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The Iran quagmire

The US pressure has cast a shadow on India's strategic bet on the Chabahar Port

10 min read
Updated On: Mar 10 2026 | 6:15 AM IST
Mohammad Asif Khan
Chabahar is an important component of the INSTC (PHOTO: SHUTTERSTOCK)

Chabahar is an important component of the INSTC (PHOTO: SHUTTERSTOCK)

Chabahar (“four springs” in Persian) is a port that has been shaped by constant upheaval due to Great Power rivalry. Now, nearly two decades after it was first offered to India, the project faces an uncertain future amid indications that India is reconsidering its investment in the port.
 
In the 2026-27 Union Budget, no funds were allocated for Chabahar in a break with a decade-long streak of annual allocations, as India completed its $120 million core infrastructure commitment.
 
This uncertainty follows increased pressure by the United States (US) on Iran to dismantle its nuclear and ballistic missile programmes. In June last year, the US, with Israeli support, bombed Iranian nuclear sites in Fordow, Isfahan and Natanz under Operation Midnight Hammer.
 
While talks between Iran and the US are underway in Geneva, recent popular protests within Iran against the regime headed by Ayatollah Ali Khamenei have been followed by American military mobilisation around the Persian Gulf. This has thrown a cloak of uncertainty over the future of Chabahar.

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“Since 2018, India’s engagement at Chabahar has functioned under limited US waivers. After the 2024 long-term agreement to operate the Shahid Beheshti terminal, the uncertainty around sanctions has complicated implementation,” Deepika Saraswat, associate fellow at the Manohar Parrikar Institute for Defence Studies and Analyses, said.
 

All-season port

Iran’s only oceanic port, Chabahar is located on the Gulf of Oman, in the Sistan-Baluchistan province. It’s the brainchild of King Shah Mohammad Reza Pahlavi, who wanted to build a $600 million naval and air base there. US firms were contracted for its construction.
 
After the pro-West Shah was ousted by the Islamic revolution in 1979, foreign interest in the port declined. Instead of spurring trade, it played an important role for Iran during the Iran-Iraq War of the 1980s — a conflict marked by Iraqi attacks on Iranian oil tankers and ports in the Strait of Hormuz.
 
That was when Chabahar proved to be decisive as it was Iran’s only port outside the Persian Gulf, which meant it could receive vital imports without coming under attack.
 
However, long-term development of the port remained uncertain because of sanctions that were imposed on Iran owing to its deteriorating relations with the US since the Islamic revolution.
 
Iran was therefore looking for reliable partners in the neighbourhood to build and operationalise the port. When President Mohammad Khatami visited Delhi in 2003, Chabahar was offered to India.
 
The proposal was part of a broader strategic cooperation framework of the New Delhi Declaration — the first major cooperation agreement signed by the Islamic Republic and India.
 
However, the threat of the US sanctions hampered any real progress on the ground. Talks gained traction again after Iran and the US negotiated a Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, which limited Iran’s nuclear programme in exchange for sanctions relief.
 
During Prime Minister Narendra Modi's visit to Iran in 2016, India, Iran and Afghanistan signed a trilateral Chabahar Agreement to develop and manage the Chabahar Port through its Shahid Beheshti terminal.
 
PM Modi hailed the occasion by quoting a couplet attributed to the 19th century Urdu-Persian poet Mirza Ghalib: “Once we make up our mind, the distance between Kashi (Varanasi) and Kashan (city in Iran) is only half a step.”
 
For India, Chabahar offered an alternative land route to access Afghanistan and Central Asia, bypassing Pakistan’s Gwadar port, which has seen growing Chinese presence over the last few years.
 
For Iran, it offered a pathway to economic revival, promising to bring in $500 million and provide the long-sanctioned country with a gateway to South Asia.
 
“India’s presence helps Iran position Chabahar as an international connectivity node rather than a sanctions-evasion outlet. That distinction matters because it supports Iran’s argument that the port is a stabilising trade project serving regional transit needs.” Dr Reza Parchizadeh, an American security analyst and international relations specialist, told the Blueprint.
 
“Iran values any durable partnership with a major non-Western economy that can be framed as legitimate, developmental, and regionally constructive,” he added.
 
The port soon became critical for humanitarian aid delivery to Afghanistan. India began its port handling and management operations via IPGL (India Ports Global Limited) in 2018.
 
In early 2024, the Taliban regime in Afghanistan announced a $35 million investment in the port. It sees Chabahar as an opportunity to facilitate trade between India and Central Asia and has shown willingness to join the International North-South Transport Corridor (INSTC), an India-Iran-Russian brainchild, aimed to link South with Central Asia to the Caucasus and then to Europe.
 
Chabahar is an important component of the INSTC, a route that bypasses the Suez Canal, potentially cutting logistics costs by about 30 per cent and transit times by about 40 per cent.
 
From Afghanistan's perspective, the port is crucial, as it provides an alternative to Pakistan’s Karachi. The landlocked country’s relations with Pakistan have been tumultuous lately, and trade has been hit by border closures and politics.
 
“Given tensions between Afghanistan and Pakistan, Chabahar is becoming more important as an alternative access route to the Indian Ocean,” Saraswat added.
 
However, when the US pulled out of the JCPOA in 2018, it meant that sanctions on Iran were placed again which slowed progress on port’s development.
 

Lingering fears

These tensions have constrained Iran’s ability to insulate Chabahar from geopolitical risks. Iran has constantly threatened to attack US air bases in the region and disrupt trade in the Strait of Hormuz if it is under attack.
 
The Strait of Hormuz is an energy chokepoint that carries one-fifth of the world's global oil trade. For India, it is even more critical, as 40 per cent of India’s crude oil imports and half of its gas imports pass through it.
 
“Iran faces a dilemma. One of its key leverage points is the Strait of Hormuz, a vital global energy chokepoint. Iran has often signalled that it could disrupt shipping there in response to military pressure (from the US),” Saraswat said.
 
“However, such a move would also harm Iran’s own oil exports and trade. Escalation would invite stronger pushback from the US and regional actors. So while this threat may serve as deterrent signalling, it carries high risks,” she added.
 
In her paper The Dynamism of Iran-India Relations, academic Mandana Tishehyar, assistant professor at Allameh Tabataba’i University, Iran noted, “India’s trade and energy security is inextricably linked to the security of the Strait of Hormuz.”
 
India, on its part, has its own reasons for scepticism: While Chabahar offers a gateway to Central Asia, the threats of US sanctions have clouded the project ever since its inception.
 
In 2018, the US made a rare exception that allowed India to continue developing Chabahar, despite sweeping sanctions on Iran. The logic at that time was clear: The US viewed the port as crucial for supporting Afghanistan and as a strategic counterweight to China’s presence at Gwadar Port.
 
But in September 2025, the US revoked this long-standing waiver as part of a renewed ‘maximum pressure’ approach towards Iran, arguing that the original justification supporting a US-backed government in Afghanistan is no longer a factor after the return of the Taliban to Kabul.
 
For India, the impact was immediate. Its operations at Chabahar, handled through IPGL, were suddenly exposed to the risk of secondary sanctions, putting future investments in question.
 
“Sustained Iran-US confrontation does not make all foreign investment in Iran structurally impossible, but it does render broad-based, large-scale, long-horizon investment unviable under current conditions,” Parchizadeh said.
 
Following a tense diplomatic exchange, the US offered a limited reprieve.
 
In October 2025, a conditional six-month waiver was granted, allowing operations to continue temporarily. That exemption is now set to expire in April this year.
 
“Even projects politically designated as 'exceptions' remain exposed to compliance risk, secondary sanctions concerns, and restricted access to international banking channels,” Parchizadeh said.
 
India has already borne the brunt of 50 per cent reciprocal tariffs for buying sanctioned Russian oil but has stopped sourcing Iranian oil to avoid further sanctions.
 
In a social media post in January this year, US President Donald Trump threatened, “Any country doing business with the Islamic Republic of Iran will pay a tariff of 25 per cent on any business being done with the US.” This and other such threats have disrupted India’s pivot to Central Asia and Europe.
 
Thus, India’s options are limited. The India-Middle East-Europe Economic Corridor (IMEC), proposed at the 2023 G20 summit to connect India to Europe via the Gulf through ports and rail lines, has yet to become operational.
 
Similarly, the INSTC, linking India to Russia and Central Asia through Iran and the Caspian Sea, is another potential route. Like Chabahar, its full potential is currently hindered by the same sanctions architecture.
 

Inevitable crises

The current phase of US mobilisation in the Gulf region is far greater than previous episodes of escalation.
 
A carrier strike group centred around the US’ largest aircraft carrier, the USS Gerald R. Ford, is inching closer to Iran, alongside guided-missile destroyers equipped with the Aegis Combat System, which have now been positioned across the Arabian Sea and the Persian Gulf.
 
Forward deployment of advanced fighter aircraft like F-22 and F-35 has also expanded across the region.
 
“US action is likely to feature periodic limited military strikes, covert action, cyber operations, and sabotage inside Iran, alongside diplomatic and economic pressure,” Parchizadeh said.
 
“These flare-ups will occur within a framework where neither side expects a decisive breakthrough or a rapid normalisation of relations,” he added.
 
However, unlike previous episodes, Iran’s standing in the region has massively declined. The 12-day war with Israel and subsequent US strikes have left Iran’s military capability massively degraded.
 
Iran’s so-called Axis of Resistance —a rough patchwork of Iranian-backed militias like Hamas in Gaza, Hezbollah in Lebanon, and the Houthis in Yemen — has also weakened Iran’s deterrence in the region.
 
“What is different today is Iran’s weakened internal and regional position. Years of sanctions have created economic strain and social discontent. Regionally, setbacks in Syria and the weakening of allied groups have eroded Iran’s deterrence posture,” Saraswat said.
 
“This makes the current phase more precarious. Iran has fewer tools at its disposal and faces greater pressure, even as it signals that it will respond strongly to any direct attack,” she added.
 
Reports suggest Trump has already discussed a timeline for air strikes, even as diplomatic talks with Iran continue.
 
Meanwhile, Iran’s growing isolation has provided fresh ground for China to spread its influence in the region. In May 2021, China and Iran signed a landmark 25-year agreement that aims to bring in $400 billion to the Iranian economy.
 
This agreement includes $280 billion dollars in Iran’s oil and gas infrastructure and another $120 billion in improving Iran’s infrastructure as part of China’s Belt and Road Initiative.
 
If China makes further inroads in Iran, it could undermine India’s long-term strategic goals in the region, like the INSTC corridor. Therefore, maintaining a sustained presence at Chabahar becomes more prudent.
 
The Ministry of External Affairs (MEA) has insisted that it has no intention of exiting the Chabahar Port project, implying that the zero budget allocation was because the $120 million capital investment has been completed. 
 
MEA has said it is in touch with the US to work on the sanction waiver arrangement.
 
“India is unlikely to walk away from Chabahar. The project has only become more important, not less, given India’s interests in Afghanistan and Central Asia,” Saraswat said.
 
India’s engagement with Iran has always relied on  ‘strategic pragmatism’, the current phase of tensions is a litmus test of how much risk of US pressure can India absorb and for how long.
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Written By :

Mohammad Asif Khan

Mohammad Asif Khan is a Senior Correspondent at Business Standard, where he covers defence, security, and strategic affairs.
First Published: Mar 10 2026 | 6:15 AM IST

In this article : Narendra ModiChabahar portWest AsiaIsrael Iran Conflict

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