By Krishna Dua 
US Ends Sanctions Waiver for Chabahar Port; India at Risk
On September 18, 2025, the United States dropped a geopolitical bombshell that reverberated across South Asia and the Indian Ocean region: the revocation of the 2018 sanctions waiver for operations at Iran’s Chabahar Port, effective September 29, 2025. This move, announced by the US Department of State, aligns with President Donald Trump’s “maximum pressure” policy against Tehran, targeting the Iranian regime’s alleged support for regional proxies and nuclear ambitions. For India, the decision strikes at the heart of a flagship connectivity project, exposing New Delhi’s strategic investments to potential US secondary sanctions and threatening its access to Afghanistan and Central Asia. The waiver, originally granted under the Iran Freedom and Counter-Proliferation Act (IFCA), had shielded Indian entities from penalties while developing the port, justified by its role in Afghan reconstruction.
Chabahar, Iran’s only ocean-facing port on the Gulf of Oman, has been a cornerstone of India’s “Act East” and neighborhood-first policies since a 2016 trilateral agreement with Iran and Afghanistan. Operated by India Ports Global Limited (IPGL) since 2018, the Shahid Beheshti terminal has handled over 8 million tonnes of cargo, including humanitarian wheat shipments to Kabul. With $120 million invested and plans for a $500 million expansion—including a 700 km rail link to Zahedan by 2026—this revocation could halt progress, deter financing, and invite legal repercussions for Indian firms. As External Affairs Minister S. Jaishankar navigates this tightrope—balancing Quad partnerships with Tehran ties—the decision underscores the fragility of India’s multi-alignment strategy. This article dissects the announcement’s origins, historical context, immediate risks to India, and the broader geopolitical chessboard, revealing how a port 2,500 km away could reshape regional dynamics.
Background: The 2018 Waiver and Its Lifeline Role
The 2018 sanctions waiver was a rare concession from Washington during Trump’s first term, amid a broader reimposition of nuclear deal-era penalties on Iran following the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in May 2018. Under IFCA, the exemption allowed India, along with other nations like Japan and South Korea, to engage in Chabahar operations specifically for “Afghanistan reconstruction assistance and economic development.” This carved out space for humanitarian and trade activities, exempting port development, rail connectivity, and non-sanctioned cargo like food and medicines from secondary sanctions—penalties imposed on third parties dealing with Iranian entities.
For India, the waiver was a diplomatic coup. Signed during Prime Minister Narendra Modi’s 2016 Tehran visit, the 10-year contract with Iran awarded IPGL operational control of Shahid Beheshti, transforming a dormant facility into a bustling hub. By 2025, it had facilitated $2.5 billion in trade, including 20,000 tonnes of wheat to Afghanistan in 2023 and eco-friendly pesticides to Iran in 2021. The Ministry of External Affairs allocated ₹100 crore for FY 2024-25 operations, underscoring its priority. Strategically, Chabahar bypassed Pakistan’s Karachi and Gwadar ports— the latter Chinese-operated—enabling direct routes to landlocked neighbors via the International North-South Transport Corridor (INSTC), slashing transit times by 40% and costs by 30%.
The waiver’s revocation, announced on September 16, 2025, by State Department spokesperson Thomas Pigott, cites the Taliban’s 2021 takeover as eroding its Afghan-focused rationale. “Once effective, persons operating Chabahar or engaging in IFCA activities may face sanctions,” the statement warned, echoing Treasury Undersecretary John K. Hurley’s crackdown on Iranian shadow banking. This isn’t isolated; it follows Trump’s February 2025 National Security Presidential Memorandum intensifying economic isolation of Tehran, amid escalating Israel-Iran tensions and Houthi disruptions in the Red Sea.
US Policy Shift: Trump’s Maximum Pressure Redux
President Trump’s return to the White House in January 2025 has revived his signature Iran strategy: maximum pressure, blending sanctions with military posturing to curb Tehran’s nuclear program and proxy support. The Chabahar revocation fits this playbook, targeting Iran’s $500 million annual port revenues—vital for evading sanctions via oil smuggling networks. US Treasury data highlights Chabahar’s role in “illicit financial facilitators” abusing global systems, with the port linked to shadow banks laundering funds for Hezbollah and Hamas.
This echoes 2018’s JCPOA exit, when Trump designated the Islamic Revolutionary Guard Corps (IRGC) a terrorist organization, freezing $100 billion in Iranian assets. By 2025, sanctions have halved Iran’s oil exports to 1.5 million barrels per day, per OPEC, and isolated its banking sector. The waiver’s end signals no carve-outs for allies; even as India balances QUAD commitments, Washington views Chabahar as enabling regime survival over Afghan aid. Critics like John Bolton, Trump’s former NSA, applaud it as “strategic clarity,” but it risks alienating partners—India’s $500 million Line of Credit to Iran in 2024 already drew scrutiny.
Geopolitically, the move counters China’s $3.7 billion investment in Gwadar, part of the Belt and Road Initiative (BRI). US officials, per Bloomberg leaks, see Chabahar’s revival as tilting the Indian Ocean toward Beijing, especially with Iran’s 25-year China pact (2021). Trump’s administration, eyeing a 2026 midterms boost, prioritizes Israel-Saudi normalization, where Iran’s port funding proxies like the Houthis is a red line.
India’s Strategic Stake: Chabahar as Regional Lifeline
For India, Chabahar is more than infrastructure—it’s a strategic bulwark. Nestled 140 km from Gwadar, it provides sea access to Central Asia’s $1 trillion market via INSTC, a 7,200 km multimodal route linking Mumbai to Moscow. Since IPGL’s takeover, cargo throughput hit 2.5 million tonnes in 2024, up 50% YoY, including fertilizers to Afghanistan and minerals from Central Asia. The $85 million investment in cranes and dredging has boosted capacity to 8.5 million tonnes annually, with plans for 12.5 million by 2026.
Bypassing Pakistan—strained by Kashmir tensions—Chabahar ensures India’s Afghan aid flow: $3 million in wheat (2020), $5 million in medicines (2022). Economically, it cuts logistics costs by $500 million yearly, per NITI Aayog, fostering trade with Uzbekistan ($1 billion potential) and Kazakhstan (oil swaps). The Zahedan rail link, 60% complete, will halve Delhi-Kabul transit from 20 to 10 days. Amid China’s BRI dominance—$62 billion in Pakistan alone—Chabahar counters encirclement, aligning with India’s SAGAR (Security and Growth for All in the Region) doctrine.
India’s $500 million credit line to Iran (2024) and $250 million for rail (2023) underscore commitment, but sanctions risk exposure: IPGL’s contracts with Indian firms like Essar and Adani could face US fines ($1-20 million per violation). The revocation threatens $100 crore FY25 allocation, stalling expansion and deterring FDI.
Immediate Risks: Sanctions Exposure and Operational Disruptions
From September 29, 2025, Indian entities risk secondary sanctions under IFCA—freezing US assets, visa bans, and trade restrictions. IPGL, with 200 staff and $50 million annual ops, faces Treasury scrutiny; past waivers shielded it, but now even routine maintenance invites penalties. Financing dries up: Indian banks, wary of FATF gray-listing, may halt $200 million loans, per RBI advisories. Cargo volumes could plummet 40%, as insurers pull coverage—echoing 2019’s 30% drop post-JCPOA exit.
Operationally, the port’s 100,000 TEU capacity upgrade halts: Rail construction, 60% done, needs $150 million more, now unviable without waivers. Afghan trade—$1.5 billion via Chabahar—suffers; wheat shipments (20,000 tonnes, 2023) risk diversion through Pakistan, undermining neutrality. Legally, Indian firms face OFAC probes, with precedents like Cosmos Shipping’s $3 million fine (2020) for Iranian dealings.
Diplomatically, it strains India-US ties: QUAD summits (2025 Delhi) and iCET tech pacts ($2 billion defense deals) could sour, as Jaishankar seeks exemptions. Domestically, opposition cries “strategic blunder,” pressuring Modi amid 2026 polls.
India’s Response: Diplomatic Maneuvers and Contingencies
New Delhi’s reaction has been measured yet firm. On September 19, MEA spokesperson Randhir Jaiswal stated: “India remains committed to Chabahar; we are engaging Washington for clarifications.” Backchannel talks via US Ambassador Eric Garcetti—India’s QUAD ally—seek a “targeted exemption” for Afghan aid, leveraging 2023’s similar plea. Jaishankar, in a Tehran call with Iranian FM Abbas Araghchi, reaffirmed the 10-year pact, offering $100 million bridge funding.
Contingencies include INSTC diversification: Bolster Bandar Abbas routes (less sanctioned) and Armenia-Georgia airlifts for urgent Afghan aid. Domestically, IPGL pivots to non-USD settlements via rupee-rial mechanisms, tested in 2024 oil trades. Long-term, India eyes bilateral pacts with Uzbekistan for alternative corridors, while accelerating Sagarmala’s domestic ports to offset export dips ($200 million annual).
Critics argue over-reliance on Iran; think tanks like ORF urge a “multi-port strategy,” including Duqm in Oman ($700 million investment).
Broader Geopolitical Implications: Indo-Pacific Ripple Effects
The revocation amplifies US-Iran frictions, emboldening Israel’s Gaza ops and Saudi’s Yemen push—proxies Iran funds via Chabahar smuggling ($300 million yearly, per Treasury). For China, it’s a windfall: Gwadar thrives, BRI advances, challenging India’s Malabar exercises. Russia, via INSTC, loses a node, straining BRICS cohesion.
In the Indo-Pacific, it tests India’s multi-alignment: QUAD’s anti-China pivot clashes with Chabahar’s Tehran tilt, risking $10 billion US-India trade. Globally, it signals sanction fatigue—EU’s INSTC support (2024) wavers—potentially fragmenting supply chains.
Potential Outcomes: Scenarios for Chabahar’s Fate
Optimistic: US grants a narrow waiver by October, post-QUAD summit, preserving 70% ops. Pessimistic: Full sanctions freeze IPGL, halving throughput and forcing Iran-China pivot. Middle ground: Phased wind-down, with India ceding to Tehran by 2027, redirecting $300 million to Duqm.
India’s leverage—$20 billion US arms buys—may yield concessions, but Trump’s unpredictability looms.
Conclusion
The US’s Chabahar waiver revocation on September 29, 2025, imperils India’s strategic gateway, exposing investments to sanctions and upending Afghan access. From 2018’s lifeline to 2025’s liability, it tests New Delhi’s balancing act amid Trump’s pressure. Yet, with Jaishankar’s diplomacy and contingencies, India can navigate this storm—perhaps emerging with diversified routes. In geopolitics’ high seas, Chabahar’s fate isn’t sunk; it’s a call to chart bolder courses, ensuring no single port—or partner—defines destiny.