India signed a 10-year contract with Iran on Monday to develop and operate the Iranian port of Chabahar, the Narendra Modi-led government said, strengthening relations with a strategic Middle Eastern nation.

India has been developing the port in Chabahar on Iran’s south-eastern coast along the Gulf of Oman as a way to transport goods to Iran, Afghanistan and central Asian countries, bypassing the ports of Karachi and Gwadar.

US sanctions on Iran, however, slowed the port’s development.

“Chabahar Port’s significance transcends its role as a mere conduit between India and Iran; it serves as a vital trade artery connecting India with Afghanistan and Central Asian Countries,” India’s Shipping Minister Sarbananda Sonowal said in Tehran, after the signing of the agreement.

“This linkage has unlocked new avenues for trade and fortified supply chain resilience across the region.”

“Iran and India are seeking to develop Chabahar port as much as possible, taking into account the interests of the two countries for joint access to regional markets,” the Indian minister said.

This “long-term contract symbolises the enduring trust and effective partnership between India and Iran,” he added.

The long-term deal was signed between Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran, authorities in both countries said.

Under the agreement, IPGL will invest about $120 million while there will be an additional $250m in financing, bringing the contract’s value to $370m, said Iranian Minister of Roads and Urban Development Mehrdad Bazrpash.

“Chabahar … can act as a focal point in the transit development of the region,” Bazrpash said at the signing ceremony.

“We are pleased with this agreement, and we have full trust in India,” he added.

IPGL first took over operations of the port at the end of 2018 and has since handled container traffic of more than 90,000 TEUs and bulk and general cargo of more than 8.4m tonnes, an Indian government official said.

A total of 2.5m tonnes of wheat and 2,000 tonnes of pulses have been shipped from India to Afghanistan through Chabahar Port, the official added.

“It will clear the pathway for bigger investments to be made in the port,” Indian Foreign Minister S Jaishankar told reporters in Mumbai on Monday.

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