The U.S. State Department says it is exempting Iran's big port project in Chabahar from sanctions in recognition of its importance to landlocked Afghanistan.
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 spokesman said on November 6.
Iran late last year inaugurated the port on the Indian Ocean, which is being built largely by India and is expected to provide a key supply route for Afghanistan while allowing India to bypass rival Pakistan to trade with Central Asia and Africa.
The State Department said it was carving exemptions from its sanctions on Iran's economy for the development of Chabahar along with an attached railway project and Iranian petroleum shipments to Afghanistan.
Iran has plans to link the port by railway through Zahedan on the Pakistani border up to Mashhad in the northeast, near the borders with Afghanistan and Turkmenistan.
"This exception relates to reconstruction assistance and economic development for Afghanistan. These activities are vital for the ongoing support of Afghanistan's growth and humanitarian relief," the spokesman said.
The U.S. sanctions had threatened India's ability to obtain financing for the development of Chabahar, which could potentially end Afghanistan's dependence on Pakistan's port of Karachi.
The effort to build up Afghanistan's economy is also aimed at reducing Kabul's dependence on foreign aid and putting a major dent in the illicit opium trade that has been a major source of revenue for the Taliban insurgency.
The United States has been building closer relations with New Delhi since the late 1990s and also temporarily exempted India from sanctions on Iran's oil sector which took effect on November 5.
The sanctions are intended to exert pressure on Iran to renegotiate its 2015 nuclear deal with world powers, which Trump walked away from this year.
India has warm relations with Iran and has joined China and European powers in saying it was not obligated to comply with the unilateral U.S. sanctions, although it has sought to appease Washington by curbing some of its Iranian oil imports.
New Delhi has poured $2 billion into development in Afghanistan since the 2001 U.S.-led overthrow of the Taliban government. It sees the Chabahar port as a key way of both sending supplies to Afghanistan and stepping up trade with Central Asia and Africa.