India's Strategic Playbook for Chabahar Port Amid US Sanctions
New Delhi is actively formulating a comprehensive strategy to ensure the continued operation of the Chabahar port in Iran, even as the United States prepares to reinstate sanctions against Tehran in March. According to two informed sources, India is navigating a delicate balance between its longstanding trade partnership with Iran and its relations with the world's largest economy, the United States.
Strategic Importance and Operational Continuity
The Chabahar port holds immense strategic value for India, providing direct access to Afghanistan and Central Asia while bypassing Pakistan. This access is crucial for countering the influence of China and Pakistan in the region, especially given the proximity of Chabahar to the China-operated Gwadar Port in Pakistan. India's infrastructure at the Iranian port has historically remained operational even during previous periods of US sanctions against Iran.
"India does not intend to completely withdraw from Chabahar. The initial investment commitment has been fulfilled. While additional investments are not anticipated in the short term, India remains firmly committed to the port's infrastructure," stated the first anonymous source familiar with New Delhi's position.
Financial Commitments and Budgetary Constraints
India has already invested $120 million in the Shahid Beheshti terminal at Chabahar and has committed an additional $250 million credit line to Iran for infrastructure development. However, no further investments are planned until the current geopolitical tensions subside. Notably, the Union budget for 2026-27 did not allocate any funds for the Chabahar port, a shift from the approximately ₹400 crore earmarked in the 2025-26 budget.
Minister of State for External Affairs Kirti Vardhan Singh recently confirmed in a written parliamentary reply that the government has fully paid its $120 million commitment for Chabahar, well ahead of the April deadline when the US sanctions waiver expires.
Commercial Viability and Growth Metrics
Since its operationalization by Indian Ports Global Ltd (IPGL) in 2018, the Chabahar port has transformed from a strategic concept into a stable, commercially viable operation. Data from India's shipping ministry reveals significant growth: in FY25, the port handled over 80,000 twenty-foot equivalent units (TEUs) of container traffic, up from 60,000 TEUs the previous year, along with more than 1.2 million tonnes of bulk and general cargo.
"Chabahar Port has decisively evolved into India's most critical overseas port project, demonstrating both operational stability and commercial success," remarked the second anonymous source.
Geopolitical Challenges and Leadership Resignations
The looming US sanctions have introduced personal liability concerns for officials involved, leading to the resignation of the entire board of IPGL, a joint venture under the shipping ministry. "Given that US OFAC sanctions include personal liabilities, company officials have stepped down," explained a third person with knowledge of the situation. Former IPGL managing director Sunil Mukundan, who resigned in September, deferred inquiries to the shipping ministry.
Regional Dynamics and China's Shadow
India ranks among Iran's top five trade partners, with exports including rice, tea, sugar, pharmaceuticals, and machinery, and imports comprising dry fruits, chemicals, and glassware. Experts warn that if India exits Chabahar, China could step in, potentially dominating Iran's port infrastructure.
"US-Iran tensions consistently impact bilateral relations. India has successfully advocated for Chabahar as a regional public good to successive US administrations. The US must decide whether it prefers China to become the dominant player in Iran," commented Harsh V. Pant of the Observer Research Foundation.
Future Expansion and Connectivity
Iran has ambitious plans to expand Chabahar, aiming to increase its container-handling capacity to 500,000 TEUs annually through enhancements like rail-mounted cranes and terminal automation. The port is integral to the International North-South Transport Corridor, offering seamless road and rail connectivity to Afghanistan, Central Asia, and the Commonwealth of Independent States.
Long-term Iranian plans envision developing Chabahar into a 32-berth port with a 100 million tonnes per annum capacity. "The Chabahar Port project symbolizes our bilateral cooperation and plays a vital role in regional connectivity and shared development," emphasized Iran's Ambassador to India, Mohammad Fathali, during recent National Day celebrations in New Delhi.
Despite the challenges posed by US sanctions and Iran's global isolation, India remains strategically engaged with Chabahar, underscoring its commitment to regional influence and trade connectivity.
