India has made no allocation for the Chabahar port project in the Union Budget 2026–27, reflecting growing uncertainty amid escalating tensions between the United States and Iran and the looming risk of renewed American sanctions on Tehran.
For several years, New Delhi had earmarked around ₹100 crore annually for the development of Chabahar, a strategic deepwater port in Iran’s Sistan-Balochistan province. India is a key partner in the project, which has been central to its regional connectivity strategy linking Afghanistan, Central Asia and Eurasia while bypassing Pakistan.
The absence of funding in this year’s Budget comes as a six-month US sanctions waiver for India’s involvement in Chabahar is set to expire on April 26. Washington has warned of a 25 per cent additional tariff on countries engaging in trade with Iran, raising fresh concerns for Indian policymakers.
Located at the mouth of the Gulf of Oman, Chabahar is Iran’s only ocean-facing port and offers direct access to global maritime trade routes. Strategically positioned west of the Iran–Pakistan border, it mirrors the China-developed Gwadar port in Pakistan, making Chabahar both an economic gateway and a geopolitical counterweight to China’s Belt and Road Initiative.
For India, the port has long been viewed as a critical alternative route after Pakistan denied overland access to Afghanistan and Central Asia. Engagement with Chabahar dates back to 2002, when talks were initiated during discussions between then Iranian National Security Advisor Hassan Rouhani and India’s National Security Advisor Brajesh Mishra. The project was formally identified as a flagship initiative during President Mohammad Khatami’s visit to India in 2003.
Cooperation gained momentum after the Taliban seized power in Afghanistan in 1996, with India and Iran backing the Northern Alliance against the Pakistan-supported regime. Chabahar subsequently emerged as a vital component of India’s efforts to overcome regional connectivity constraints.
Last month, External Affairs Ministry spokesperson Randhir Jaiswal confirmed that India remains in dialogue with Washington on the issue. “We remain engaged with the US side in working out this arrangement,” he said, referring to the conditional sanctions waiver issued by the US Treasury.
While the Trump administration had earlier moved to revoke the 2018 Chabahar waiver, it later extended a temporary exemption. However, renewed pressure on Iran and the threat of punitive tariffs appear to have influenced India’s decision to pause fresh budgetary commitments, pending greater clarity on the sanctions regime.
The move underscores the delicate balance New Delhi faces between safeguarding its strategic interests in the region and navigating an increasingly complex geopolitical and sanctions landscape.
