Trump Effect? Is India Pulling Out of Iran's Chabahar Project?

India–Iran relations have long been hostage to Tehran’s ties with Washington. Crippling US sanctions on Iranian oil along with secondary sanctions on entities doing business with Iran hit India hard, sharply curtailing energy ties and slowing strategic projects. Chief among them was the Chabahar port, envisioned as India’s gateway to Afghanistan and Central Asia, but repeatedly stalled by US restrictions.

Now as anti-regime protests gather momentum in Iran and authorities crack down with an iron fist, leading to the death of at least 2500 people, US President Donald Trump is warning of fresh strikes on Iran. The protests have once again brought the possibility of regime change in Iran, something that hawks in the US and Israel have long dreamt of doing. As war clouds gather over Iran and the US has slapped a 25 percent sanction on countries doing business with the regime, India is reported to be quietly pulling out of the Chabahar project in Iran. But the MEA has denied the claim. 

 "As you are aware, on October 28, the US Department of Treasury had issued a letter outlining the guidance on the conditional sanctions waiver valid till April 26, 2026. We remain engaged with the US side in working out this arrangement," Randhir Jaiswal, the MEA spokesman said at his weekly briefing on Friday. The waiver has enabled India’s Indian Ports Global Limited to continue managing the port under its 10-year agreement with Iran.

Jaiswal spoke of   India's long-standing partnership with Iran and said New Delhi is closely following the evolving situation in the country. India has asked its citizens not to travel to Iran, and advised the 9,000 or so Indian nationals living in the country to immediately leave the country while commercial airlines are still operating.

However, despite Jaiswal’s denial, there is talk that India is transferring the $120 million it has committed for Chabahar to Iran, to avoid exposure to the port project. But Jaiswal did not comment on this, instead emphasising that New Delhi is talking to the US about the Chabahar exemption that ends in April.

The crisis has come at a time when India and the US are engaged in repairing ties that took a massive hit last year with the tariffs and President Trump’s claims that he was responsible for ending the India-Pakistan conflict in May. The arrival of Sergio Gor, the ambassador-designate, has led to hopes that the relations could in time be reset.  

With the US once again tightening the screws on Tehran, New Delhi is being forced to weigh its regional ambitions against the costs of defying Washington.

At a time when India is already bleeding with a 50 percent tariff hike on its exports to the US, a further 25 percent would hit much harder. This despite claims that India’s trade with Iran is miniscule and so the overall effect on the economy will be minimal. It is very likely that New Delhi will not want to further anger the unpredictable Donald Trump by siding with Iran and much rather sacrifice its relations with Iran.

In 2002, when Prime Minister Atal Bihari Vajpayee’ s national security advisor Brajesh Mishra and his Iranian counterpart Hassan Rouhani, first discussed the Chabahar project, there was much excitement in government as well as among policy-wonks in India.

This was exactly what India needed to open the trade route to Central Asia as well as to Afghanistan. Considering that Pakistan did not allow India to use its territory for sending goods to land-locked Afghanistan, developing a port in Iran’s  Makran coast of Sistan and Baluchistan province, adjoining the Afghanistan border, would allow India to have robust trade not just with Afghanistan but also Central Asia and onwards to Europe. Next year, in 2003, when the then Iranian president Mohammad Khatami visited India, he and Vajpayee signed a roadmap of strategic cooperation and the joint development of Chabahar became the centre piece of cooperation. An MOU was signed on Chabahar.

Soon afterwards, India, which had excellent ties with Hamid Karzai, began work on the Zaranj-Delaram highway to connect   Afghanistan to the Iran border, so that goods could be carried from the port to the border on trucks and then on to Afghanistan’s main highway network. The highway was completed in 2009 with the sweat and tears of Indian workers, who were attacked by the Taliban several times to stop the construction.

Yet the grand design never really took off due to America’s troubled relations with the Islamic Republic. Ever since the 1979 Islamic revolution that overthrew the Shah of Iran, a close ally of the US and Western powers, relations between Washington and Tehran had never looked up. Except during a brief period when the landmark nuclear agreement was signed in 2015 between Iran and the P5 nations: US, Russia, China, UK, France and Germany. During the brief interlude, the Chabahar project was resurrected. That was however short-lived with Donald Trump walking out of the deal in 2018, during his first term in office.

India’s ties with Iran and the Chabahar project have long been held hostage to Tehran’s ties with Washington.