Chabahar Port in Iran faces uncertainty: US revokes sanctions exemption; what it means for India

India's strategic gateway to Afghanistan and Central Asia, the Chabahar Port in Iran, faces mounting challenges as the United States revoked sanctions exemptions previously granted under the Iran Freedom and Counter-Proliferation Act (IFCA). The move, effective September 29, risks exposing Indian operators at the port to US penalties and raises serious questions about the future of one of India’s most important regional connectivity projects.

Since India took operational control of the Shahid Beheshti terminal at Chabahar in 2018 through its state-run India Ports Global Limited, the port has become a linchpin in New Delhi’s strategy to bypass Pakistan and secure trade routes to Afghanistan and Central Asia.

The port, situated on the Gulf of Oman, not only facilitates regional commerce but also serves as a critical channel for humanitarian aid to Afghanistan. Recent years have seen a sharp increase in cargo throughput, with over 8 million tonnes of goods handled and tens of thousands of containers processed. Plans to expand the port’s capacity from 100,000 to 500,000 TEUs and connect it to Iran’s railway network by mid-2026 further underline its growing importance.

However, the US Treasury’s recent designation of an international illicit financial network supporting Iran’s Islamic Revolutionary Guard Corps (IRGC) and the revocation of IFCA sanctions waivers mark a significant escalation in Washington’s “maximum pressure” campaign against Iran.

The sanctions target individuals and entities facilitating Iranian oil sales that finance Iran’s military and proxy groups in the region, directly impacting Iran’s shadow banking infrastructure.

For India, the revocation of the Chabahar sanctions exception complicates its ambitions.

The port’s operations could now come under the risk of US sanctions, threatening the significant investments India has already made—amounting to over $120 million in infrastructure and credit lines for development.

This creates a diplomatic conundrum as India balances its deepening partnership with the United States against its strategic and economic ties with Iran.

The Chabahar Port project is a vital counterweight in the region to China’s influence through Pakistan’s Gwadar port and aligns with India’s broader goal to expand trade corridors to resource-rich Central Asian countries and Russia via the International North-South Transport Corridor (INSTC). The port’s strategic location near the Strait of Hormuz enhances its importance for ensuring regional stability and securing maritime trade routes.