India is reportedly seeking an extension to the U.S. sanctions waiver for Iran’s Chabahar Port, a move that underscores the port's strategic importance for regional trade and connectivity. As the existing waiver nears its expiration date, several neighboring countries have expressed keen interest in leveraging the Chabahar Port to bolster their own trade routes, further highlighting the port's significance.
The Chabahar Port, located on the southeastern coast of Iran along the Gulf of Oman, holds substantial geopolitical importance for India. It serves as a crucial gateway for India to access landlocked Afghanistan and Central Asian countries, providing a more direct and alternative trade route compared to traditional routes that pass through Pakistan. This access is vital for India's economic and strategic interests in the region.
In May 2024, India and Iran solidified their commitment to the port's development by signing a 10-year contract valued at $370 million for its ongoing operation. Under the terms of the agreement, India is set to invest $120 million in the development of infrastructure at the Shahid Beheshti terminal and extend a $250 million credit line to Iran. This long-term agreement replaced an initial pact from 2016 and underscores India's commitment to the Chabahar Port project.
However, the U.S. had revoked a 2018 sanctions waiver that had allowed India to develop the Chabahar Port despite broader sanctions on Iran. Effective September 29, 2025, entities operating the Chabahar Port or engaging in related activities may face sanctions under the U.S. Iran Freedom and Counter-Proliferation Act (IFCA). This decision has cast uncertainty over the ongoing modernization of the facility and presents a diplomatic challenge for India as it balances its relations with both the U.S. and Iran.
The Chabahar Port is a crucial component of the International North-South Transport Corridor (INSTC), an ambitious project aimed at connecting India's economy to markets in Central Asia and Europe. By including Chabahar in the INSTC, India gains access to Afghanistan and opens a path to Central Asia, marking a significant geopolitical shift. The port is envisioned as a trade corridor connecting India, Iran, and Afghanistan, offering an alternative route for Indian goods to reach Afghanistan and Central Asia. For landlocked Afghanistan, Chabahar Port provides a vital alternative to Pakistan's Karachi Port.
Despite the U.S. sanctions, the Taliban's Ministry of Trade and Industry has emphasized the need to diversify Afghanistan's trade and transit routes, highlighting the port's importance for the country. Demonstrating its commitment to diversifying trade routes beyond Pakistan, the Taliban government declared a $35 million investment in 2024 to upgrade Iran's port infrastructure.
The development of the Chabahar Port also holds strategic implications for India in the context of China's growing regional influence. The port sits approximately 140 km away from Gwadar, the Pakistani port developed by Beijing. Some analysts suggest that U.S. sanctions place India in a delicate position, requiring it to balance its investment ambitions with the risk of violating American regulations.
India has already invested significantly in the Chabahar Port project, with investments in infrastructure development and a commitment to further expansion. The port has facilitated the shipment of humanitarian aid to Afghanistan, including wheat and other essential supplies. Moreover, Chabahar has served as a transit point for trade between India and Central Asian countries.
As India seeks an extension to the U.S. sanctions waiver, the future of the Chabahar Port project remains uncertain. The decision will not only impact India's regional connectivity plans but also have broader implications for trade and geopolitical dynamics in the region. The port has the potential to transform regional trade and connectivity for India, Iran, Afghanistan, Central Asian, and Eurasian countries.
