US-Iran Peace Deal Rekindles India’s Chabahar Port Plans, Strengthens Regional Connectivity Prospects

The agreement is anticipated to bring immediate relief to India’s energy sector by ensuring smoother oil and gas supplies from the Middle East through the Strait of Hormuz, a critical maritime trade route. More importantly, it could reopen opportunities for India to resume full-scale operations and investments at Iran’s strategically located Chabahar Port.          India’s participation in the Chabahar project was severely impacted after the United States re-imposed sanctions on the port on September 29, 2025. In response, India submitted a plan detailing how it would wind down operations at Chabahar, including activities at the Shahid Beheshti Terminal. Based on these assurances, the US Treasury Department’s Office of Foreign Assets Control (OFAC) granted a six-month sanctions exemption, which expired on April 26, 2026.      Anticipating potential sanctions, India had transferred its entire committed investment—estimated at around $120 million—more than a year before restrictions were reintroduced. The funds were earmarked for the development of Chabahar Port, a project viewed as crucial to India’s regional connectivity strategy.          Following the sanctions, India Ports Global Ltd (IPGL), the state-owned company responsible for developing and operating the port, faced significant operational challenges. Government-appointed directors resigned from the company’s board, while its official website was taken offline to shield stakeholders from potential sanctions-related exposure.

The situation worsened in January 2026 when US President Donald Trump announced that countries conducting business with Iran could face a 25 per cent tariff on all trade with the United States, further complicating India’s engagement with the Persian Gulf nation.

Sanctions also created barriers to repatriating funds generated from port operations and posed regulatory hurdles for any potential divestment from the project. Such a move would have required approvals from the Reserve Bank of India (RBI) and the Department of Investment and Public Asset Management (DIPAM).      Despite these challenges, Indian officials maintained that Chabahar’s value extended far beyond financial returns. “Money was not the issue; it is a strategic location for India,” an official familiar with the matter said.      In March 2024, India and Iran signed a landmark 10-year agreement granting India operational rights over the Shahid Beheshti Terminal, cementing New Delhi’s long-term commitment to the project.      Situated in Iran’s Sistan-Baluchistan Province on the country’s southeastern coast, Chabahar Port provides India with direct access to Afghanistan and Central Asia, bypassing Pakistan. The port is also a key component of the International North-South Transport Corridor (INSTC), a 7,200-kilometre multimodal network connecting India with Iran, Afghanistan, Azerbaijan, Russia, Central Asia and Europe through sea, rail and road links.      With the prospect of sanctions relief following the US-Iran peace deal, India could regain momentum in developing Chabahar as a major regional trade and connectivity hub, strengthening its strategic footprint across Central Asia and beyond.