Is India out of Chabahar port project under US pressure?

The official position of India's Ministry of External Affairs on Friday does not deny that India has pulled out its personnel from Chabahar, that the website of Port Global has been shut down, and that in anticipation of US sanctions, India had already paid Iran the committed sum of $120 million last year to develop the port. What MEA spokesperson Randhir Jaiswal said at the official briefing was that India is still in talks with the US since the waiver is valid until April this year.

“We remain engaged with the US side in working out the arrangements," Jaiswal said diplomatically. For all practical purposes, however, withdrawing from the project is both a diplomatic and economic setback for India. For Prime Minister Narendra Modi, it is a huge loss of face and a political setback, if only because he had taken credit for pushing the deal and had boasted that his government does not believe in bowing to pressure exerted by third parties.

The fact is that India’s engagement with Chabahar has always been linked to US sanctions. Although India first showed interest in the project in 2003, it did not progress much until 2016 after Iran had signed a deal with the US and its allies and undertook not to develop a nuclear bomb. The project once again floundered after 2018 when US President Donald Trump unilaterally walked away from the deal. The uncertainty that followed led to India dropping out of the Chabahar rail project in 2020.

With President Joe Biden in the saddle in 2020, the project lurched forward and in May 2024, India signed a 10-year-contract with Iran to operationalise the project. The long-term agreement was signed between Indian Ports Global Ltd (IPGL) and Port and Maritime Organisation (PMO) of Iran, enabling operation of the Shahid-Behesti terminal.

India paid upfront the $120 million that IPGL had pledged for equipping the port. India had also offered a credit window equivalent to $250 million for mutually identified projects aimed at improving Chabahar-related infrastructure.

A year-and-a-half later, India appears to have developed cold feet and succumbed to US pressure. Nothing else explains the reported withdrawal of personnel and shutting down the IPGL website.

This is not the first time India has succumbed to US pressure. Besides withdrawing from the Chabahar rail project, it had also stopped oil and gas imports from Iran, which dropped to zero, following US sanctions.

Chabahar, which means ‘four seasons’, promised to provide India a direct maritime link to Afghanistan and Central Asia, allowing it to bypass Pakistan and counter China's Belt & Road Initiative. A deep-water port, the Chabahar project envisaged a port, free trade zone, 628-km railway line to Zahedan on the border with Afghanistan, and the 1,000-km track to Sarakhs on the border with Turkmenistan.

The port was meant as a strategic counter to Pakistan’s Gwadar port being developed by China. Chabahar was meant to provide a direct access to Afghanistan and Central Asian countries and boost India’s trade with these countries. Eventually, it would have connected India to Russia and Europe, cut shipping time and reduced costs.