India-Iran: Chabahar Port And Multimodal Trade Corridors – IMPRI Impact And Policy Research Institute

Policy Update
Ayush Bansal

Background

India and Iran have historically enjoyed cultural, economic, and historical connections. Their relations have also gained new strategic importance in the last few decades with the re-emergence of Chabahar Port as a hub for India’s regional connectivity policy. Located in Iran’s Sistan and Baluchestan province on the Gulf of Oman, Chabahar is Iran’s sole deep-sea port directly connected with the Indian Ocean. It offers India the opportunity to circumvent Pakistan and gain direct maritime and land linkages to Afghanistan, Central Asia, and Eurasia.

India’s involvement deepened in 2016 through a trilateral transit agreement with Iran and Afghanistan, opening avenues for trade via Chabahar. This agreement reflected New Delhi’s “Connect Central Asia” and “Act West” policies while also serving as a counterbalance to China’s Belt and Road Initiative (BRI) and the China–Pakistan Economic Corridor (CPEC), particularly the Gwadar Port project.

Functioning of Chabahar Port and Multimodal Corridors

Chabahar Port has two terminals: Shahid Beheshti and Shahid Kalantari, with several berths and advanced cargo handling facilities. Government-owned corporation India Ports Global Limited (IPGL) has been responsible for Shahid Beheshti Terminal since 2018.

In May 2024, a 10-year bilateral deal was inked by India and Iran that cemented long-term Indian investment in Iranian port infrastructure and equipment. According to the new agreement, India made a substantial investment commitment. India pledged $370 million in direct investment, along with a $250 million line of credit. This means they’re not only investing directly, but also making a large sum of money available for borrowing to help the project succeed. India has already supplied mobile harbor cranes and container handling equipment worth $25 million, enabling efficient operations.

The port is integrated into wider transport corridors. The 750 km Chabahar–Zahedan railway line is being developed and is due for completion in mid-2026. Upon opening, it will connect Chabahar to the national railway network of Iran and the International North–South Transport Corridor (INSTC), a 7,200 km multimodal corridor connecting India with Russia and Europe through Iran and the Caspian Sea.

Performance

Since assuming operations in 2018, India has facilitated significant throughput: over 90,000 TEUs and 8 million tonnes of cargo by 2024. Chabahar has also served as India’s primary humanitarian corridor to Afghanistan, transporting wheat, pulses, and medical supplies during times of crisis.

The following table summarizes key statistics on investment, capacity, and performance of Chabahar (with a comparative reference to Gwadar):

This table shows that while Gwadar enjoys a larger initial investment, Chabahar’s returns are more strategic and humanitarian, with steady cargo growth and long-term integration into INSTC. For India, the return on investment lies less in direct revenue and more in strategic autonomy, trade diversification, and geopolitical leverage.

Impact

Geopolitical Context: Then vs. Now

• Then (2010s):
  For a long time, the port of Chabahar was mostly seen as a symbolic counter-move to Gwadar, another port in the region. For India, the real goal was to find a way to get around Pakistan and create a clear path to deliver aid to Afghanistan. Western sanctions on Iran, as well as regional turmoil, limited investments and impaired project implementation.

• Now (2020s):
  With the 2024 long-term agreement, Chabahar has transitioned from being a token project to a structured strategic asset. It is now a member of the INSTC and is viewed as a critical component of Eurasian connectivity. Increasing Sino-Pakistani cooperation at Gwadar and rising U.S. and China competition have enhanced Chabahar’s value as a balance corridor for India.

Strategic Outcomes

1. Countering China: By signing this long-term agreement with Iran, India has moved beyond the old, temporary way of doing business. This has established a more stable and predictable partnership that both countries can depend on.
2. Regional Stability Contribution: Chabahar also plays a crucial role in promoting regional stability. It provides a vital lifeline for Afghanistan, offering a much-needed humanitarian and trade route that helps the country overcome its isolation and become more self-reliant.
3. Economic Efficiency: Chabahar cuts costs and transportation time, thereby making Indian products more competitive in Central Asian markets.
4. Bilateral Trust: The long-term pact with Iran enhances predictability, moving beyond ad-hoc arrangements.

Emerging Issues

1. Sanctions and Financial Risks:Sanctions by the U.S. on Iran make banking and payment arrangements difficult, deterring potential investors and causing uncertainty for Indian companies.
2. Regional Instability:West Asia tensions, particularly Iran–Israel tensions, threaten disruption to the smooth operation of Chabahar and discourage foreign investors.
3. Slow Infrastructure Development:Although the plans for Chabahar are ambitious, progress has been gradual and essential infrastructure remains unfinished. As an example, the railway to Zahedan, a key part of the project, is still incomplete.
4. Competition from Gwadar and BRI:China’s rapid expansion in Gwadar, with integrated road and rail connectivity through CPEC, continues to challenge Chabahar’s competitiveness.

Way Forward

1. Expediting Infrastructure Projects:
   India and Iran must prioritize the completion of the Chabahar–Zahedan railway by 2026. Timely execution will unlock the port’s true potential as a gateway to Central Asia.
2. Leveraging INSTC Synergies:
   Increased synergies with the INSTC and digital logistics platforms can turn Chabahar into a transhipment point for goods headed to Europe.
3. Diversifying Investments:
   India can encourage private sector involvement in logistics, warehousing, and shipping services at Chabahar to boost trade volumes and reduce operational dependence on state entities.
4. Strengthening Regional Partnerships:
   Coordinating with Afghanistan (even under Taliban rule), Central Asian states, and Russia will ensure long-term usage of Chabahar, insulating it from regional instability.
5. Balancing Geopolitics:
   India must continue its delicate diplomacy, maintaining ties with Iran while not undermining its relations with the U.S. and Gulf states. Clear carve-outs for Chabahar in sanctions regimes, as seen previously, remain essential.

Conclusion

The India-Iran collaboration on Chabahar Port exemplifies a strategic transformation from a symbolic partnership to a structural connectivity asset. Chabahar is frequently referred to as the ‘golden gateway’ to Central Asia and Eurasia. This is a significant contrast with the past, when sanctions and geopolitics kept it back from developing. For India, Chabahar is less focused on immediate financial gains and more centered on strategic autonomy and regional integration. For India to unlock the full potential of Chabahar port, more development need to be done.

References

About the Contributor

Ayush Bansal is a research intern at IMPRI (Impact and Policy Research Institute), and is currently pursuing his master’s in economics from Gokhale Institute of Politics and Economics, Pune.

Acknowledgement

The author sincerely thanks Aasthaba Jadeja and IMPRI fellows for their valuable contribution.

Disclaimer:  All views expressed in the article belong solely to the author and not necessarily to the organisation.  

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