India has omitted any funding for the Chabahar port project in its 2026 Union Budget, a move coinciding with heightened US-Iran tensions and looming uncertainties over American sanctions. For years, New Delhi allocated ₹100 crore annually to this strategic initiative in Iran's Sistan-Balochistan province, but the latest fiscal plan signals a pause.

Chabahar, Iran's inaugural deep water port at the Gulf of Oman's entrance, provides Tehran with direct entry to global maritime trade lanes. Positioned west of the Iran-Pakistan border, it parallels Pakistan's Gwadar port—developed by China under the Belt and Road Initiative—positioning Chabahar as India's regional counterbalance.

The port holds economic promise for Iran, offering a sanctions workaround through alternative trade paths. For India, it unlocks vital access to Afghanistan and Central Asia, circumventing Pakistan's persistent refusal of overland routes.

India's engagement with Chabahar spans over two decades. Talks commenced in 2002 between Iran's then-National Security Advisor Hassan Rouhani and India's Brajesh Mishra. The momentum built in 2003 during President Mohammad Khatami's visit to India, where he and Prime Minister Atal Bihari Vajpayee inked a cooperation roadmap spotlighting the port.

Post-Partition, Pakistan's emergence severed India's land connections to Iran and Central Asia. With India's economy largely insular for decades, the isolation posed little immediate issue. Dynamics shifted after the Taliban's 1996 takeover in Afghanistan, opposed by both India and Iran, who backed the Northern Alliance under Ahmed Shah Massoud.

Pakistan's blockade intensified New Delhi's quest for alternatives. Chabahar's relevance surged as China advanced Gwadar, framing the Indian project as both an economic lifeline and a strategic hedge against Beijing's regional sway.

In September 2025, the United States slapped broad sanctions on Iran yet extended India a six-month waiver for Chabahar, due to lapse on 26 April 2026. This followed earlier revocations and extensions under the Trump administration.

Last month, India's External Affairs Ministry spokesperson Randhir Jaiswal affirmed ongoing dialogues with Washington on Chabahar matters. His remarks addressed reports of New Delhi reassessing amid threats of a 25 per cent US tariff on nations trading with Tehran.

The Trump administration had withdrawn the 2018 waiver before granting India a temporary reprieve. Escalating US-Iran frictions prompted fresh tariff announcements targeting third-party dealings with Iran.

This budget silence underscores India's delicate balancing act: nurturing Chabahar for connectivity while navigating US pressures. The port remains pivotal for bypassing Pakistan and countering Gwadar, yet sanctions risks loom large.

Without renewed funding, operational phases—like equipment upgrades and terminal expansions—face delays. India had previously committed $500 million via a credit line, with operations commencing in 2018 under India Ports Global Limited.

Strategic stakes extend beyond trade. Chabahar facilitates aid to Afghanistan, evading Pakistani routes, and bolsters India's presence in the International North-South Transport Corridor linking to Russia and Europe.

Iran views the port as a sanctions shield, enhancing its export capabilities. India, meanwhile, eyes it for energy imports and mineral access from Central Asia.

US policy under Trump prioritises 'maximum pressure' on Iran, complicating allies' projects. India's waiver plea hinges on Chabahar's non-oil trade focus and Afghan humanitarian role.

Should the waiver expire without extension, India risks penalties, prompting diversified funding or private partnerships. Tehran has urged faster progress, citing Indian hesitancy.

Regionally, Pakistan champions Gwadar, deepening China-Pakistan ties. Chabahar's stall could tilt balances, amplifying Beijing's influence.

India's budget choice reflects fiscal prudence amid domestic priorities like infrastructure and defence. Yet, it invites scrutiny over strategic retreats in a contested neighbourhood.

Diplomatic overtures continue. Jaiswal's update on the US Treasury's 28 October 2025 guidance reaffirms India's push for a viable arrangement.

Long-term, Chabahar embodies India's multi-alignment: engaging Iran for access while reassuring the US. Resolution by April will shape its trajectory.

Based On NDTV Report