Govt assessing if Chabahar Port may have spillover effects of US sanctions

Officials say legal consultations on, solution will be worked out

The government is assessing the possible spillover effects of the US administration’s decision to sanction entities operating the Chabahar Port on India’s ambitious bid to run foreign port terminals, multiple officials in the know said.

 

India Ports Global (IPGL), which operates the Shahid Beheshti Terminal at the Iranian port, is also part of the Bharat Global Ports consortium launched by Shipping Minister Sarbananda Sonowal in February to bid for overseas port projects. 

“The government is currently in legal consultations to ascertain the possibility of US sanctions on IPGL, but more importantly, the consultations will focus on whether these sanctions, if there, will also apply to the Bharat Global Ports Consortium and the Sagarmala Finance Company by extension,” a government official said.

 

Sagarmala Finance Company (SMFCL) — formerly the Sagarmala Development Corporation (SDCL) — is a state-owned entity recently revamped to serve as India’s primary maritime financing non-banking finance company (NBFC). It recently secured approval from the Reserve Bank of India for this role. IPGL is a wholly owned subsidiary of SDCL. 

Another senior government official said a solution would surely be worked out and that there should not be any big risks on that front, adding that US sanctions on Iran are not a new phenomenon and the government will take appropriate steps to minimise the impact. 

Queries sent to the Ministry of Ports, Shipping and Waterways, as well as Shipping Secretary T K Ramachandran, remained unanswered until the time of going to press. 

On September 16, the US State Department announced that the Secretary of State had revoked the sanctions exception issued in 2018 under the Iran Freedom and Counter-Proliferation Act (IFCA) for Afghanistan reconstruction assistance and economic development, effective September 29. 

“Once the revocation is effective, persons who operate the Chabahar Port or engage in other activities described in IFCA may expose themselves to sanctions under IFCA,” the statement said.

The Ministry of External Affairs (MEA) is also assessing the implications of the move. “We have seen the US press statement regarding revocation of sanctions waiver for Chabahar Port. We are presently examining its implications for India,” MEA Spokesperson Randhir Jaiswal said. 

Legal experts agree that the US sanctions pose a challenge for the government’s ongoing push to expand its maritime presence through the consortium. 

“There can be various spillover effects on India’s attempt to bid to develop foreign port terminals through IPGL or Bharat Ports Global due to the sanctions. In international projects, there is a clear requirement to disclose whether any of the related entities come under a sanctioned regime, and that would put the consortium at a disadvantage," said Jatinder Jay Cheema, Barrister & Solicitor and Advocate, Chambers of Jay Cheema. 

He added that even if these entities sought to enter into a joint venture (JV) to operate a foreign port, it could increase the risks, potentially putting the JV or the operating entity at the same disadvantage.

 

“Even if not formally barred, foreign regulators and lenders may treat the consortium with greater caution, which could weaken its hand in bidding for international port projects. That said, the Chabahar project carries sovereign backing from the Government of India, which provides some diplomatic cover in managing these risks,” said Jidesh Kumar, Managing Partner, King Stubb & Kasiva, Advocates and Attorneys.

 

He added that much will depend on whether any US action is confined strictly to Chabahar operations or whether it is read as extending to the larger corporate group. “Here again, India’s strategic positioning and bilateral engagement with the US will play a critical role in mitigating potential fallout,” he said. 

The Bharat Global Ports consortium, bringing together IPGL, SDCL, and Indian Port Rail and Ropeway Corp (IPRCL), is intended to drive port expansion, operations, and financing, positioning India as a key player in international trade and logistics, Sonowal had said at its launch. 

Along with Chabahar, IPGL also operates the Sittwe Port in Myanmar.