Tightrope walk for India on Chabahar
Looming American sanctions have put Iranian port project in jeopardy
Updated At : 02:47 AM Feb 10, 2026 IST
Haste : It’s puzzling that India transferred $120 million to Iran despite warnings about US sanctions. iStock
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INDIA’s Chabahar initiative has finally faltered after US President Donald Trump’s recent warning of additional tariffs on countries doing trade with Iran. The US annulled the 2018 sanctions waiver for the Chabahar port in September last year, but granted exemption to India till April 26, 2026, putting New Delhi’s long-term agreement for the Shahid Beheshti terminal at risk.
Post-Soviet efforts by India to access Afghanistan and Central Asia included the Sarakhs railway project in 1996-97 and the Chabahar project, which was first proposed by New Delhi and Tehran in 2002. The initiative, however, lacked feasibility and relied solely on Chabahar’s proximity to the Indian Ocean, Afghanistan and Central Asia.
Despite the sanctions on Iran, then Prime Minister Manmohan Singh expedited the project, aimed at establishing India’s foothold in Afghanistan, reducing Kabul’s reliance on Pakistan and supporting the Ashraf Ghani government against the Taliban with $2 billion invested since 2001. Chabahar was set to lower shipping costs and times, and boost trade with Iran, Afghanistan and Central Asia, while connecting to the International North-South Transport Corridor (INSTC) and countering China’s Belt and Road Initiative (BRI) as well as the China-Pakistan Economic Corridor (CPEC).
In 2016, amid improved US-Iran relations post-JCPOA (Joint Comprehensive Plan of Action), Prime Minister Narendra Modi visited Tehran; he secured a transit agreement and committed $500 million to the Chabahar port to enhance Eurasian ties. India’s decision again emphasised geopolitical benefits with Eurasia over a realistic assessment of US and Iran strategies.
In 2017, Iran opened the Shahid Beheshti terminal, funded by an $85-million Indian investment, enabling India’s shipments to Afghanistan. In 2018, despite limited regional support due to US sanctions, India received a waiver under the Iran Freedom and Counter-Proliferation Act, allowing port work without penalties; this emphasised shared US-India interests in stabilising Afghanistan and countering China.
In 2018, India sought to join the TIR (Transports Internationaux Routiers) Convention and the Ashgabat Agreement, but faced limited regional support due to concerns over US sanctions. These developments led to India Ports Global Ltd (IPGL) signing a 10-year $370-million deal with Iran to manage the Shahid Beheshti terminal and enhance the regional trade route to Central Asia, linking to Afghan cities through the India-built Zaranj road and facilitating access to Turkmenistan and Kazakhstan by developing a rail line from Chabahar to Zahedan.
More than a year after India finalised the Chabahar port contract in May 2024, the US revoked the sanctions waiver, cautioning nations about dealing with Iran. India ignored the warnings, with External Affairs Minister S Jaishankar promoting the regional benefits of Chabahar and leveraging US narratives on democracy and anti-China sentiment while appealing to Iran’s cultural ties with India.
Things didn’t go as planned. India overlooked shifting US views on Iran, Afghanistan and Pakistan, missing implications beyond the India-US partnership. New Delhi also didn’t realise that Tehran’s Chabahar plan aimed to counter American sanctions and stabilise Sistan-Baluchestan. Indian policymakers did not fully appreciate Iran’s capacity for disruption; they laid too much emphasis on cultural connections and ignored Tehran’s strategic balancing that complicated India’s position.
After the terminal’s inauguration, then Iranian Foreign Minister Mohammad Javad Zarif travelled to Islamabad and suggested collaboration on Chabahar and the CPEC with Pakistan and China, alarming India, which aimed to bypass Pakistan.
America’s crippling of India’s Persian Gulf investments was expected, but it’s puzzling that India transferred $120 million to Iran despite warnings about the revival of US sanctions.
Opposition leaders in India are accusing the government of yielding to US pressure. The Ministry of External Affairs (MEA) claims that it is engaging with the US to protect India’s interests. India may consider using local Iranian workers or forming an independent entity to manage the port and limit government liability.
In the light of the interim trade agreement that lowers tariffs to 18%, India may reassess its involvement in the Chabahar port. The 2026-27 Union Budget has not earmarked funds for the port, in stark contrast to last year’s Rs 400-crore allocation.
However, India has committed $120 million to the Chabahar project without direct budgetary allocations, signalling a shift away from direct investment to avoid US sanctions. Iran is ready to collaborate and is watching how India addresses geopolitical challenges.
Has the port project in Iran been concluded or just suspended due to geopolitical factors? India aims to maintain access to Afghanistan while navigating secondary US sanctions.
The MEA’s further negotiations with the US now depend on Iran’s regime stability and nuclear stance. India’s move is not a concession to Trump; the project was flawed from the start, with past governments overselling its benefits and ignoring geopolitical realities.
Engaging with any Islamic regime poses risks as Central Asian nations don’t view India as a viable energy partner. Since the Chabahar operation, India’s trade with Eurasia remains stagnant; Central Asian countries prefer sea routes through Turkey, China or Russia. It’s also a misconception that they want access to the Indian Ocean through Iran; they prefer land routes through China or traditional Russian ports.
Concerns about the BRI and the CPEC causing disruptions in the Gulf are exaggerated; Iran is wary of Chinese dominance. However, India’s delays in Chabahar led Iran to ally with China, which has invested significantly there. Frustrated by India’s limited contributions and compliance with US sanctions, Iran fears China may control Chabahar near the Gwadar port.
The belief that Chabahar is the only western corridor should be re-evaluated as India’s rationale for accessing Afghanistan and Central Asia through it is weak. While direct maritime access to Afghanistan and Central Asia would always remain an option, depending on the geopolitical barriers, India should explore more viable and reliable connectivity routes to the region. An example is the rise in trade between India and Russia through the INSTC, which shows the benefits of stable trade routes.
The Ukraine crisis is driving Eurasian states to seek Asian connectivity. Kazakhstan has already developed the Mundra port for access to the Indian Ocean. India should propose linking the Kandla port to Almaty and Kashgar, bypassing Pakistan. Improved connectivity via China can enhance India’s access to Afghanistan and Central Asia and beyond, but a border agreement is needed to get things going.
Views are personal
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