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”.

The United States, which has warm ties with India but a long adversarial relationship with Iran, had begrudgingly accepted the port project while the US military was in Afghanistan, as it saw New Delhi as a valuable partner to back the Kabul government that fell in 2021.

But Washington warned Monday that Indian companies could face sanctions, as US relations sour with Iran over Tehran’s support for Hamas in its war with Israel.