March 8, 2019 | Policy Brief

Chabahar Port Deal Threatens to Capsize Iran Sanctions

March 8, 2019 | Policy Brief

Chabahar Port Deal Threatens to Capsize Iran Sanctions

Afghanistan sent India its first exports last week through southeastern Iran’s Chabahar port, which the Trump administration has exempted from U.S. sanctions in order to facilitate Afghan reconstruction efforts. However, Iran may try to exploit the exemption to generate revenue for illicit ends, thereby undermining the Trump administration’s maximum pressure campaign against the clerical regime.

The port of Chabahar connects India to Afghanistan and other Central Asian markets, a longtime objective for New Delhi in light of Pakistan’s ban on the passage of Indian goods through its territory. In this context, Chabahar provides India – and, by extension, the United States – an effective way to counter Chinese expansion in the Gulf by providing an alternative to Pakistan’s Gwadar port, which Beijing funds under the auspices of its Belt and Road Initiative.

But Tehran’s Islamic Revolutionary Guard Corps (IRGC) has a track record of using Iran’s air and sea ports to smuggle goods. If the past is precedent, the regime may redirect the funds generated by trade at Chabahar to its weapons programs and regional proxies. The IRGC’s ubiquitous role in the Iranian economy, combined with its well-documented history of sanctions evasion, requires India to monitor the port rigorously.

The United States can aid such an effort. For instance, Washington can provide export control and cargo inspection expertise to help New Delhi detect possible Iranian subversion.

The Trump administration can also pressure India by requiring Indian companies to place funds in escrow accounts in order to make sure they can pay U.S. fines if they fail to comply with sanctions.

Likewise, the Trump administration can require India to issue certifications that no IRGC affiliates are active in Chabahar. Though the U.S. would have limited means to verify or enforce such certifications independently, the requirement would force India to go on the record. In so doing, it would give Washington a political basis to take even harsher measures to pressure New Delhi if all else fails.

For example, America could threaten to revoke the Chabahar project’s exemption, thereby exposing New Delhi to U.S. secondary sanctions. America could also rescind the waiver it gave India that allows it to keep importing 300,000 barrels per day of Iranian crude despite U.S. sanctions.

Chabahar port holds significant economic promise for India, the United States, and the region. But the lack of adequate safeguards to protect the port from IRGC activity may undermine not only U.S. sanctions on Iran, but also the U.S.-India relationship. Washington and New Delhi should work together to prevent such an outcome.

Varsha Koduvayur and Andrew Gabel are research analysts at the Foundation for Defense of Democracies (FDD), where they also contribute to FDD’s Center on Economic and Financial Power (CEFP). Follow Varsha and Andrew on Twitter at @varshakoduyavur and @Andrew_B_Gabel

Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based nonpartisan research institute focusing on national security and foreign policy.

Issues:

Afghanistan Iran Iran Global Threat Network Iran Sanctions Sanctions and Illicit Finance The Long War