Decoding India’s shocking budget decision on Chabahar port: ‘Tactical freeze, not a retreat’

The Union Budget presented by Nirmala Sitharaman allocated nothing  for India’s flagship Chabahar port project in Iran, a surprising move since the Finance Minister had set aside Rs 100 crore in the 2025-26 Budget,  which was later increased to Rs 400 crore in the revised estimate.

The decision also comes as the US slapped new sanctions against Iran in the wake of the protests in the Middle Eastern country against the Islamic regime. The US had imposed tough economic sanctions on Iran in September last year, but New Delhi said it was granted a six-month waiver from sanctions to continue its operations at Iran's Chabahar port.

However, the port, a collaboration between Iran, Afghanistan, and India, has once again become a sensitive point with the US sanctions and regional geopolitical competition. The new 25% tariff imposed by the US President Donald Trump administration on countries doing business with Iran has cast uncertainty over the future of India's investment in Chabahar Port, placing New Delhi between strategic considerations and pressure from Washington.

There are also reports that shortly after Trump announced the tariffs on Iran, New Delhi allegedly transferred all of its financial obligations at  Chabahar, which amounted to $120 million, to Tehran. India also informed the US Treasury that it would “end all activities at Chabahar Port” as the sanctions waiver is set to expire in April.

However, some unnamed Indian government sources denied claims that India was halting its activities in Chabahar. “Exiting Chabahar is not an option,” the sources told NDTV, adding that India was seeking “a middle ground” with the United States.

Meanwhile, strategic affairs expert Brahma Chellaney has said the Centre’s move could be a tactical freeze rather than a strategic retreat  in the ongoing collaboration with Tehran amid threats and sanctions by the United States.

“Chabahar Port is India’s only viable route to Afghanistan and Central Asia that bypasses Pakistan. An Indian exit would almost certainly leave a vacuum for China to fill,” Chellaney posted on X.

Chabahar remains a vital strategic investment for New Delhi. The  project aims to enable India to reach Central Asia through Afghanistan, a region rich in natural gas and vital minerals. New Delhi has been trying to deepen its ties in the region in recent years, but Pakistan does not allow India to transit, and there is no direct land access. Chabahar is therefore the best option to achieve this goal.

New Delhi has other incentives to succeed in the Chabahar project: Afghanistan under the Taliban is now relatively stable, and the Taliban regime has friendly and growing relations with India.

Randhir Jaiswal, a spokesman for the Indian Ministry of External Affairs, said last month that he was in talks with the US on issues related to the Chabahar Port project. The omission of the budget allocation for this project indicates that negotiations between India and the United States have not yielded any tangible results.

Will India pull out?

India has diplomatic and strategic options other than Chabahar. The country is expanding its ties in the Middle East, including strengthening  defence ties with the United Arab Emirates (UAE) and committing to the  India-Middle East-Europe Economic Corridor and the I2U2 group, a framework in which India is a member along with Israel, the United States, and the UAE.

Moreover, given that economic interests and trade are the main factors in Trump’s foreign policy, India may consider backing out of Chabahar. Washington has recently taken several notable steps toward India, including inviting India to join the Defence Supply Chain Initiative and the Trump Peace Committee.

However, pulling out of Chabahar would be a politically risky proposition. The Trump administration has angered much of the BJP’s party base with its tariff policies and harsh criticism of India.