Chabahar Setback: India Pulls Out Of Strategic Iran Port Project

The Idea to bypass Pakistan’s Gwadar Port through Iran’s Chabahar port seems to have collapsed as India fully exits the project after US President Donald Trump, on 12 January, announced an extra 25 per cent sanction to all the countries that trade with Iran.

India’s decade-old development project in the Persian Gulf was already heavily constrained due to ongoing sanctions imposed on Iran, but in 2018, India was permitted to construct, which was again cancelled by Trump.

Sanctions on the port remain reimposed as of 29 September 2025; however, the Office of Foreign Assets Control (OFAC) under the US Department of the Treasury granted a six-month exemption.

The current waiver came into effect on October 29, 2025, and is valid until April 26 this year.

India, however, has decided to withdraw completely before the exemption period is over.

India signed a 10-year agreement with Iran in 2014, and tasked the project to a state-owned entity, India Ports Global Limited (IPGL), to develop and operate the Shahid-Bahisti Terminal at Chahbahar Port.

Situated in Iran’s Sistan-Baluchistan Province on the country’s south-eastern coast, outside the Persian Gulf, Chabahar Port boosts trade engagement through the International North South Transport Corridor (INSTC), a strategically significant route that opens markets in Europe, Central Asia, Afghanistan and Russia for India.

The INSTC Network

INSTC is a 7,200-kilometre-long multi-modal network that includes sea, rail, and road routes for transporting goods between India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia, and Europe.

India has reportedly invested 4000 crore in the much-ambitious project; it left in the midst of Iran’s internal protest against the falling economy, resulting in the deaths of civilians and security forces.

Following the renewal of US sanctions, government-appointed directors on the board of India Ports Global Ltd resigned en masse, and the website came down to protect board members and others associated with the port from potential sanctions.

Additionally, India transferred $120 million to Iran, which it committed for developemnt of Chabahar Port.

India considers Chabahar Port strategically important. It is a response to the Gwadar port in Pakistan, developed by China, and provides a route for delivering humanitarian aid such as food grains and medicines to Afghanistan.

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