US Revokes Chabahar Waiver: Impact on India’s Trade, Energy and Investor Confidence

On 19 September 2025, the United States withdrew the sanctions waiver that had allowed India to operate at Iran’s Chabahar Port without penalty. The exemption, first granted in 2018 under the Iran Freedom and Counter-Proliferation Act (IFCA), will expire on 29 September 2025. Chabahar has been central to India’s plan to secure access to Afghanistan and Central Asia while bypassing Pakistan. The waiver’s revocation puts those trade routes at risk and introduces fresh uncertainty into regional geopolitics and India’s long-term connectivity strategy.

Key Market Implications of the US Sanctions Decision

Here are the key impacts that investors must not overlook:

• Strategic Investment Disruption

India has invested approximately $500 million in the Chabahar Port since 2016, including operational control of the Shahid Beheshti terminal and infrastructure development for cargo handling. The revocation of the waiver exposes Indian entities to sanctions under the Iran Freedom and Counter-Proliferation Act (IFCA), effective 29 September 2025.

This jeopardises the viability of India’s first overseas port project, which handled 2.84 million tonnes of cargo in FY 2024–25, up from 1.2 million tonnes in FY 2020–21. The investment was aimed at bypassing Pakistan and accessing Afghanistan and Central Asia. With the waiver revoked, Indian operators face legal and financial risks, which could potentially freeze further capital infusion and operational expansion.

• Humanitarian Corridor Collapse

India sent at least 20,000 tonnes of wheat to Afghanistan via Chabahar in 2023 alone. The number increases significantly if we add life-saving medicines to it. This route became critical after the Taliban takeover in 2021, as it bypassed Pakistan’s restrictions on Indian aid.

The waiver enabled Indian shipping lines and insurers to operate without fear of secondary sanctions. Its revocation now deters global logistics firms from servicing Chabahar, risking a halt to humanitarian supplies. The port’s strategic role in supporting reconstruction projects in Afghanistan, including the Zaranj–Delaram highway, is now compromised, weakening India’s diplomatic leverage in Kabul.

• Undermining of the INSTC

Chabahar was designated as a key node in the 7,200-kilometre International North-South Transport Corridor (INSTC), connecting India to Russia via Iran, Azerbaijan, and Central Asia. India had proposed integrating Chabahar with the INSTC to reduce freight costs by 30% and transit time by 40% compared to the Suez route.

The waiver allowed India to pursue multimodal logistics development, including rail connectivity to Zahedan and onward to Central Asia. With the waiver revoked, Indian participation in INSTC-linked projects faces compliance risks, threatening the corridor’s operationalisation and India’s ambition to become a Eurasian trade hub.

• Strategic Setback

Chabahar was India’s counterweight to Pakistan’s Gwadar Port, which China operates under the China–Pakistan Economic Corridor (CPEC). The first phase of Gwadar was completed with $298 million in Chinese assistance. At the same time, broader CPEC investments exceed $60 billion.

In contrast, Chabahar’s growth was slower but strategically vital for India’s regional influence. The waiver allowed India to maintain parity in maritime infrastructure. Its revocation now tilts the balance in China’s favour, enabling Gwadar to emerge as the uncontested gateway to Central Asia and the Middle East, while Chabahar risks stagnation due to its exposure to sanctions.

• Erosion of Investor Confidence

The waiver’s revocation introduces compliance uncertainty for Indian public and private investors in West Asia. Entities such as India Ports Global Limited (IPGL), which operates Chabahar, now face potential asset freezes and banking restrictions. This undermines investor confidence in India’s ability to navigate geopolitical risks.

Many Indian investors in West Asia cited the unpredictability of sanctions as a top concern. The Chabahar episode may deter future investments in Iran, Iraq, and Syria, weakening India’s economic footprint in a region critical for energy and connectivity.

Threat to India’s Energy Diversification

India imported 23.5 million barrels of Iranian crude in 2018 before US sanctions curtailed purchases. Chabahar was envisioned as a logistics hub for resuming oil imports under a barter or rupee payment mechanism. The waiver allowed limited engagement without triggering sanctions. Its revocation now blocks any future energy cooperation via Chabahar, forcing India to rely more heavily on Gulf suppliers such as Saudi Arabia and the UAE. This reduces India’s bargaining power and increases vulnerability to price shocks. In FY25, India’s oil import bill increased by 2.7% to $137 billion, primarily due to a reduction in diversification.

• Restricted Access to Central Asian Markets

India’s trade with Central Asia stood at $2 billion in 2023, with major exports including pharmaceuticals, textiles, and engineering goods. Chabahar provided a direct route to Turkmenistan, Uzbekistan, and Kazakhstan via Iran’s rail network.

The waiver enabled Indian freight operators to bypass Pakistan’s transit blockade. Its revocation now risks sanctions on logistics firms, insurers, and banks involved in Central Asian trade via Chabahar. This could reduce trade volumes by up to 40%.

Stocks Facing Direct Impact

Stocks such as Shipping Corporation of India, Adani Ports, and Container Corporation of India may face operational and financing risks due to halted logistics and compliance with sanctions. Indian Railway Construction International Limited (IRCON) International and Rail India Technical and Economic Service (RITES) Ltd, which are involved in infrastructure and rail connectivity to Chabahar, could face project delays. Additionally, Indian Ports Global Ltd, India’s operator at Chabahar, faces legal and financial uncertainty, which impacts associated Public Sector Undertaking (PSU) portfolios. Strategic trade and export-linked stocks may also see volatility amid rerouting pressures.

Conclusion

From an investor and trader perspective, the revocation of the Chabahar waiver certainly introduces short-term uncertainty and heightened risk exposure for Indian entities operating in Iran. Stocks linked to logistics, infrastructure, and trade, including Shipping Corporation of India, Adani Ports, and IRCON, may face volatility as projects slow or financing becomes constrained. However, long-term opportunities remain for investors who strategically monitor geopolitical developments, diversify portfolios, and focus on companies with strong risk management and alternative trade routes.

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