What does Trump's Chabahar sanctions policy mean for India-Iran trade?

Trump's Chabahar sanctions review may impact India-Iran trade, regional connectivity, and New Delhi's strategic interests in Central Asia

The US government is reviewing the sanctions waiver for Iran’s Chabahar Port project, where India has a significant stake. This could have implications for India’s connectivity plans with Central Asia, reported The Print.

 

India secured a sanctions waiver for the Chabahar Port project in November 2018, during Trump’s first term. This strategic port provides India with direct access to Afghanistan, bypassing Pakistan. Last year, India and Iran finalised a 10-year agreement, allowing India Ports Global Private Limited to manage and operate a terminal at Chabahar.

 

With Prime Minister Narendra Modi potentially visiting the White House soon, the US administration has reiterated its stance on pressuring Iran to address nuclear concerns, missile programs, and regional activities.

 

 

“The Secretary of State shall modify or rescind sanctions waivers, particularly those that provide Iran any degree of economic or financial relief, including those related to Iran’s Chabahar port project,” stated a ‘National Security Presidential Memorandum’ signed by Trump.

 

India’s balancing act 

Chabahar remains important for India’s regional strategy, especially in maintaining trade routes to Afghanistan. India initially secured the waiver in 2018 due to the port’s role in Afghanistan’s reconstruction. However, with the Taliban now in control of Kabul, the geopolitical landscape has shifted.

 

PM Modi’s discussions with US officials are expected to cover economic and strategic issues, including the future of the Chabahar waiver. In their recent call, the US President emphasised fair trade practices, immigration policies, and defence cooperation.

 

US sanctions and India’s trade considerations 

The US approach toward Iran changed in 2018 when it withdrew from the Joint Comprehensive Plan of Action (JCPOA), an agreement aimed at limiting Iran’s nuclear program. Since then, new sanctions have been imposed, impacting global trade with Iran, including India’s oil imports.

 

Before the sanctions, India imported approximately $13 billion worth of goods from Iran annually, primarily oil. Since 2019, trade has decreased significantly, with imports dropping to below $1 billion. Between April and October 2024, India imported just $216 million worth of goods from Iran, showing its compliance with US policies.

 

Future of India-Iran cooperation 

While India has largely followed US sanctions on Iran, it continues to import oil from Russia despite international pressure. In 2023-24, India purchased $54 billion worth of Russian oil, with imports increasing since the Ukraine conflict began in 2022.

 

Iranian officials have expressed interest in strengthening economic cooperation with India, particularly in the Chabahar Economic Zone. A senior Iranian official recently mentioned that business opportunities between the two countries could still be explored while respecting existing sanctions.

 

If the US fully revokes India’s waiver for Chabahar, it could affect economic ties between New Delhi and Tehran. The outcome of upcoming discussions between PM Modi and US officials will be key in determining the way forward.