India and Iran on Monday signed a 10-year contract to develop and equip the strategic Chabahar port in Iran as India seeks to grow trade in West and Central Asia.

The agreement will give India 10-year access to use the port, located close to Iran's southeastern border with Pakistan, according to Iran's Ministry of Roads and Urban Development.

The contract will, in turn, see India Ports Global Limited (IPGL) invest $370 million into "providing strategic equipment" and "developing the transport infrastructure of the port."

Iran's Urban Development Minister Mehrdad Bazrpash and India's Ports and Shipping Minister Sarbananda Sonowal signed the contract in the town of Chabahar, in a ceremony broadcast live on state media.

India, in 2016, agreed to finance the development of the Iranian port as a trading hub for central Asia as Prime Minister Narendra Modi sought to revive economic ties with Tehran after the lifting of sanctions.

Modi and former Iranian President Hassan Rouhani oversaw the signing of a memorandum of understanding for the provision of a line of credit from India's EXIM Bank to develop the port.

The development of the port, however, stalled despite waivers to unlawful sanctions, which the United States began reimposing in 2018 after unilaterally withdrawing from the 2015 nuclear deal with Iran.

"Chabahar... can act as a focal point in the transit development of the region," Bazrpash said at the signing ceremony, adding, "We are pleased with this agreement, and we have full trust in India."

On his part, Sonowal indicated that "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."

This "long-term contract symbolises the enduring trust and effective partnership between India and Iran," he pointed out.

Earlier, India's External Affairs Minister Subrahmanyam Jaishankar stressed the agreement would "clear the pathway for bigger investments to be made in the port," noting that without a long-term agreement, "it’s very difficult to invest in a port."

He mentioned that India anticipates the project will enhance its connectivity within an international north-south transport corridor under development with Iran and Russia, while also bolstering trade relations with Central Asia.

"We will see more connectivity linkages coming out of that port," Jaishankar added.

In 2019, before the outbreak of the COVID-19 pandemic, both countries agreed to speed up the project after a visit by Jaishankar to Tehran.

Chabahar port is on the Indian Ocean about 100 kilometers (62 miles) west of the Pakistan border.

The port acts as a gateway for Indian goods to reach markets in Afghanistan and Central Asia, bypassing Pakistan. Last year, India sent 20,000 tonnes of wheat aid to Afghanistan through the Chabahar port, Bloomberg reported.

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