Did India just withdraw from Iran’s Chabahar Port under US pressure?

India’s decade-long involvement in Iran’s strategically vital Chabahar Port is under scrutiny, after recent reports suggested New Delhi may be winding down its involvement amid renewed US sanctions and the threat of punitive tariffs.

Strategically located on Iran’s southeastern coast outside the Strait of Hormuz, Chabahar has long been central to India’s ambitions for accessing Afghanistan and Central Asia while bypassing Pakistan.

According to a detailed report by The Economic Times (ET Infra) published on Thursday, India has already transferred the entirety of its financial commitment—estimated at around $120 million—to Iran, effectively liquidating its liabilities related to the development of the port.

The payout was completed before the United States reimposed sanctions on Chabahar in late September 2025, according to Indian government sources cited by the report. 

Although India subsequently received a six-month conditional sanctions waiver from the US – which took effect on October 29, 2025, and remains valid until April 26, 2026 – giving New Delhi limited room to manage its commitments and explore an arrangement with Washington.

Speaking to TRT World, P Manoj, Editor of ET Infra and the author of the report, said what struck him most was not just India’s exit, but “the timing of the payment.”

“What was surprising to me was that India paid the entire amount committed to Iran for the port project before the sanctions kicked in,” Manoj said. “That was a great piece of information shared with me by a government source dealing with the project.” 

He said the developments effectively meant “game over” for India’s stakes in the Iranian port.

Former Indian diplomat Anil Wadhwa, who served as Secretary (East) at the Ministry of External Affairs, offered a more cautious reading of the same move.

“It is clear that India had to transfer the funds before sanctions on Iran kicked in, since it would not have been possible to do so when sanctions were on,” Wadhwa told TRT World. “This does not mean that India has withdrawn from the project and still has till April 26, 2026, to come to any arrangement with the US.”

While the Indian government has not officially announced a withdrawal, the sequence of developments has raised questions about whether New Delhi is being compelled to scale back a key strategic project under US pressure—or merely recalibrating.

US sanctions and a narrowing window

India’s position is further complicated by the fact that it is already facing a 50 percent tariff imposed by the Trump administration, while simultaneously trying to negotiate a long-pending free trade agreement (FTA) with the United States. 

This dual pressure leaves New Delhi with limited room to manoeuvre, making any defiance of US sanctions on Iran economically risky and diplomatically costly, even as it seeks to preserve its long-term strategic interests in the region.

The uncertainty intensified after US President Donald Trump warned on January 12 that any country doing business with Iran would face an additional 25 percent tariff on all trade with the United States.

To manage an orderly exit, India reportedly informed the US Treasury’s Office of Foreign Assets Control (OFAC) that it intended to “wind down all activities” at the port, including at the Shahid Beheshti terminal. Based on this, OFAC granted the six-month conditional sanctions waiver, valid until April 26, 2026.

Manoj believes these moves left New Delhi with little choice. “The reimposition of sanctions and the latest tariff knock by Trump doesn’t give India any leeway to continue in Chabahar,” he said.

But Wadhwa sees the situation as a tactical pause rather than a full exit. “This is a tactical recalibration rather than a complete withdrawal,” he said, adding that the funds were transferred “so that work in the Shahid Beheshti terminal does not come to a stop.”

He noted that this kind of balancing act is not new for New Delhi. “India has been mindful of US sanctions on Iran in the past,” Wadhwa said. “Although India does not favour unilateral sanctions over those imposed by the UN, it has complied with US-related sanctions due to the fallout they can have on India–US relations in a variety of fields. Any adjustment and understanding on Chabahar is therefore expected to be undertaken in consultation with the US.”

India’s Ministry of External Affairs (MEA), however, maintains that it remains engaged with Washington on the issue. At its weekly briefing on Friday, the MEA confirmed that the US Treasury had issued guidance on a conditional sanctions waiver and said India was still “working out this arrangement” with the American side.

Responding to questions about Chabahar and Iran-related sanctions, the MEA reiterated that it is closely monitoring developments and remains engaged with the US. On broader India–Iran ties, the spokesperson emphasised that New Delhi has a “long-standing partnership” with Tehran and would take that relationship forward in line with evolving circumstances.

Yet, as Manoj noted, the diplomatic language itself was revealing. “I trust my source with the information,” he said. “The Foreign Ministry is adept at deploying such diplomatic responses.”

India’s financial exit, operational retreat

ET Infra reported that New Delhi transferred all committed funds well in advance, anticipating that sanctions would eventually return. Once the money was transferred, India effectively removed any remaining financial obligations tied to the project.

“If Iran wants to buy cranes and other equipment for Chabahar, they can do so independently,” a government source told ET Infra, adding that Iran is free to operate the port without Indian involvement.

Operationally, India has also begun stepping back. The state-owned India Ports Global Ltd (IPGL)—tasked with developing and running Chabahar—has also reportedly stepped back. Government-nominated directors resigned en masse following the sanctions, and the company’s website was taken down, reportedly to shield officials from potential exposure to US penalties.

Another government source cited by ET Infra said India had “no choice” but to exit unless sanctions are eased again, noting that India held no physical assets at the port and was largely involved through manpower support.

According to Manoj, the decision ultimately came down to cold geopolitical and economic calculation.

“If the reimposition of sanctions on Chabahar was bad for India, the latest Iran-related tariffs made it worse,” he said. “India had to decide which side of the bread is butter, with the FTA with the US lingering. Because of this, I feel, India just let go of Chabahar with the hope that passage of time may show a path forward.”

There have been reports that India is exploring a temporary workaround, under which a local Iranian entity could be hired to operate the port until tensions ease. But Manoj dismissed the idea as impractical.

 “That entity will also come under sanctions, and by dealing with it, India will again be in trouble,” he said, arguing that such workarounds offer little real protection from US penalties and do little to alter the underlying strategic reality.

Strategic stakes beyond sanctions

Chabahar’s importance extends far beyond trade volumes. Located on Iran’s southeastern coast, outside the Strait of Hormuz, the port has long been viewed by India as a strategic gateway to Afghanistan and Central Asia.

It is also a key node in the International North–South Transport Corridor (INSTC), a 7,200-kilometre multimodal network connecting India to Iran, Russia, Central Asia and Europe.

Wadhwa, who has also served as India’s ambassador to many countries, including Oman, which overlooks the Strait of Hormuz, stresses that this strategic logic has not changed.

“The Chabahar terminal and port are important for India’s access to trade through the Caspian for Central Asia and Russia, and for Afghanistan since Pakistan has blocked access,” he said. “India has been trying to develop the North–South Transport Corridor with Russia and Iran since 2003.”

But Manoj, on the contrary, believes those ambitions are now on hold. “That will obviously take a back seat now,” he said.