The status of India’s commitment to Chabahar port in Iran is confusing. According to a recent report in the Economic Times, the US secretary of state revoked the waiver on US sanctions issued in 2018 to operate Chahahar Port, effective September 29, 2025. According to the notification “consistent with President [Donald] Trump’s maximum pressure policy to isolate the Iranian regime, the Secretary of State has revoked the sanctions exception issued in 2018 under the Iran Freedom and Counter-Proliferation Act (IFCA) for Afghanistan reconstruction assistance and economic development.”

That exception had covered the development of the port in which India was involved and the construction of a railway, as well as shipment of goods to Afghanistan. In 2018, India Ports Global Ltd (IPGL) a government of India entity, through the India Ports Global Chabahar Free Zone (IPGCFZ) took over operations of the port. It signed a 10-year deal with Iran’s Ports and Maritime Organisation (PMO) to run the Shahid Behesti terminal at the port . For this, India provided a $120 million grant for equipment purchases and a $250 million equivalent rupee equivalent line of credit. (In 2020 India was dropped from the Chabahar-Zahedan railway project because it was delaying the project. )

Based on information provided by India as to how it planned to wind down all the activities in Chahbahar, the US Office of Foreign Assets Control (OFAC) granted a six month exemption to India that is valid till April 26 this year. Now, the government of India is making it known that it is still trying to persuade the US to seek a way out through which it can meet US demands, even while continuing its activities in the port.

India has been forced to take the knee by the US not only on account of Chabahar, but oil and gas. In 2018, the US unilaterally walked out of the Joint Comprehensive Plan of Action (JCPOA), an agreement to keep Iran’s nuclear activities in check. But India was a collateral casualty. After it walked out, the US instituted harsh sanctions against Iran, prohibiting other countries from trading or dealing with it. Iran was the fourth largest supplier of oil to India in 2018-2019 when India imported 23.5 million tonnes from Iran. Indian companies had to stop imports and stop their dealings with Iran for fear of secondary sanctions.

Importance of Iran

A look at a map or a casual glance through history will tell you that India straddles a unique geography – it has both continental and maritime elements. North India buts into central Asia, and the southern half, the peninsula, juts out into the Indian Ocean. Not surprisingly, this has shaped India’s security for millennia. Invaders from the Iran, Caucasus and Central Asia take up the ancient and medieval history of the country, while those from the sea straddle its modern one.

Independent India’s foreign and security policy has been shaped by this reality, as well as the fact that the creation of Pakistan and the resultant India-Pakistan hostility has blocked off India from its continental access because of the Himalayan barrier and India’s dispute with China.

Also read: Iran's Crisis: From 1953 Coup to 2025 Protests and the Western Quest to Remake the Middle East

In recent decades, Iran emerged as a major element in India’s foreign policy. Iran matters to India because of its location, size and history. It also matters because it has the world’s third largest oil and second largest natural gas reserves. These are the closest sources of hydrocarbons to India. As a relatively rich country with a population of 93 million, it is also a major market for Indian rice, pharmaceuticals, textiles, tea, machinery, equipment chemicals and oil seeds. Unfortunately, western sanctions have choked this possibility.

Oil and connectivity

The loss to India from stopping the import of Iranian oil was not just a matter of numbers. Iran is possibly the closest source of hydrocarbons to India, thus offering a price advantage in terms of transportation. Iranian oil is of a quality that makes refining easy. India has emerged as a refinery hub of the world and being able to access safe and secure oil supplies benefits the Indian oil sector as a while. Prior to the sanctions, Indian companies like Essar, ONGC Videsh Limited (OVL), and Tatas were active in Iran.

In 2009, US pressure led to India withdrawing from the Iran-Pakistan-India gas pipeline project. At the time, the US used the leverage of the Indo-US nuclear deal which was supposed to somehow compensate India for the loss of a reliable energy source. For a while Pakistan was involved in the project, but in 2019, it, too, withdrew in the face of US pressure.

Unilateral American sanctions have also hit Indian efforts to develop Iranian oil fields. A consortium of OVL, Indian Oil and Oil India discovered the Farzad B Gas field and sought to develop it, but they were stymied by sanctions as well as Iranian demands. Besides this, Indian companies have been interested in other oilfields like Yadavaran. The main point here is that there is a huge business opportunity available to Indian companies if the issue of sanctions is dealt with effectively.

As of result of this, where India was a major purchaser of Iranian oil, today China buys 80% of its oil exports at a discount on account of sanctions. But, cleverly, it does it through independent “teapot” refiners and keeps its state-owned companies away from the trade.

Besides oil and markets, Iran offers another geopolitical advantage to India. Using ports like Chahbahar and Bandar Abbas, India is able to bypass the Pakistani blockade of Eurasia. The original intention was to develop Chahbahar as a route to Afghanistan, but clearly, it is also one to central Asia if connectivity projects like the Chahbahar-Zahedan-Mashad railways are developed. India had expressed interest in participating and funding the project but has now backed off.

An even older connectivity project is the International North South Transportation Corridor (INSTC) which links west Indian ports like Mumbai and Kandla to Bandar Abbas in Iran. From there, containerised cargo is sent by road to Russia through Azerbaijan. The original plan of 2002 includes Turkey, the Central Asian Republics, Armenia, Oman, Ukraine and Syria. Since Bandar Abbas handles 85% of Iran’s seaborne trade, Chabahar has been included as part of the scheme.

Chabahar is Iran’s only deep water port. But it is obvious that India is a major beneficiary of its development as it enables it to bypass Pakistan and maintain trade and strategic relations with Afghanistan and Central Asia. Taken together with the INSTC, it is an answer to China’s connectivity projects running east-west across central Asia, and to CPEC that links China to Gwadar port which is just 170 km to its east.

India and Russia have carried out several test runs and proved the economic viability of the INSTC. However, the low India-Russia trade volumes (except in oil) , and the western embargo on Iran has limited its functioning. Therefore India has been looking at alternatives such as the US-helmed India-Middle East Economic Corridor (IMEC) linking Indian ports to the Israeli port of Haifa and thence to Europe.

The US embargo on Iran and its push to eliminate the India-Russia oil trade goes against Indian interest. Besides, preventing the development of India-Iran relations undermines India’s larger economic and geopolitical interests. This is the price we are being made to pay for closer ties with the US.

Note that the US “maximum pressure” on Iran is not motivated by its dislike of the regime in Iran, or the lack of democracy there. It is primarily motivated by US-Israeli interests in preventing Iran from developing its nuclear sector. The 2015 JCPOA, which was devised by the five permanent members of the UN Security Council and Germany along with the EU was trashed by Trump in 2018 who felt it was inadequate. Then in 2025, the sectorf was targeted in the Israel/US bombing campaign in 2025 and suffered enormous damage.

The US has not hesitated to use all the instruments at its command to maintain its hegemonic interests in the region. But they run four-square into what India considers its national interests. What is the way out ? So far India has quietly yielded, with little to show for in return. Clearly, it needs to do a lot of homework before it can claim that it is pursuing a policy of strategic autonomy.

Manoj Joshi is a distinguished fellow, Observer Research Foundation, New Delhi.

This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.

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