How India can shield operations at Iran’s Chabahar port after US revokes sanctions waiver

By Thomas Babychan

In the theatre of global geopolitics, infrastructure is rarely neutral. The Chabahar port in southeastern Iran manifests this truth: a project at once economic, strategic, and political.

For India, Chabahar is not merely a maritime facility, but a key to its economic prosperity. Positioned just 1,000 kilometres from Gujarat’s Kandla port, the deep-water harbour offers New Delhi a direct corridor to Afghanistan, Central Asia, and Europe, bypassing the capricious choke points of Pakistan.

Trump administration’s recent revocation of the sanctions waiver, which had permitted India to operate the port since 2018, is a blunt reminder of the United States’ willingness to weaponize financial hegemony to dictate the strategic choices of other sovereign nations.

The US action is not simply an isolated policy shift; it is a case study in coercive economic diplomacy.

By revoking India’s exemption under the Iran Freedom and Counter-Proliferation Act (IFCA), Washington threatens Indian state and private enterprises involved in Chabahar, potentially halting operations, deterring investment, and indirectly amplifying Chinese influence in the region.

Yet history and comparative experience suggest that sanctions, even when wielded by a superpower, are not insurmountable. India has already demonstrated the capacity to navigate extraterritorial pressure through innovative financial arrangements, institutional safeguards, and diplomatic strategy.

The pressing question is whether New Delhi will seize the opportunity to architect a framework that renders external coercion ineffectual, preserving Chabahar as both an economic artery and a geopolitical instrument. The stakes extend far beyond commercial calculations.

Chabahar represents a test of India’s economic sovereignty, strategic foresight, and capacity to shape regional power dynamics without ceding agency to external actors. If India succumbs to pressure, it risks surrendering a vital strategic foothold to its regional rivals while signaling the limits of its independent foreign policy.

Conversely, a sanctions-resistant strategy would not only safeguard Chabahar but also reaffirm India’s position as a decisive actor in Eurasia, capable of insulating its economic ambitions from extraterritorial interference. Chabahar is strategically located on Iran’s Makran coast, beyond the congested waters of the Strait of Hormuz. Its utility lies in providing India access to Afghanistan and Central Asia, avoiding dependence on Pakistan’s transit corridors.

The 218-kilometre India-built highway connecting Zaranj and Delaram in Afghanistan presents how infrastructure can translate into geopolitical leverage. From this corridor, Indian exports, ranging from machinery and pharmaceuticals to rice, can reach Central Asian markets efficiently, while imports of crude oil, petrochemicals, and strategic minerals become feasible without Pakistani intermediaries.

The economic stakes of Chabahar are compounded by its integration into the International North-South Transport Corridor (INSTC). This multimodal network links India and Iran to Russia and Northern Europe, reducing shipping times by roughly fifteen days compared to conventional Suez Canal routes.

Such logistical efficiency has enormous commercial value, but it is also a form of geopolitical insurance: by offering alternative routes, India reduces its vulnerability to the political whims of neighbouring states and external powers. However, the US sanctions waiver revocation threatens to undercut these benefits. Without legal protection, Indian operators face the risk of punitive measures, constraining capital flow, technology deployment, and trade volume.

This raises broader questions: can India design mechanisms to maintain operational continuity without triggering US retaliation? Can it insulate Chabahar from the extraterritorial reach of US law while sustaining growth and regional influence?

The answer lies in a blend of institutional ingenuity, financial restructuring, and strategic diplomacy.

Chabahar’s strategic significance is further highlighted when juxtaposed with China’s Gwadar port in Pakistan, developed under the Belt and Road Initiative. While Gwadar enhances Beijing’s maritime footprint, Chabahar provides India with a countervailing presence in the Persian Gulf, effectively neutralizing some of China’s leverage.

The port is thus not merely a trade conduit but a geopolitical lever, a signal that India can exert influence in areas traditionally dominated by external powers. US sanctions, by attempting to constrain India’s operations, ironically consolidate Chinese advantage, revealing the contradictions of Washington’s coercive diplomacy.

India has historical precedent and technical capacity to shield Chabahar from US-imposed sanctions. Over the years, India has conducted oil trade with Iran through rupee-denominated transactions via UCO Bank, circumventing dollar-based systems and avoiding punitive measures.

Such strategies show that extraterritorial economic coercion, while intimidating, is not insurmountable. A deliberate and structured approach can render Chabahar operationally autonomous, protecting both investment and strategic intent. One of the primary avenues is the creation of dedicated financial institutions insulated from US oversight.

A Special Purpose Bank, fully capitalised by the Reserve Bank of India or a consortium of public-sector banks, could handle rupee-based trade settlements with Iran, Afghanistan, and Central Asian partners.

Transactions would bypass SWIFT and dollar-based intermediaries, limiting exposure to extraterritorial enforcement. India could also explore integration with Russia’s SPFS system, creating a hybrid network that reduces dependence on Western-controlled financial infrastructure.

Such mechanisms, though complex, are feasible given India’s banking sophistication and prior experience in sanctions navigation. Parallel to financial insulation, operational independence can be achieved through a state-owned enterprise dedicated to Chabahar.

Legally registered in a neutral jurisdiction, such an entity could operate in non-dollar currencies, engage in barter agreements, and employ private logistics partners to diversify risk.

Historical precedent exists in Russia’s deployment of offshore subsidiaries to maintain trade with sanctioned states like Syria and Venezuela, and India has similarly demonstrated adaptability through offshore structuring during previous Iran sanctions.

By separating operational responsibility from potentially exposed entities like India Ports Global Limited, India can shield core port activities from punitive action. Private-sector engagement also plays a strategic role. Indian conglomerates can be incentivised to develop logistics, warehousing, and shipping operations tied to Chabahar.

By routing trade through third-country hubs like Dubai or Mauritius and establishing legal escrow accounts, private firms can insulate themselves from US enforcement while complying with Indian law. Commercial pragmatism combined with legal foresight can mitigate exposure to extraterritorial pressure. Technological innovation adds another layer of resilience.

India’s Unified Payments Interface (UPI) could be adapted for cross-border settlements in rupees, integrated with systems like SPFS, creating a non-dollar digital trade architecture. While requiring investment and international coordination, such an initiative would reinforce India’s long-term ability to conduct trade independently of US oversight.

By combining financial, operational, and technological safeguards, Chabahar can continue to function as a commercial and strategic conduit irrespective of Washington’s policy shifts.

The strategic port is emblematic of a broader principle: economic sovereignty is inseparable from strategic autonomy. By constructing institutions, payment mechanisms, and operational frameworks that bypass US-imposed limitations, India can assert control over its regional initiatives.

This is not a simple technical exercise; it is a political and economic statement, signalling that India will not subordinate strategic imperatives to the financial coercion of external powers. The implications extend beyond India.

For Afghanistan and the Central Asian republics, Chabahar provides alternative trade routes, mitigating dependency on Pakistan and reducing vulnerability to coercive pressures from any single actor.

The port is a conduit not only for goods but for political agency, enabling regional states to engage with India and Iran without navigating US-imposed barriers. Economically, it represents a potential model for sanctions-resistant trade corridors in a world where financial hegemony is weaponised.

The US sanctions also reveal the limitations of hegemonic economic control. By targeting Chabahar, Washington risks undermining its own credibility as a partner while strengthening the hand of China, which continues to expand Gwadar and the maritime network known as the “String of Pearls.”

For India, this asymmetry stresses the need to build autonomous economic infrastructure and financial mechanisms capable of sustaining projects irrespective of external coercion.

Legal and institutional innovation is crucial in this context. India could enact domestic legislation analogous to the EU’s Blocking Statute, shielding domestic firms from extraterritorial sanctions.

Bilateral agreements with Iran, Russia, and Central Asian partners can formalise non-dollar trade channels, while a dedicated government task force can provide guidance on legal compliance and sanctions risk mitigation.

By combining legislative, institutional, and technological measures, India can create a multi-layered framework that preserves Chabahar’s operational viability and economic value. The risks are real: US backlash could manifest in symbolic sanctions, political pressure, or trade friction.

Economic costs are significant, with the creation of banks, state enterprises, and digital infrastructure demanding billions in upfront investment.

Yet the alternative, surrendering strategic agency and ceding influence to China, is far more consequential. The balance of risks clearly favours proactive institutionalization of sanctions-resistant mechanisms.

In effect, Chabahar becomes a litmus test for India’s capacity to navigate the intersection of economics and geopolitics in a coercive global system. It forces New Delhi to reconcile commercial imperatives with sovereign strategy, technological capability with institutional design, and diplomatic prudence with assertive independence.

Success here would not only preserve trade and investment but establish India as a model for other nations facing extraterritorial pressure, demonstrating that economic coercion can be mitigated through foresight, innovation, and strategic planning.

Thomas Babychan is a journalist and trade analyst based in India.

(The views expressed in this article do not necessarily reflect those of Press TV.)

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