhi is on a slow drift away from Moscow and it resists the urge (largely) to upset the proverbial apple cart.

On Iran

Unlike Russia, India’s relationship with the other third state hostile to the United States – Iran – is not marked by a steady drift of separation. Rather, Iran’s value in India’s strategic calculus has long grown, despite the relationship often being hostage to the US-Iran relationship. While India had secured an Afghanistan-linked waiver from sanctions in 2018 for Chabahar from the Iran Freedom and Counter-Proliferation Act of 2012, Washington refused any special waivers/extensions of waivers to India for the purchase of Iranian oil. New Delhi has not imported Iranian oil ever since.

The Shahid Beheshti port, however, holds special importance for India’s regional policy and its connectivity plans, with New Delhi long having endured the multiple challenges that have plagued its Chabahar plans (explained here). India’s aim to boost Chabahar’s capabilities is ambitious; India Ports Global Limited (which was created specifically to develop/operate Chabahar) declares that while the port’s current handling capacity is 2.5 million tonnes per year, the completion of Phase I of development work will increase that to 8, with all four phases eventually taking it up to 82 million tonnes. In this light, the IPGL is set to invest $120 million in the port.

On India’s choices

Evidently, then, the pillars of the India-Iran bilateral are only growing stronger. For New Delhi, Chabahar is a geo-strategic tool that will also yield economic dividends, especially if the International North-South Transport Corridor gets going, and helps (to a limited degree) to counter China and its Belt and Road Initiative.

However, unlike Russia, India has no historic dependence on Iran. Its determination to pursue older partnerships, defined through Chabahar, is by choice and a product of strategic choice. This is not to suggest that the India-Russia bilateral was not driven by choice – it is simply that the scale and scope of that relationship created dependencies that India did not necessarily find discomforting. Its new choice with Russia is to preserve the older relationship but to scale down the dependence.

With Iran, its choice is to grow closer – a function of India’s strategic autonomy which has also resulted in significant new partnerships with the West. Essentially, for every INSTC (Iran, Central Asia, Russia), there is an IMEEC (Arab states, Israel, Europe, with US support).

For Washington then, CAATSA sanctions on Chabahar (should they be necessary) or their exemptions, will depend on how much it is willing to compromise on its coercive foreign policy instruments meant for the states that are increasingly drawing closer to each other – an Axis of Upheaval as Kendall-Taylor and Fontaine called it in the Foreign Affairs magazine.

Its relationship with Tehran has further deteriorated across late 2023 and early 2024 due to increasing Iranian proxy action in the Red Sea, Lebanon, and Iraq. Given the ambitions that India has for Chabahar and New Delhi’s necessity to project it as a safe investment environment, the farther the threat of US sanctions, the better - naturally. Chabahar then is arguably a litmus test for how well the United States recognises India’s value in deterring China, in increasing Iran’s own stakes in regional stability, and in New Delhi’s appreciation for choice at a time when it is drawing closer to the West than ever before.

Bashir Ali Abbas is a research associate at the Council for Strategic and Defense Research, New Delhi, and a South Asia Visiting Fellow at the Stimson Center, Washington DC. The views expressed are personal.