“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 previously faced years-long delay due to differences over a clause related to arbitration.

D’Souza said former US president Donald Trump’s administration had provided a waiver for access to Afghanistan and if India gets a similar concession, it could benefit the region, which needs trade, transit and economic opportunities.

She added the White House may not follow through on the punitive measures, given both India and the United States are in an election year.

India’s involvement in Chabahar began in 2016 when a trilateral agreement was signed to establish the International Transport and Transit Corridor involving New Delhi, Iran and Afghanistan during Prime Minister Narendra Modi’s visit to Tehran.

Washington later exempted India from certain sanctions linked to the port and the construction of a railway line connecting it with Afghanistan.

D’Souza said the harbour also provided India an alternative trade route to Afghanistan and Central Asia, as the frequent closure of the Afghan-Pakistan border by Islamabad affected people in the Taliban-ruled nation.

“It has been an area of interest [for India] for more than two decades given Pakistan’s denial of trade and transit opportunities for Afghanistan and Central Asia with India, and thereby a denial of much-needed regional economic development and integration,” she said.

D’Souza noted that the US was aware of Chabahar’s ability to act as a counterweight to Beijing’s growing presence in the region.

“The expanding Chinese footprint through the Belt and Road Initiative in the region and the strengthening relationship between Pakistan and China has economic and geopolitical implications,” she said.

“The US does need India to balance China but at the same time, it can’t overlook the sanctions it has imposed on Iran. It isn’t exactly clear how it is going to play out till new governments are in place in both India and the US.”

Indian External Affairs Minister S. Jaishankar said the project will “benefit the entire region” and his government would convince the US of its importance.

“I did see some of the remarks that were made, but I think it’s a question of communicating, convincing, and getting people to understand that this is actually for everyone’s benefit. I don’t think people should take a narrow view of it,” he said.

02:44

Iran’s new missile can reportedly reach Israel and US military bases in Middle East

Iran’s new missile can reportedly reach Israel and US military bases in Middle East

Kabir Taneja, an associate fellow with Observer Research Foundation Strategic Studies Programme in New Delhi, said Chabahar has endured sanction threats over the last two decades and the latest deal was a continuation rather than a radical change in the India-Iran relationship.

“It is a continuation of what has been there for a long period of time. The issue of sanctions is not new on Chabahar port. India dealt with it around the time Barack Obama was in power in the US and it was a very difficult sort of thing to deal with,” Kabir said.

He said strong sanctions delayed the Chabahar port and also hit other initiatives like Farzad-B Gas Field, adding India was keen on completing the project that aligns with its neighbourhood strategy.

Kabir said the US was under “tremendous” domestic pressure over the war in Gaza and Israel’s tit-for-tat strikes against Iran last month mean “we are in a very sensitive time” that could discourage the Biden administration from targeting Chabahar.

“So, even though there are threats of sanctions on Chabahar, I think more clarity only comes once the US elections are done. I don’t think a lot of things are happening on this front before the elections.”

Professor Sujata Ashwarya from the Centre for West Asian Studies at Jamia Millia Islamia University said India deciding to forgo “commercial arbitration” in foreign courts in favour of “investment arbitration” has made its involvement in the project vulnerable.

“If there is an issue regarding an investment and development of Chabahar, then that dispute would fall under the jurisdiction of Iranian and Indian courts which is not good for India. I think commercial arbitration is always better in any commercial deals,” she said.

Sujata also said the US was tied up with the Russia-Ukraine and Gaza wars and a “tiny commercial agreement” between India and Iran was not important to its electorate, and Washington was unlikely to slap sanctions on New Delhi.

“So far what the US has said is that it is examining the deal and it will let the world know how it looks at the deal. It has not intervened at all,” she said.