US Sanctions on India's Chabahar Port: Strategic Implications for Regional Connectivity and Indo-Iranian Relations

Chabahar port had been positioned as an alternative gateway to Afghanistan that bypasses Pakistan.

United States:

U.S. sanctions on a major Indian port project in Iran became effective on Monday, demonstrating President Donald Trump's readiness to pressure long-standing partner New Delhi in pursuit of his broader regional objectives—specifically applying pressure on Tehran.

The sanctions targeting the Chabahar port follow the reinstatement of comprehensive UN sanctions against Iran, as Trump, European allies, and Israel collectively focus on Iran's nuclear program.

In 2018, the first Trump administration granted a rare exemption allowing Indian companies to continue developing Chabahar while imposing extensive unilateral sanctions on Iran, whose primary port at Bandar Abbas was operating beyond capacity.

The geopolitical landscape has shifted significantly since 2018. At that time, Kabul remained under a government supported by Washington, the European Union, and India, all of whom regarded Pakistan's involvement in Afghanistan with suspicion, alleging connections to the Taliban.

Chabahar had been promoted as an alternative route into Afghanistan that would bypass Pakistan, which has historically controlled the majority of transit trade into Afghanistan.

The Taliban regained control of Afghanistan in 2021 as U.S. forces withdrew under a peace agreement signed by Trump.

The U.S. president has also departed from decades of American diplomatic deference toward India, during which his predecessors avoided pressing New Delhi on disagreements, viewing the rising power as a counterbalance to China.

Trump, appearing displeased after Prime Minister Narendra Modi declined to commend him regarding a ceasefire in a four-day conflict with Pakistan, has imposed significant tariffs on India due to its oil purchases from Russia.

State Department spokesman Tommy Pigott announced the termination of the sanctions exemption for Chabahar in an earlier statement, noting that it would take effect on September 29.

The decision aligns with "President Trump's maximum pressure policy to isolate the Iranian regime," and the exemption had been granted "for Afghanistan reconstruction assistance and economic development," according to Pigott.

India Evaluates Options

Under U.S. law, companies including state-operated India Ports Global Limited will have 45 days to exit Chabahar or risk having any U.S.-based assets frozen and U.S. transactions prohibited.

Joshua Kretman, counsel at law firm Dentons and former State Department sanctions official, explained that including an Indian firm on the sanctions list "has the potential to create a kind of cascading effect where banks and other companies may not transact with the designated business."

"If that sanctioned entity operates globally, needs access to major banks or dollar clearing, there is legitimate reason for concern," he added.

Responding to the decision, Indian foreign ministry spokesman Randhir Jaiswal stated only: "We are presently examining the implications that this revocation has for India."

Despite Afghanistan's closure, India signed a 10-year contract last year in which the state-run India Ports Global Limited (IPGL) committed to $370 million in investments for Chabahar.

The port maintains strategic importance for India as it is situated near the border with longtime adversary Pakistan, in the troubled Baluchistan region.

Just 200 kilometers (125 miles) away on Pakistani territory, China is constructing a major port in Gwadar, which will provide Beijing with significant new access to the Arabian Sea and Indian Ocean.

Chabahar "has strategic value for India: regional connectivity with Iran and Afghanistan and the Middle East without being held back" by "friction with Pakistan," said Aparna Pande, a research fellow at the Hudson Institute.

However, she noted that India consistently avoids violating sanctions.

"At a time when there is an American administration which is imposing sanctions and tariffs as punitive action, India will likely adopt a wait-and-watch approach," she said.

India reluctantly ceased purchasing Iranian oil after Trump imposed sanctions during his first term.

Nevertheless, Kadira Pethiyagoda, a geopolitical strategist who has written on Indian foreign policy, suggested that India could use its ties with Iran as "leverage in its dealings with the US, Gulf states and Israel."

"India may choose to wear the sanctions as part of a broader effort amongst non-Western Great Powers, including China and Russia, to reduce reliance on the US economy and decouple from Western-controlled financial networks," he stated.