Israel- -Iran conflict: With $550 million at stake, India’s Chabahar port gamble faces heat from escalation

By Admin

20 Jun, 2025

India’s deep-rooted strategic and economic engagement with Iran hinges on a single, critical hub   Chabahar Port. Operated by India Ports Global Limited (IPGL), Chabahar stands as New Delhi’s gateway to Afghanistan and Central Asia, offering a vital alternative route that bypasses Pakistan. But as tensions between Israel and Iran escalate in mid-2025, the future of this investment, estimated at over $550 million, faces growing uncertainty.

A Strategic Investment

India’s involvement at Chabahar isn’t just commercial   it’s geopolitical. Chabahar directly challenges China’s presence at Pakistan’s Gwadar Port, making it central to India's regional balancing strategy. The recently signed 10-year agreement (May 2024) for managing the Shahid Beheshti terminal solidifies India’s long-term vision. Under IPGL   a joint venture of Jawaharlal Nehru Port Trust and Kandla Port Trust   operations are conducted in partnership with Iran’s Aria Banader.

Infrastructure and Financial Commitments

India has made sizable contributions to Chabahar’s development:

• $85 million invested in berth upgrades
  
  

• $150 million line of credit via Exim Bank
  
  

• $400 million credit line to facilitate steel imports for the Chabahar–Zahedan railway, an ambitious connectivity project
  
  

Originally entrusted to Ircon International under a $1.6 billion MoU, the rail project faced hurdles due to funding delays, leading Iran to take over segments in 2020. Nevertheless, Indian interest and engagement remained steady.

Private Sector Interest & Diplomatic Push

Private players such as Adani Group and Essar have long shown interest, dating back to 2017, though concrete investment is yet to materialize. Meanwhile, India continues to open the doors for private participation through bids and joint ventures.

Diplomatically, India and Iran maintain active channels. At the 19th Foreign Office Consultations in January 2025, officials reaffirmed their commitment to Chabahar and its integration into the International North-South Transport Corridor (INSTC)   a broader vision to link India with Russia and Europe via Iran.

Rising Threats Amid Geopolitical Volatility

However, the ongoing Israel-Iran conflict casts a shadow over this investment. With tensions threatening to draw in the United States, the Chabahar project could suffer disruptions in:

• Insurance premiums for cargo vessels
  
  

• Logistic delays and operational uncertainty
  
  

• Reduced confidence in long-term corridor plans
  
  

Additionally, Western sanctions on Iran remain a constant hindrance. They complicate both the port's expansion and critical rail infrastructure efforts, making the Indian gamble on Chabahar increasingly exposed.

Conclusion

India’s Chabahar engagement is a calculated bet on regional connectivity, strategic autonomy, and economic outreach. But with $550 million and strategic access on the line, the fallout from the Israel-Iran conflict may well test the resilience of India’s Iran policy. For now, Chabahar remains afloat   but navigating through the political minefield will require deft diplomacy and sustained strategic vision.