Will US sanctions threat undo India-Iran Chabahar port deal aimed at countering China’s regional expansion?

The threat of potential US sanctions over a port deal between India and Iran is unlikely to deter New Delhi from pressing ahead with the project seen as crucial for its ambition to boost trade with Central Asia and counter Chinese influence in the region, analysts say.

The two countries signed on Monday a 10-year agreement to develop the strategically important Chabahar deep water port in Sistan-Baluchistan province, close to the Islamic republic’s border with Pakistan.

Observers said the pact was a sign of India “taking a more assertive stand on regional and global issues” and the facility was aimed at bypassing Pakistan’s Gwadar Port, a key project under China’s Belt and Road Initiative.

“This is one of the metrics of how India is moving ahead in its bilateral relationship in the region in the face of Chinese expansionism,” said Dr Shanthie Mariet D’Souza, a Fulbright-Nehru visiting chair at the University of Massachusetts-Amherst.

But a day after the contract was secured in the presence of Indian ports and shipping minister Sarbananda Sonowal and his Iranian counterpart Mehrdad Bazrpash, Washington warned that “anyone” considering business deals with Tehran must be aware of the “potential risk of sanctions”.

“We’re aware of these reports that Iran and India have signed a deal concerning the Chabahar port. All entities considering business deals with Iran need to be aware of the potential risk that they are opening themselves up to and the potential risk of sanctions,” State Department spokesman Vedant Patel told a press briefing on Tuesday.

Under the agreement, Indian Ports Global Limited will invest about US$120 million, with an additional US$250 million in financing, bringing the deal’s value to US$370 million.

The accord