U.S. Should Rescind Sanctions Waiver for Iranian Port at Chabahar

Donald Trump has reignited Washington’s economic war on Tehran, and New Delhi is now caught in the crossfire. India signed a 10-year deal in 2024 to develop and operate the port of Chabahar on Iran’s southeastern coast, yet the deal presumed the United States would continue to exempt Chabahar from sanctions as it had since 2018. However, in his directive to resume a policy of “maximum pressure” on Iran, Trump instructed the State Department to “modify or rescind” the waiver for Chabahar.

India has pushed back against the White House’s new stance on the sanctions waiver, with its foreign ministry officials emphasizing New Delhi’s intent to invest in the port.

Iran Seeks Indian Investments

Access to Chabahar not only facilitates India’s trade with Russia and Central Asia but also creates an alternative to Pakistan’s Gwadar port, which is part of China’s Belt and Road Initiative. Eager to revitalize its economy, Iran has been actively courting Indian investment.

Tehran and New Delhi signed an agreement last year seeking to incorporate Chabahar into the International North-South Transport Corridor, a route streamlining freight movement between India and Central Asia. To advance this project, India established India Ports Global Limited (IPGL), a joint venture between Jawaharlal Nehru Port and Deendayal Port Trust. Led by maritime trade figures with government ties, IPGL is a fully owned subsidiary of Sagarmala Development Company Limited, an Indian state-run enterprise that also controls India Ports Global Chabahar Free Zone in Iran.

Rationale for Chabahar’s Sanction Waiver Justification No Longer Applicable

In 2018, the State Department exempted Chabahar from sanctions under Section 1244 of the Iran Freedom and Counter-Proliferation Act on the grounds that this would facilitate Afghanistan’s economic development and shipments of humanitarian aid. At the time, the first Trump administration saw India’s involvement in Chabahar as essential to Afghanistan’s reconstruction.

The Taliban’s takeover of Afghanistan in 2021 rendered this original rationale obsolete. Nevertheless, the Biden administration hesitated to revoke the waiver, most likely viewing it as a potential bargaining chip to entice Tehran back to the nuclear negotiating table. Even though Tehran proceeded to accelerate its nuclear program, the waiver remained.

Washington’s Leverage Can Sway New Delhi

India was once among Iran’s leading trade partners, but their economic ties significantly weakened after India halted Iranian oil imports in compliance with U.S. sanctions reimposed by the first Trump administration. New Delhi continued to comply with U.S. sanctions after Trump’s departure, causing its bilateral trade with Iran to shrink from $21 billion in 2018 to $3 billion in 2022.

Efforts to advance Chabahar’s development have often faced implementation challenges, largely due to the geopolitical risk caused by tensions over Tehran’s nuclear program and regional policy, uncertainty about the long-term viability of the waiver, and constraints and limits the U.S. sanctions regime generate despite the waiver. Seeking to establish the port as an important trade and transport corridor, India, Iran, and Afghanistan signed a trilateral pact in 2016, followed by a 2018 bilateral agreement in which India committed $85 million to its expansion. Iran twice sought additional memoranda of understanding, requests that India declined, citing the risk of economic repercussions.

Washington’s Options: From Persuasion to Coercion

The Chabahar project ultimately strengthens Tehran’s Islamist regime, benefits the Taliban and Russia, and thus undermines U.S. strategic interests. Instead of conceding to India’s pressure to renew the waiver, Washington should enhance strategic cooperation with New Delhi in areas of mutual interest, such as countering China’s influence. To ensure compliance with a White House decision to rescind the Chabahar waiver, the Treasury Department should press IPGL to withdraw from all agreements with Tehran while preparing to impose sanctions on the company and its executives if they prove recalcitrant.

Saeed Ghasseminejad is a senior Iran and financial economics advisor at the Foundation for Defense of Democracies (FDD), where Janatan Sayeh is a research analyst. They contribute to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). Follow the authors on X @SGhasseminejad and @JanatanSayeh. For more analysis from Saeed and Janatan, please subscribe HERE. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.