According to the latest decision of the U.S. port of Chabahar, which operates in India, Indian individuals and who work or engage in related activities at the port may face sanctions as of September 29. The port isly India’s first overseas port project. The Economic Times said: “This decision could hinder India’s connectivity project in Eurasia.”
Key exemptions have been revoked
The U.S. government recently announced that it will revoke the sanctions exemption for Iran's Chabahar Port. According to the Indian Express, the deputy spokesman of the US State Department said in a statement on September 16th that in line with US President Trump's "maximum pressure" policy aimed at isolating Iran, the sanctions exemption introduced in 2018 according to the Iran Freedom and Non-Proliferation Act (IFCA) has been revoked. The decision will take effect Sept. 29.
Located on the coast of the Gulf of Oman on the southeastern coast of Iran, Chabahar is India’s key maritime gateway to the country’s mainland Afghanistan and Central Asia.In 2018, in order to support Afghanistan’s reconstruction aid and economic development, the United States exempted Indian entities from sanctions under the IFCA, allowing them to invest and operate the port from U.S. sanctions.
The exemption had previously allowed Indian companies to operate the port unrestricted by the United States, allowing New Delhi to circumvent Pakistan, directly to Afghanistan and the resource-rich Central Asia region. Once the exemption comes into effect, all entities operating the port of Chabahar or engaged in related activities could face the risk of sanctions stipulated by the law.
Indian Foreign Ministry acknowledged this progress on Monday, and spokesman Randil Jaiswar said: “We have seen U.S. press releases on the lifting of the Chabahar port sanctions exemption.
“India relies on the port’s long-term interconnectivity blueprint that could be severely damaged.”
For India, unlike other Iranian ports, Chabahar has a direct route to sea routes that avoid Pakistani territory.
In addition, strategically, Chabahar Port is also the core of India's regional connectivity goals. The Indian government hopes to use the port to open up new markets for exports from India's inland areas to carry out trade with Russia and Europe. India's First Post said that the decision of the United States limited India's ability to build Chabahar into a hub connecting Central Asia and Europe. In the "India-Middle East-Europe Economic Corridor" announced in 2023, New Delhi plans to connect India's west coast ports with the United Arab Emirates by sea, then cross Saudi Arabia and Jordan by rail to the port of Haifa in Israel, and ultimately connect Europe by shipping. The plan can ultimately shorten the transportation time by about 40% compared with the Suez Canal route.
India hopes to build trade channels with Afghanistan and Central Asia by expanding the Chabahar port’s market, according to the report, without the integration of Chabahar port, the range of radiation of the “India-Middle East-Europe Economic Corridor” may be more limited to the Gulf region, making it difficult to develop into a trade channel through Eurasia.
India has invested heavily in the project since 2016 and the port’s throughput has been growing steadily, with government officials and experts hoping that the port’s full-blown operation will significantly boost trade, taxation and boost New Delhi’s strategic influence.
In addition, in May 2024, India and Iran signed a 10-year agreement to develop and operate the Chabahar port. Under the agreement, India Global Port Limited pledged to invest approximately $1.2 billion in operations and pledged another $2.5 billion in credit to support the construction of surrounding infrastructure.
However, India Today pointed out that this move by the United States is undoubtedly a "strategic blow" to India: India's efforts over the years may be in vain. After losing the immunity, the expansion plan of Chabahar Port will also slow down significantly. Hundreds of millions of dollars of investment in India are at risk, and its long-term connectivity blueprint relying on the port may also be hit hard.
Qian Feng, a researcher at the National Institute of Strategic Studies at Tsinghua University, told the Global Times reporter that companies or individuals involved in the operation of the Chabahar port face secondary sanctions from the United States, which will cause India's US $370 million investment in port upgrades to stagnate. This not only undermines India's plans to use the port to establish regional trade links, but also weakens India's ability to compete with Pakistan's Gwadar port in the land rights competition, and also shakes New Delhi's strategic plan to expand its influence in Central Asia through infrastructure connectivity.
Businesses worry about disruptions in goods supply chains
According to the Indian newspaper, as a result of U.S. sanctions, Indian enterprises may face delays in freight transportation due to compliance review and banking restrictions. Ongoing projects may slow down, and transportation of basic goods, building materials and other goods to Afghanistan and Central Asia is affected. Although the Indian government says it is fully assessing the impact, enterprises are still concerned that supply chains will be interrupted. Freight insurance costs may rise and foreign investors may not be willing to participate in projects related to the Chabahar port.
Trade tensions continue to escalate – the United States imposes a 50% tariff on Indian exports due to India’s ongoing imports of Russian oil, resulting in a decline in India’s exports and economic pressure on chemical, metal, pharmaceutical and agricultural industries, according to sources in Hong Kong’s South China Morning News, who said that senior trade negotiators of India and the United States failed to resolve the tariff dispute between the two sides during talks last week at the United Nations General Assembly.
For India, the current challenge lies in how to maintain the operation of the Chabahar port while avoiding direct conflict with Washington.But with the implementation of the latest sanctions, India’s most ambitious overseas port project is destroyed.