Why India May Exit Chabahar—And Why It’s Not A Complete U-Turn Walking Away

With just two days left for the US sanctions waiver to expire for India’s operations at the Chabahar port, New Delhi is looking to divest its stake in the strategic project, Business Standard reported, citing sources. The government is considering a plan to divest the stake of India Ports Global (IPGL) in India Ports Global Chabahar Free Zone (IPGCFZ) to an Iranian entity, the report said.

The US waiver is set to expire on Sunday, and India is exploring an arrangement with a local entity to oversee operations while sanctions remain in force. The arrangement would include a provision to transfer control back to India once sanctions are eased or lifted, the report added.

Initial US Sanctions Waiver

In 2018, the Trump administration granted India a waiver to develop the port, which serves as a strategic route to bypass Pakistan and access Afghanistan and Central Asia.

In September 2025, the US State Department withdrew this waiver, stating that the project no longer met the conditions for exemption. The move was part of Washington’s broader “maximum pressure” policy aimed at limiting Iran’s economic relief.

However, the US later granted a temporary six-month waiver, allowing India to continue operations after sustained diplomatic efforts by the Ministry of External Affairs.

“Following India’s representation, the US Department of the Treasury on October 28, 2025, issued a letter stating that activities at the Chabahar port will not be exposed to US sanctions till April 26, 2026,” the MEA said in Parliament in February.

How Much Has India Invested?

India has invested around $120 million in equipment procurement at the port, which has also been crucial for delivering humanitarian and emergency assistance to Afghanistan.

In 2024, New Delhi signed a 10-year agreement with Tehran to operate the terminal.

The port’s strategic location makes it a key node in the proposed International North-South Transport Corridor (INSTC), a network connecting India with Central Asia and Russia, aimed at reducing transit time for trade.

IPGL, the operator of the India-financed Chabahar port, is a wholly owned subsidiary of Sagarmala Development Corporation Ltd (SDCL), now known as Sagarmala Finance Corporation, India’s first maritime non-banking financial company.

How significant is the Chabahar port?

Located on Iran’s southeastern coast along the Gulf of Oman, Chabahar is the country’s only deep-water port with direct access to the Arabian Sea. It lies opposite Pakistan’s Gwadar port, which has been developed with Chinese investments.

For India, Chabahar is not just a trade route but a strategic counter to regional rivals. It allows India to bypass Pakistan, which has historically denied overland transit access for Indian goods.

What Are the Potential Risks for India?

This does not signal a complete disengagement from Iran. However, the government has assessed the risks of continuing investments under active US sanctions. According to the Business Standard report, citing legal experts, further investments could expose Indian companies to sanctions risks.

There is also a possibility of US sanctions extending to Indian firms operating at the port, which could undermine India’s ambitions to emerge as a global ports player.

Will India-Iran Relations be Affected?

Not necessarily. Both New Delhi and Tehran acknowledge the constraints posed by Western sanctions. India’s move is seen as a temporary operational adjustment to ensure continuity at the port while navigating geopolitical tensions.

The ongoing Iran–US conflict, coupled with a fragile ceasefire, adds to the uncertainty. According to a News18 report, India is likely to continue playing a role in advisory and logistical planning capacities, depending on how US sanctions evolve.