US President Donald Trump's fresh sanctions against Tehran have spooked India into reviewing its marquee connectivity project in Central Asia, the Chabahar port in Iran, imperilling a prime ministerial promise and a key route to Afghanistan bypassing Pakistan.
Prime Minister Narendra Modi had promised the "early implementation" of a commitment India made to Iran during his visit to Tehran last May on developing two terminals and five berths at the strategically located port on the Gulf of Oman, within 18 months.
That commitment followed the nuclear agreement Iran struck with world powers that laid the ground for the then Barack Obama administration to withdraw a series of sanctions that had held up India's investment in Chabahar for years.
But the sanctions slapped by the Trump administration yesterday, after twin Iranian ballistic missile tests, have forced the foreign office into a quandary: meeting India's commitments could risk the future of its investments in Iran.
None of the 13 individuals and 12 companies - based out of Iran, Lebanon, China and the UAE - sanctioned yesterday by the US treasury department has any business with major Indian companies or with New Delhi's Chabahar project.
But the sanctions have triggered worries in the foreign office over the prospect of the return of broader economic measures against Iran that could then effectively lock in Indian investments in the port and a special economic zone (SEZ) next to it, indefinitely.
"Any negative development between the US and Iran is not good for India," Gulshan Sachdeva, professor in energy studies at Jawaharlal Nehru University told The Telegraph. "The way the Trump administration is going, the future with Iran is tough to predict."
India has long eyed the Chabahar port as its gateway to Central Asia and Afghanistan, areas it cannot reach by land without passing through Pakistan, its strategic adversary.
But the nuclear-related sanctions imposed by the Obama administration against Iran included "secondary sanctions" - which meant that any company, government or individual that did business with the sanctioned entities could also face American sanctions.
That fear kept India away from investing in Chabahar till the nuclear deal Tehran struck with the five permanent members of the United Nations Security Council and the European Union in October 2015, under which the secondary sanctions were lifted.
During Modi's 2016 visit, India and Iran also struck a deal to jointly build a rail line connecting Chabahar to the city of Zahedan near the Iranian border with Afghanistan. Modi, Iranian President Hassan Rouhani and Afghan President Ashraf Ghani also oversaw the signing of a trilateral transit treaty that allows India and Afghanistan to trade through Chabahar and Iranian territory. Modi committed a US$ 150 million soft loan to Iran, and a US$ 500 million investment in the Chabahar SEZ.
India and Iran are simultaneously also developing the International North South Transport Corridor (INSTC) together with Russia, connecting the Gulf of Oman to Central Asia and Eastern Europe.
These projects are crucial for India from a strategic perspective too. China has financed the Arabian Sea port of Gwadar in Pakistan's Balochistan, which India views as a strategic threat. The Chabahar port, just 72km west along the coast from Gwadar, offers India a counter.
The connectivity projects also allow India to present an alternative to China's One Belt One Road initiative to other countries that need trade corridors but are wary of Beijing.
"These investments and plans were natural for India to proceed on when there was a certain amount of certainty in the situation between the US and Iran," Sachdeva said.
But Friday's sanctions again include "secondary sanctions," demonstrating willingness by the Trump administration to punish those who engage with Iran.
India committed Rs 150 crore for the Chabahar project in the budget announced by finance minister Arun Jaitley on February 1. But it is yet to actually sink money into the Chabahar port, and some officials are now cautioning that New Delhi should wait to first see if an escalation in tensions leads to the unravelling of the nuclear agreement or in a parallel set of broader, tough sanctions.
Holding back on the money though carries its own risks, other officials warned - it could force Iran to look elsewhere for partners, and leave trade with Afghanistan at the mercy of Pakistan.
