U.S. President Donald Trump’s latest executive order has created fresh challenges for India’s strategic investments in Iran’s Chabahar Port. This order asks the U.S. Secretary of State to review and possibly cancel the special waiver India had received to develop the port. If this happens, India’s trade and connectivity plans with Afghanistan and Central Asia could face serious trouble.
This is not the first time India has had to deal with U.S. sanctions on Iran. But this time, the situation is more complicated. With the world changing fast and global politics becoming more unpredictable, India has to find a smart way to protect its interests without damaging its relationship with the U.S.
Why is Chabahar Port So Important for India?
1. Chabahar Helps India Avoid Pakistan
For years, Pakistan has refused to let India send goods to Afghanistan and Central Asia through its land routes. Chabahar Port gives India a direct alternative route, allowing smooth trade without depending on Pakistan. It also strengthens India’s position in Afghanistan, where Pakistan has historically had more influence.
2. Key Part of INSTC Trade Route
Chabahar is a key link in the International North-South Transport Corridor (INSTC), a 7,200 km-long trade route connecting India, Iran, Russia, and Europe. This corridor reduces transportation time and cost for Indian goods going to Eurasia. If India’s role in Chabahar is blocked, it could affect the INSTC’s future.
3. Countering China’s Growing Influence
China is expanding its presence in the Arabian Sea and Indian Ocean through Pakistan’s Gwadar Port (which is part of the China-Pakistan Economic Corridor, or CPEC). India’s investment in Chabahar helps balance this by maintaining its own strategic position in the region. If India pulls back from Chabahar, China and Pakistan will get an advantage.
Trump’s Executive Order: A New Challenge for India
On February 4, 2025, President Trump signed a National Security Presidential Memorandum (NSPM) that tightens sanctions on Iran. It specifically asks U.S. officials to cancel exemptions that help Iran economically, including those linked to Chabahar Port. This is part of Trump’s larger strategy to weaken Iran’s economy and restrict its nuclear activities.
For India, this is a problem. Just last year, in May 2024, India signed a $370 million, 10-year agreement with Iran to develop and operate Chabahar Port. Now, this agreement is under threat. If the U.S. removes the waiver, India might have to scale down its investment or face penalties under American sanctions laws.
Another concern is the Islamic Revolutionary Guard Corps (IRGC), a powerful Iranian military group that the U.S. considers a terrorist organization. Trump’s order suggests that any financial transactions linked to Iran could be seen as supporting the IRGC. This makes India’s business dealings with Iran even riskier.
How Will This Affect India?
1. Trade and Connectivity Will Suffer
If India is forced to step back from Chabahar, its trade routes to Afghanistan and Central Asia will be affected. It will also slow down the INSTC project, which India has been working on for years.
2. Pakistan Will Gain an Advantage
If Chabahar’s development slows down, countries like Afghanistan and those in Central Asia might have to depend more on Pakistan for trade routes. This will strengthen Pakistan’s position in the region, reducing India’s influence.
3. India-Russia Trade Could Be Impacted
Russia is an important partner in the INSTC, and Chabahar is a major link in this route. If India’s role in the port is restricted, it could negatively affect India-Russia trade relations as well.
How Should India Respond?
India has successfully handled U.S. sanctions on Iran before. For example, during earlier rounds of U.S. sanctions, India continued buying Iranian oil through special payment systems like rupee-rial trade. India also secured previous waivers for Chabahar by arguing that it helped Afghanistan’s development.
To tackle this situation, India should:
• Engage in High-Level Talks with the U.S. – India must highlight how Chabahar is crucial for Afghanistan’s economy and stability. The U.S. has always supported Afghanistan, so India can use this as a reason to ask for continued exemptions.
• Find Alternative Payment Solutions – India could explore new financial systems to avoid U.S. restrictions, possibly working with Russia or European partners.
• Strengthen Ties with Iran and Central Asia – India should deepen its partnerships in the region so that even if U.S. pressure increases, these countries continue to support India’s involvement in Chabahar.
Final Thoughts: A Test of India’s Diplomacy
Trump’s executive order on Chabahar is a big test of India’s diplomatic skills. The challenge is to keep the U.S. happy while ensuring that India’s investments in Chabahar remain safe.
One thing is clear: India cannot afford to lose Chabahar. It is too important for trade, connectivity, and countering China’s influence.
The key question is: Will the U.S. put its Indo-Pacific partnership with India above its pressure on Iran? India must make sure that the answer is YES. The next few months will decide the fate of this critical project and, to some extent, India’s influence in the region.
