Published: Thu, November 08, 2018
Markets | By Otis Pena

USA exempts Chabahar port-related activities from its sanctions

USA exempts Chabahar port-related activities from its sanctions

While Iranian oil exports are expected to fall because of USA sanctions that took effect on Monday, reports from OPEC and other forecasters have indicated that the global market could see a 2019 supply surplus as demand slows.

The exception granted by Secretary of State Mike Pompeo to USA sanctions reimposed on Iran on Monday also will permit the construction of a railway line from Chabahar port to Afghanistan, and for shipments to the war-torn country of non-sanctionable goods, like food and medicines, the spokesman said.

This waiver will bring some measure of relief to India, which had been discussing a sanctions exemption for Chabahar having signed an agreement with Iran and Afghanistan in May 2016 for the port's development. US Secretary of State Michael R Pompeo had said these countries have shown significant reduction in oil purchase from Iran.

President Donald Trump's "South Asia strategy underscores our ongoing support of Afghanistan's economic growth and development as well as our close partnership with India", a State Department spokesperson said.

India has warm relations with Iran and has joined China and European powers in saying it was not obligated to comply with the unilateral US sanctions, although it has sought to appease Washington by curbing some of its Iranian oil imports.

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Afghanistan's imports of Iranian petroleum products were also being exempted from sanctions, the spokesperson added. India has committed $500 million to the project and $2 billion to build a railway line from Chabahar to Hajigaj in Afghanistan.

"We are making it abundantly clear to the Iranian regime that they will face mounting financial isolation until they fundamentally change their destabilizing behavior".

Adding that while the "exception" has been granted after much deliberation, the strategic importance of these projects can not be ignored.

"This exception relates to reconstruction assistance and economic development for Afghanistan", he said. Chabahar has been a huge counter to Pakistan's Gwadar port project but more importantly it will keep Islamabad out and give India and the other allies access to Kabul. The port of Chabahar on the Gulf of Oman - as Iran's sole Indian Ocean port - has emerged as a key feeder port to the INSTC.

The decision by the Trump administration, which a day earlier imposed the toughest ever sanctions on Iran and is very restrictive in giving exemptions, is a seen as a recognition by Washington of India's major role in the development of the port on the Gulf of Oman, which is of vast strategic importance for the reconstruction of war-torn Afghanistan.

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