The United States’ decision to revoke the 2018 waiver on sanctions for the Chabahar port project in Iran has raised concerns over India’s strategic interests in the region.
Former Foreign Secretary Kanwal Sibal described the move as “one more strategic blow that the United States has chosen to inflict on India” and said it was “quite unnecessary.”
Chabahar port, India’s gateway to Afghanistan and Central Asia, was first proposed in 2003 to provide an alternative route to landlocked Afghanistan. The port also serves as a key hub in the International North-South Transport Corridor, linking India with Russia and Europe.
Former ambassador to the US Meera Shankar highlighted that the sanctions would likely be targeted and prospective. “It won’t be retroactive because the waiver was in force at that time,” she said, adding that the restrictions would mainly affect companies and individuals involved in the project, including freezing of assets and visa restrictions.
Sibal explained that the port’s strategic significance goes beyond Afghanistan. “It not only gives Afghanistan an alternative to the sea and gives us access to Afghanistan, but it also connects us to Central Asia,” he said.
The port also serves as a counterweight in the Arabian Sea to China-operated Gwadar port in Pakistanonly 140 kilometres away.
India has invested heavily in Chabahar, including $500 million in 2016, $120 million in Shahid Beheshti Port in 2024, a $250-million credit window for infrastructure upgrades, and port equipment worth $24 million. The port has been used for shipments of wheat and medicines to Afghanistan and continues to be a crucial link in India’s regional trade strategy.
The External Affairs Ministry said India is carefully examining the implications of Washington’s decision, which will take effect in 10 days. Sibal warned that the move will test India’s willpower, as the government must decide whether to continue developing the port despite potential sanctions or yield to US pressure.
Below is the excerpt of the discussion.
Q: Why do you think the US has acted in this manner? In 2018, it was this very administration that had given the sanctions waiver for Chabahar port because they felt it was important for regional connectivity and it was important for India.
Sibal: The genesis of the project in 2003 was to develop an alternative route for us to Afghanistan because Pakistan was the only access Afghanistan had to the sea. Given the fact that Pakistan was not allowing us over-land transit to Afghanistan, the intention was to give an alternative route to Afghanistan to access the sea and for us to connect with Afghanistan. At that time, it was not the Taliban that was in power.
The progress on this has been slow and fitful. As for what has happened now, I think this is one more strategic blow that the United States has chosen to inflict on India, apart from other steps they have taken, and it seems quite unnecessary. It is not only that it gives Afghanistan an alternative to the sea and gives us access to Afghanistan, but it also connects us to Central Asia.
As you know, very recently, a trilateral meeting between India, Iran, and Uzbekistan took place, because Uzbekistan is very keen on developing this project. China is also involved in this area, not directly in the port, but in building refineries, railway lines, and other infrastructure. They have shown interest and are probably involved on the ground. I have not followed it that closely, but I know that they are present.
The International North-South Corridor is a different project, but the intention is, at some stage, to link the two through a railway line across Iran. That will happen in due course.
Right now, there is no need for the United States to punish us this way. I think it is partly also a result of the irritation Trump felt because at the SCO meeting, Putin, Modi, and Xi were together, and Iran is a member of the SCO. So, it is part of the syndrome that the Trump administration suffers from when it comes to India’s show of strategic autonomy. It’s unfortunate and is not going to help our relations.
Q: Ambassador Shankar, what does this waiver exemption, now revoked, imply? The State Department press statement says that government entities and individuals involved with the Chabahar project may get sanctioned if they are involved. Could companies or individuals already associated also be sanctioned, or would it only impact anyone who now tries to get involved or invest?
Shankar: My sense is that it would be prospective. It won’t be retroactive because the waiver was in force at that time. Unlike the very harsh tariffs the US has imposed on Indian exports for Russian oil, these will be more targeted sanctions at companies and individuals involved in the project.
In 2018, this was a conscious decision by the US. India had interests in the project because it gave us connectivity to Afghanistan and Central Asia, which we did not have because Pakistan continued to deny us transit across their territory. So, this was less about China and more about India’s connectivity with Central Asia. The North-South Corridor would enable India to access Russian oil directly and bring it out through Iran.
At some level, this is part of the US strategy and policy to exert maximum pressure on Iran. The Trump administration has completely aligned its regional policy with Israel. They have encouraged Israel to target Iran’s nuclear facilities, launched attacks on some deep facilities themselves, and tightened the sanctions regime by doing away with the 2018 waivers. In this case, the sanctions are more targeted at companies, individuals, and government entities involved with the port project. The sanctions involve freezing assets in the US, restricting dealings, and blocking visas and travel for individuals engaged in the project. The sanctions are targeted, not far-reaching.
Q: Ambassador, does this now mean India-Iran cooperation on the Chabahar project will come to a halt, or can we continue if we do it via local currency arrangements, sidestepping the dollar?
Sibal: It’s not that simple. This project has been signed at the government-to-government level. Many entities on the Indian side have been involved in the past before we got this waiver order for international companies supplying cranes and port facilities, but those were not fulfilled because those companies feared sanctions.
Now, in terms of expanding the port or adding facilities to make it more efficient, will all be subject to prospective US sanctions. Mira Shankar may be right, that this may not apply retrospectively, but I am not sure. Once the waiver is revoked, it is revoked for anyone involved, past, present, or future. This places the Indian government in a difficult position: whether to defy these sanctions and continue developing the project or bend to US will. It will test our willpower.
Q: Ambassador Shankar, Chabahar port was an important counterweight in the Arabian Sea to Gwadar port, which is controlled by China. Given that we had already cut energy ties with Iran due to US sanctions, will this be a body blow to India-Iran relations?
Shankar: It depends on how India chooses to react. Will it try to find ways to continue the project? Will it negotiate with the US to find a way forward? There are many uncertainties, but clearly the US has signalled that it does not take India’s interests into account regarding Iran, unlike in the past.
Watch accompanying video for entire discussion.
