India works out Chabahar handover to Iran amid US sanctions
India is negotiating an arrangement to transfer operational control of the Shahid Beheshti terminal at Chabahar port back to Iran, structured so that control could revert to India later if sanctions ease or a fresh waiver is secured.
The move follows the expiry of a US sanctions waiver that had allowed India Ports Global Limited (IPGL) to operate the terminal despite broader American sanctions on Iran.
India has already completed its committed financial obligations under the original operating contract, and the reported approach involves IPGL divesting its stake in the port's free-zone entity to an Iranian party rather than an abrupt, uncompensated exit.
Officials have publicly reaffirmed India's continued engagement with all stakeholders to keep the port functional, even as day-to-day operational control shifts.
The India-Iran-Afghanistan Chabahar Agreement and INSTC Corridor
Chabahar is central to India's strategy for connectivity to Afghanistan and Central Asia that bypasses Pakistani territory, and it links India into a wider multimodal trade corridor to Russia and Europe.
Key Details
- India, Iran, and Afghanistan signed a trilateral agreement in May 2016 to establish the Chabahar transit corridor, aimed at improving trade connectivity among the three countries.
- India Ports Global Limited (IPGL), a subsidiary under India's Sagarmala Development Corporation, signed a 10-year contract in May 2024 with Iran's Ports and Maritime Organisation to equip and operate the Shahid Beheshti terminal, committing about $120 million in equipment procurement plus an additional credit line for related infrastructure.
- The International North-South Transport Corridor (INSTC) is a ~7,200 km multimodal (sea-rail-road) route connecting India to Russia and Europe via Iran, Azerbaijan, and Central Asian states; Chabahar functions as the corridor's southern maritime gateway for India.
- INSTC membership includes India, Iran, Russia, and Central Asian and Caucasus states; the corridor is projected to cut freight time and cost significantly compared to the traditional Suez Canal route.
The current handover negotiation is a direct consequence of US sanctions pressure threatening India's INSTC access point — if IPGL's operational role at Chabahar lapses, India's overland/sea link to Afghanistan and Central Asia that bypasses Pakistan becomes harder to sustain, even though the trilateral agreement and India's contractual rights remain formally intact.
US Sanctions Architecture and the Chabahar Waiver
India's Chabahar involvement has always operated inside a carve-out from US sanctions on Iran, making the project vulnerable to shifts in US Iran policy.
Key Details
- The US first granted a Chabahar-specific sanctions exception in 2018 under the Iran Freedom and Counter-Proliferation Act, 2012, recognising the port's role in Afghan reconstruction and humanitarian trade.
- This exception was revoked effective September 2025; following Indian diplomatic engagement, the US Treasury's Office of Foreign Assets Control (OFAC) granted a conditional six-month extension valid until April 26, 2026, reportedly on the understanding that India would wind down its Chabahar activities.
- CAATSA (Countering America's Adversaries Through Sanctions Act, 2017) is the broader US law under which secondary sanctions on countries dealing with Iran, Russia, and North Korea are administered; India has separately sought and received CAATSA-related waivers in other contexts (e.g., the S-400 deal).
The reported "handover" structure — IPGL divesting to an Iranian entity with a right of reversion — is a hedge that lets India preserve its long-term claim to the terminal without violating the terms of its wound-down US sanctions exposure, reflecting India's practice of balancing strategic autonomy against US sanctions risk.
Chabahar versus Gwadar: Competing Port Strategies in the Region
Chabahar and Pakistan's Gwadar port, only about 72 km apart on the Makran coast, are frequently compared as competing connectivity projects reflecting India-China regional rivalry.
Key Details
- Gwadar port is developed by China under the China-Pakistan Economic Corridor (CPEC), itself a flagship project of China's Belt and Road Initiative (BRI); Pakistan has not permitted India transit access through its territory to Afghanistan/Central Asia, which is the core reason India invested in the alternative Iranian route.
- Chabahar was conceived partly as a strategic counterweight, giving India an Arabian Sea foothold and land access to Afghanistan and Central Asia without transiting Pakistan.
- Both ports lie on the Gulf of Oman, underscoring their overlapping strategic catchment for trade with landlocked Central Asia and Afghanistan.
Any weakening of India's operational role at Chabahar (due to US sanctions pressure) tilts the regional connectivity balance further toward Gwadar/CPEC, which is relevant to India's broader Indo-Pacific and Central Asia connectivity diplomacy, including its Connect Central Asia policy.
- Chabahar trilateral agreement: signed May 2016 between India, Iran, and Afghanistan.
- IPGL-Iran 10-year operating contract for Shahid Beheshti terminal: signed May 2024; about $120 million equipment-procurement commitment, fulfilled in full by August 2025.
- US sanctions exception for Chabahar: originally granted 2018 under the Iran Freedom and Counter-Proliferation Act, 2012; revoked effective September 2025; conditional extension granted until April 26, 2026.
- INSTC: ~7,200 km multimodal corridor linking India to Russia/Europe via Iran and Central Asia; touted to cut transport time by around 40% and cost by around 30% versus traditional routes.
- Gwadar and Chabahar are approximately 72 km apart on the Makran coast (Gulf of Oman).