What Renewed Sanctions on Chabahar Implies
The US decision to withdraw the sanctions waiver on Chabahar has wider consequences extending beyond Iran and India.
By Manashjyoti Karjee
On February 4, 2025, US President Trump issued an executive order called the National Security Presidential Memorandum NSPM-2, directing the Secretary of State to “modify or rescind sanctions waivers, particularly those that provide Iran any degree of economic or financial relief, including those related to Iran’s Chabahar port project.” This directive is part of Washington’s broader “maximum pressure” campaign targeting Iran’s economic activities, nuclear programme and regional influence.
On the legal front, the sanctions on Chabahar were originally waived under Section 1244 of the Iran Freedom and Counter-Proliferation Act (IFCA), 2012, which allowed India to continue business with Iran for humanitarian and Afghanistan-related trade. At that time, the US viewed India’s involvement as beneficial to Afghanistan’s reconstruction. But as the Taliban took over Afghanistan in 2021, the original justification for the waiver weakened. To maintain leverage over Iran in negotiations, like in the nuclear sector, the Biden administration retained the waiver as a diplomatic tool.
With the waiver revoked, businesses like banks, shipping firms, or logistics providers, engaging in Chabahar-related transactions now face U.S. secondary sanctions, cutting them off from the American financial system. This will make it difficult for India and other countries to continue investing in the project. India has already invested approximately $120 million in Chabahar’s development and extended Iran a $250 million credit line. Despite the risks, the 2025-26 Indian Union Budget has allocated ₹100 crore (approximately $12 million) for Chabahar’s expansion through India Ports Global Limited (IPGL). However, with increasing restrictions, it remains uncertain whether India will be able to execute its development plans for the port.
The move also impacts the International North-South Transport Corridor (INSTC) and regional connectivity. Chabahar is a critical part of the INSTC a 7,200 km-long trade route connecting India to Russia and Central Asia via Iran. The port handles an annual cargo volume of 2.1 million tonnes, with potential expansion to 8.5 million tonnes once fully operational and hence, plays a critical role in India’s regional trade strategy. Additionally, India has been developing the Chabahar-Zahedan railway (500 km) as part of the INSTC, with an investment of $1.6 billion.
However, with the sanctions waiver now revoked, the feasibility of completing the railway project is in jeopardy, potentially disrupting India’s connectivity plans to Central Asia.
The US decision to withdraw the sanctions waiver on Chabahar has wider consequences extending beyond Iran and India.
The action strengthens the Pakistan port of Gwadar, only 72 km to the east of Chabahar, making it a better hub under the China-Pakistan Economic Corridor (CPEC). China has already spent more than $62 billion on CPEC, and with Chabahar under U.S. sanctions, Gwadar is ready to become the pre-eminent connectivity hub of the region.
In addition, India-Iran trade has already dropped from $21 billion in 2018 to a mere $3 billion in 2022 because of previous U.S. sanctions. The new U.S. move risks further isolating India’s economic footprint in Iran, compelling New Delhi into a challenging strategic corner. Without Chabahar, India’s direct access to Central Asia is considerably diminished, and it becomes more dependent on alternative, less practical routes.
The author is Researcher, Security & Society, Advanced Study Institute of Asia – SGT University.
Views are personal and IAR neither endorses nor is responsible for them
