India steps back from Iran’s Chabahar port over US tariff threat

India has reportedly begun winding down its involvement at Iran’s strategically located Chabahar port, stepping back from operational responsibilities as the threat of renewed US sanctions grows.

According to a report by Economic Times, India has already transferred its committed investment of about $120 million for the port project and is now limiting further exposure as the Trump administration prepares to end the sanctions waiver that had allowed New Delhi to operate at the facility.

The waiver, granted in 2018 under the Iran Freedom and Counter-Proliferation Act (IFCA) to support Afghanistan’s connectivity and humanitarian needs, is expected to lapse on April 26. The US decision not to renew the exemption has triggered concerns within the central government over the risk of secondary sanctions on public sector entities and officials.

US President Donald Trump on January 13 announced 25 per cent tariffs on countries doing business with Iran, aiming to pressure Tehran over its protest crackdown that has reportedly left over 2,600 people dead.

India Ports Global Ltd (IPGL), the government-owned company managing India’s interests at Chabahar, has already taken precautionary steps. ET reported that all government-nominated directors have resigned from IPGL’s board and the company has curtailed public operations to shield personnel from potential sanctions exposure.

Officials described the move as a strategic and legal necessity rather than a political decision. “Continuing operations without a waiver would expose Indian entities and individuals to sanctions risk,” a senior official said.

Strategic interest in the dumps

India and Iran signed an agreement in 2016 to develop Chabahar port, located in Iran’s Sistan-Baluchistan province on the Gulf of Oman. The project was seen as a key pillar of India’s regional outreach, providing access to Afghanistan and Central Asia while bypassing Pakistan, and as a counterbalance to China-backed Gwadar port in Pakistan.

While commercial traffic through Chabahar remained limited, the port was used for humanitarian shipments, including wheat consignments to Afghanistan, and was linked to the International North-South Transport Corridor (INSTC).

Strategic affairs expert Brahma Chellaney criticised the US decision, saying it weakens India’s regional connectivity and indirectly benefits China. In a post on X, he said revoking the waiver undermines a rare strategic project that aligned US, Indian and Afghan interests.

The Ministry of External Affairs (MEA) on Friday, January 16, said India remains engaged with the US administration on the issue and continues to underline the port’s importance for regional development and stability. However, officials acknowledge that without sanctions relief, resuming operations would be difficult.

Iran retains full control over the port infrastructure and the funds already invested by India. “The Iran government is free to do whatever they want with the money transferred by the Indian government per the long-term agreement,” ET

“If Iran wants to buy cranes and other gears for Chabahar port, they can independently do that and they can carry on operations at the port independently without any involvement from India.”