India steps back from Chabahar, strengthening China’s position in Gwadar

India has effectively abandoned its strategic partner, Iran, at one of the most difficult moments for the country.

According to India’s NDTV television channel, the government did not allocate any funds for the development of Iran’s Chabahar Port in the 2026 financial year budget. The 2026–2027 national budget (from April 1, 2026 to March 31, 2027), presented on January 31 by Finance Minister Nirmala Sitharaman, contains no provisions for financing this project. The reason cited is rising tensions between the Islamic Republic of Iran and the United States.

For several years, India had been investing around $10 million annually in the development of this Iranian port, which served as a key gateway for Indian trade with Central Asia and the Middle East. Chabahar was also important for New Delhi as a counterweight to Pakistan’s Gwadar Port and as a way to bypass transit routes through Pakistan.

In September 2025, the United States expanded sanctions against Iran while simultaneously granting India a six-month waiver to continue its participation in the Chabahar project. More recently, Washington announced plans to introduce additional 25-percent tariffs against Iran, prompting Indian partners in Tehran to conclude that further spending on the project was no longer worthwhile.

Chabahar is located at the entrance to the Gulf of Oman and is Iran’s only port with direct access to the Indian Ocean that does not depend on the Persian Gulf.

Source:Khmer Times

Tehran and New Delhi have been discussing joint development of the port since 2003. In 2022, the two sides agreed to expand Indian investments in the construction and modernization of Chabahar and approved a corresponding roadmap. In May 2024, India and Iran signed a 10-year agreement on port operations, with an option for automatic extension. According to The Economic Times, after this deal India transferred to Iran the full amount of its financial commitments, estimated at about $120 million. However, in September 2025, as part of Washington’s pressure campaign against Iran, the United States canceled Chabahar’s exemption from sanctions and gave India six months for what was described as a “civilized divorce.” This waiver expires on April 26.

In January, India’s Ministry of External Affairs said it was holding talks with Washington about easing sanctions related to Chabahar. Judging by India’s decision to stop financing the project, these efforts appear to have failed.

As a result, major Indian investments and hopes for an alternative trade route to Afghanistan and Central Asian states are now under threat. Most Indian funds had already been directed toward upgrading port infrastructure, developing the Shahid Beheshti terminal, and creating a new logistics hub.

India has also lost an important instrument for competing with China. Pakistan’s Gwadar Port is a key node of the China-Pakistan Economic Corridor and the Belt and Road Initiative, giving Beijing direct access to the Arabian Sea and the Indian Ocean. New Delhi had placed similar strategic bets on Chabahar, hoping both to counter China’s Belt and Road and to outmaneuver Pakistan. Gwadar is located in the same geographic area as Chabahar, and the distance between the two ports is minimal. Armenian experts previously noted that India needs reliable access to Europe and Central Asia, while Pakistan blocks its traditional overland routes.

It is worth recalling that India also joined another U.S.-backed initiative aimed at countering China’s Belt and Road — the India-Middle East-Europe Economic Corridor (IMEC). However, the memorandum signed in September 2023 at the G20 summit never evolved into a binding agreement and effectively collapsed amid the sharp escalation in the Middle East.

Chabahar is critically important for India as part of the International North–South Transport Corridor, which links India with Iran, Central Asia, Russia, and Europe through multimodal transport routes.

India’s opposition has accused the government of excessive deference to Washington and of allowing a strategic port to become hostage to the whims of Donald Trump. Yet Prime Minister Narendra Modi had little room to maneuver. He continues to hope for a free trade agreement with the United States and is therefore trying to avoid provoking the American president, preferring compromise.

Source: wionews

A slowdown or suspension of Chabahar’s development could also hurt the interests of Central Asian countries. For Afghanistan, the port represents one of the most important gateways to global markets.

Another country negatively affected by sanctions on Chabahar is Armenia. In 2024, Yerevan announced plans to participate in port management. After a visit to Mumbai, then-Deputy Economy Minister Nerses Nasibyan said that Chabahar would be of particular interest to Armenian logistics companies once the necessary infrastructure was in place. Armenian media, quoting Nasibyan, wrote that the port “will become an important hub for Armenia to develop and deepen trade relations with the outside world.”

Armenia linked Chabahar to hopes of becoming part of a hypothetical high-speed multimodal route that could sideline the Middle Corridor and help Yerevan finally close the issue of the Zangezur Corridor.

In what specific format India, Armenia’s partner, intended to integrate Yerevan into this project remains unclear. Last year, Armenian media reported that Yerevan was working on launching a route via Chabahar to connect with Gulf states and India. The idea emerged in 2023, but implementation was postponed due to a lack of infrastructure and funding. Under the concept, cargo from India’s Mumbai port would be shipped to Chabahar, then transported overland to Armenia and Georgia, and onward to Europe and Russia.

Armenian officials argued that Chabahar should be viewed as Armenia’s strategically important access point to open seas and as a component of the North–South corridor. Plans were made to integrate Armenia’s logistics chains into the port’s infrastructure. It was emphasized that although Chabahar is located about 1,000 kilometers from Armenia, it remains a priority direction for the country’s economic development.

Three months after these publications, Armenia signed onto the so-called “Trump Route”…

By Tural Heybatov

News.Az