India to Sign Chabahar Port Deal with Iran, Ignoring U.S. Warning against Haste

India will push ahead this week with plans to build a port in southeast Iran, two sources said, with Prime Minister Narendra Modi keen to develop trade ties with Central Asia and prepared to fend off U.S. pressure not to rush into any deals with Iran.

India and Iran agreed in 2003 to develop a port at Chabahar on the Gulf of Oman, near Iran’s border with Pakistan, but the venture has made little progress due to Western sanctions on Iran.

Now, spurred on by Chinese President Xi Jinping’s signing of $46 billion of energy and infrastructure deals with Pakistan, Modi wants to swiftly sign trade agreements with Iran and other Gulf countries.

“Shipping Minister Nitin Gadkari will travel on a day-long tour to Iran to sign a memorandum of understanding for development of Chabahar port,” a Shipping Ministry source with direct knowledge of the matter told Reuters. The deal will be signed on Wednesday, he said.

The United States cautioned India and others last week against strengthening ties with Iran ahead of a final agreement. But Indian officials said New Delhi could not ignore its national interest and noted a report that a U.S. energy delegation was visiting Iran.

The official said the best chance of a comprehensive nuclear deal with Iran depended on maintaining existing international pressure. He said the United States continued “to have ongoing, frank conversations with India on this issue.”

Iran has also proposed a free-trade agreement with India, a Trade Ministry source said. Rupee-denominated trade with Iran, started in 2012 because of complications arising from sanctions, has almost doubled Indian exports to Tehran in the past two years to $4 billion.

Bypassing Pakistan

Building the port would benefit India by cutting transport costs and freight time to Central Asia and the Gulf by about a third.

The port is also central to India’s efforts to circumvent Pakistan and open up a route to landlocked Afghanistan where it has developed close security ties and economic interests.

India has already spent about $100 million to construct a 220-km (140-mile) road in western Afghanistan to link up with Chabahar port.

Last week Modi assured Afghan President Ashraf Ghani of India’s commitment to building the port.

At the weekend, Iranian media reported that Iran had turned down an Indian request seeking multi-billion-dollar development rights for the Farzad B gas field.