India signs MoU to develop Iran’s Chabahar port

India on Wednesday signed an agreement with Iran to develop a port in southeast Iran, in a move that would help improve India's access to landlocked Afghanistan and other central Asian countries at a time when China is expanding its role in the region.

The deal comes after a thaw in Iran's relations with western powers, nearly ending a stand-off over Iran's nuclear build-up that the US and its allies consider as threat to the region.

The US, however, has warned countries against engaging Iran before a formal nuclear agreement is reached by the 30 June deadline.

The US and other western powers are still working on the finer details of the agreement meant to block Tehran from developing nuclear weapons in exchange for the lifting of Western sanctions.

The US has been asking India and other countries not to ''rush'' into doing business with Iran as Washington was yet to work out a deal with Tehran on the latter's contentious nuclear programme (See: India pushing Iran port plans despite US pressure).

Chahahar, where the port will come up, is close to Pakistan's Gwdar where China is developing a port that would give China a direct access to the Persian Gulf.

The development of the strategically important Chabahar port in Sistan-Balochistan Province on Iran's southeastern coast will give India a sea-land access route to Afghanistan bypassing Pakistan.

The pact was signed after comprehensive talks between visiting road transport and highways minister Nitin Gadkari with the Iranian leadership in Tehran. ''The MoU was signed after the talks between the two sides,'' a source said.

Iranian President Hassan Rouhani, in his meeting with Gadkari, said, ''Resumption of Iran-India cooperation in the southeastern Iranian port city of Chabahar would lead to a new chapter in relations of two countries.''

The port will also be the closest port for India for importing crude oil from Iran, which would save transportation costs. India intends to lease two berths at Chabahar for 10 years.

The port will be developed through a special purpose vehicle (SPV) which will invest $85.21 million to convert the berths into a container terminal and a multi-purpose cargo terminal.

''With the signing of this MoU, Indian and Iranian commercial entities would now be in a position to commence negotiations towards finalisation of a commercial contract under which Indian firms will lease two existing berths at the Port and operationalise them as container and multi-purpose cargo terminals,'' a ministry of external affairs statement said.

''The availability of a functional container and multi-purpose cargo terminal at Chabahar Port would provide Afghanistan's garland road network system alternate access to a sea port, significantly enhancing Afghanistan's overall connectivity to regional and global markets, and providing a fillip to the ongoing reconstruction and humanitarian efforts in the country,'' it said.

Rouhani, in his meeting with Gadkari, underscored the importance of mutual cooperation in the port project and beyond and said Iran's transit position could help India connect with the east to west and north to south of Iran and also play a pivotal role in connecting India to Central Asia, the Caucasus and Eastern Europe via railway.

India had, in October last year, approved the framework of an inter-governmental memorandum of understanding (MoU) for setting up an $85.21 million joint venture firm for equipping two fully-constructed berths at Chahbahar port.

As per the framework, an Indian joint venture company would lease two fully constructed berths in Chahbahar port's Phase-I project for a period of ten years, which could be renewed by ''mutual agreement''.

The Indian side will transfer ownership of the equipment to be provided through the investment to Iran's port and Maritime Organisation (P&MO) without any payment at the end of the tenth year.