India's Chabahar Dream in Iran: Is It Over?

New Delhi, India — US-India relations are at another crossroads, this time over New Delhi's decade-long investment in Iran's Chabahar Port.

India's most ambitious connectivity project in its extended neighborhood risks hitting a dead end after the US sanctions waiver on the project expired on Sunday, with no sign Washington will renew it. The port had been a hub of India's hopes to build a trade and transit corridor to Afghanistan and continental Central Asia.

The US is pressuring Iran's economy to collapse through a strong sanctions campaign aimed at cutting off the country's revenues.

The latest move is a naval blockade of Iranian ports, while Tehran claims control of the Strait of Hormuz. India heavily depends on this narrow sea route for energy imports and is negotiating with Iran to ensure passage.

So, is India's Chabahar dream dead?

What's in Chabahar Port for India

Located in southeastern Iran, on the Gulf of Oman, Chabahar Port consists of two terminals: Shahid Kalantari and Shahid Beheshti. India is involved in developing the Shahid Beheshti terminal and has invested at least $120 million in equipment.

Thanks to its geographical location, the port has been seen as India's economic and strategic platform for two decades.

Currently, Pakistan - India's nuclear-armed perennial rival - sits between India and Afghanistan as well as Central Asia. Due to enduring tensions with Pakistan, India cannot use land routes to these regions.

Chabahar Port helps India overcome this by sea: shipping from the Iranian port to Iran's western coast, then overland and via railway across Iran to Afghanistan and Central Asia. India has used this route multiple times over the past decade.

There is also a second strategic reason. In November 2016, Pakistan inaugurated the deep-sea port of Gwadar, funded by China, at the mouth of the Gulf of Oman. Though a commercial port, China's presence worries India that it could be used to challenge economically or militarily through naval operations.

Chabahar offers an escape: about 140km west of Gwadar, also a deep-sea port on the Gulf of Oman, giving India a strategic position to mitigate risks from Gwadar.

Chabahar Port is also the southern node of the International North-South Transport Corridor (INSTC) - a 7,200km network of railways, roads, and sea routes linking Russia and India via Iran.

"Chabahar is important in India's connectivity efforts to Central Asia, a region difficult for New Delhi to access," said Kabir Taneja, fellow at the Observer Research Foundation (India).

"The Iranian port and INSTC corridor provide core investment and access to regions like Afghanistan that are diversifying their sea outlets," Taneja told Al Jazeera.

India and Iran agreed to develop the port in 2003, but it stalled due to rounds of US sanctions. Talks revived after the US eased sanctions under the 2015 Iran nuclear deal.

In 2016, Indian Prime Minister Narendra Modi visited Tehran, announcing plans to build and operate the port after talks with President Hassan Rouhani, pledging $500 million to develop the strategic port.

The port operated minimally before US President Donald Trump withdrew from the nuclear deal in 2018 and re-imposed sanctions on Iran. India quickly received a waiver from Trump to continue developing Chabahar, as Afghanistan at the time had a US-backed government needing Indian aid through the port.

Since the Taliban took power in Kabul in 2021, Afghanistan-Pakistan relations hit rock bottom, with frequent border clashes.

Is Chabahar Port Sanctioned Now?

Despite Trump's "maximum pressure" policy to cut off Iran's revenues, the US Treasury initially exempted Chabahar from sanctions in 2018.

But in September 2025, the second Trump administration announced the cancellation of all Iran sanctions waivers, including for Chabahar. India lobbied and received an extension until April 26, 2026, after promising to gradually reduce operations there.

India also paid the $120 million investment it had pledged in February this year, drawing criticism from the opposition, which accused the Modi government of bowing to US pressure and abandoning a key strategic project.

"India's withdrawal from Chabahar as soon as the US pressured is a new low in this government's foreign policy," said Pawan Khera, spokesperson for the main opposition Congress Party. "How long will the Indian government let Washington dictate national interests?"

After the waiver expired, Indian foreign ministry spokesperson Randhir Jaiswal said New Delhi is discussing the issue with Tehran and Washington. "The ongoing conflict is also a complicating factor," Jaiswal added.

What Are India's Options Now?

Last year, a day before US sanctions took effect (before the extension), officials appointed by New Delhi from India Ports Global Limited (IPGL), which manages Chabahar Port, resigned, and the website was taken down.

In February this year, the Indian government allocated no budget for Chabahar in its annual estimates, the first time in nearly a decade.

Professor Rajan Kumar of Jawaharlal Nehru University (New Delhi) believes India has no choice but to wait for the conflict in the Middle East to end. "Until the conflict ends and Iran remains heavily sanctioned, India has few options."

New Delhi is reportedly looking to transfer IPGL's stake in the Chabahar Free Zone to an Iranian entity to operate. However, no agreement has been reached. Analysts say a transfer could allow India to return to managing the port when Iran sanctions are lifted in the future.

"Chabahar has truly become a losing bet in recent years, a damaged asset," said Michael Kugelman, senior fellow at the Atlantic Council. "There could be a scenario later where India seizes the opportunity, but with war in Iran and US tensions, relations will be very strained."

India will face major sanctions challenges if it proceeds with the Chabahar project. Kugelman said: "It will become increasingly difficult to avoid US sanctions risk." He believes at best India will play the long game and find a way back; at worst, "New Delhi will have to accept losses and withdraw."

However, Anwar Alam, senior fellow at the Policy Perspectives Foundation (New Delhi), argues India's final decision on Chabahar depends on priorities. India could manage sanctions and reach deals with the US and Iran without leaving Chabahar. "But if the greater priority is to maintain good relations with Trump and Israeli Prime Minister Benjamin Netanyahu, rather than retaining control of Chabahar, then withdrawal is the only option."