Why Chabahar Port Budget Slashed To Zero? Know Geopolitics Behind The Move And What It Means for India’s 'Crown Jewel'

New Delhi: The Union Budget 2026-27 presented on February 1 this year has indeed caused a stir as India’s allocation for Chabahar port- its gateway to Afghanistan, Central Asia, and beyond- has dropped to zero. 

The move comes as US President Donald Trump intensified sanctions and military pressure on Tehran.  

In a sharp contrast to 2025-26, when the grant to the strategic connectivity project located in Iran’s Sistan-Balochistan province along its southern coast was increased from Rs 100 crore to Rs 400 crore, the latest decision marks a departure from India’s consistent annual allocation.

Iran’s premier deepwater terminal

Positioned at the entrance of the Gulf of Oman, Chabahar serves as Iran’s premier deepwater terminal, providing the nation with unhindered access to international shipping lanes.

Geographically, it sits just west of the Pakistan-Iran border, acting as a direct mirror to Pakistan's Gwadar port located to the east. Since Gwadar was built by China as a cornerstone of the Belt and Road Initiative (BRI), Chabahar functions as much more than a commercial hub, it is India’s strategic counterweight in the regional power struggle.

For Iran, Chabahar is framed as a strategic shield to weaken the grip of Western sanctions by establishing alternative trade lifelines. For India, the port represents a vital bypass around Pakistan, which has persistently blocked New Delhi's land-based access to the lucrative markets of Afghanistan and Central Asia.

Pivotal gateway 

Chabahar is viewed as a pivotal gateway for strengthening trade and transit ties with Iran, Afghanistan, and Central Asia, and beyond. 

Both India and Iran champion the port as a cornerstone of the International North-South Transport Corridor (INSTC), a 7,200-kilometer multimodal network designed to streamline the flow of goods across South Asia, the Middle East, Central Asia, Russia, and Europe.

Six-month reprieve

Since 2015, India has funneled approximately Rs. 1,100 crore into the development of Chabahar. 

The absence of financial support in the newest budget concurs with Donald Trump's activated sanctions targeting the Chabahar port and stance on Tehran where US imposed stringent economic sanctions on Iran.

While the vision of the port as a "Golden Gate" to Afghanistan and Central Asia, circumventing Pakistan’s blockade, was first proposed in 2003, it remained largely on paper for over a decade. The project finally gained real momentum in 2015 when New Delhi and Tehran formalized their agreement, turning a long-standing strategic ambition into a physical reality.

In 2018, Donald Trump famously withdrew from the Iran nuclear deal, yet he initially carved out a specific exemption for Chabahar to support Afghanistan’s stability, even while intensifying his "maximum pressure" campaign against Tehran. 

This pragmatic balance continued under Joe Biden from 2021 to 2025. However, upon returning to office for a second term, Trump took a much harder line, revoking the long-standing waiver in September 2025. It was only after these sanctions had already begun to freeze port operations that his administration granted India a temporary, six-month reprieve, the very one currently set to expire this April.

Earlier this month, the Ministry of External Affairs said the government was in touch with the Trump administration to secure an extension to the waiver. 

While the Narendra Modi government has confirmed it is actively negotiating with the Trump administration to extend the waiver, there are no guarantees.

For years, this project has been the crown jewel of India’s "Connect Central Asia" policy, making the sudden "zero" in the budget ledger a significant geopolitical signal. Here's all you need to know about the Chabahar port.

The Geopolitical Significance: Why Chabahar?

• Located in the Sistan-Balochistan province on Iran’s southern coast, Chabahar is more than just a port; it is India’s strategic bypass. 
• Since Pakistan denies India over-land transit to Afghanistan and Central Asia, Chabahar provides a direct maritime gateway. 
• Furthermore, it sits just 72 km away from the Gwadar Port in Pakistan, which is funded and operated by China. 
• Chabahar is India’s answer to China’s "String of Pearls" and the China-Pakistan Economic Corridor (CPEC).
• It is also a vital node for the International North-South Transport Corridor (INSTC), a 7,200-km multi-modal route connecting India to Russia and Europe.

The History: A Long Road

The idea was first proposed in 2003 during the Vajpayee administration, but progress was stalled for over a decade due to Western sanctions on Iran's nuclear program. It was only in 2016 when PM Modi visited Tehran, signing a trilateral agreement with Iran and Afghanistan to develop the Shahid Beheshti Terminal.

India officially took over port operations in 2018 and since then, it has been used to ship thousands of tons of wheat and humanitarian aid to Afghanistan. In May 2024, India signed a landmark 10-year contract to operate the port, signaling a move away from short-term renewals.

Zero Allocation

The absence of funds in the 2026-27 Budget (after a revised estimate of ₹400 crore last year) is driven by few main factors:

The "Trump Effect"

With Donald Trump back in the White House, the US has significantly tightened its stance on Iran.

In January 2026, the U.S. administration announced that any country trading with Iran would face a 25% additional tariff on their exports to the U.S.

A previous six-month sanctions waiver granted to India for Chabahar is set to expire on April 26, 2026. The lack of funding reflects New Delhi’s extreme caution as it negotiates a "middle path" with Washington to avoid secondary sanction

Funds Already "In the Pipeline"?

Analysts suggest this might also be a technical pause. India has already committed and transferred significant portions of its $120 million investment for the Shahid Beheshti terminal. If the current funds are still being utilized or are stuck in the banking system due to payment hurdles, a fresh allocation might not have been immediate.

A Regional Shift

The "zeroing" of the Chabahar budget is part of a broader recalibration of India's neighborhood aid.

Reflecting the current strains in ties, the aid to Bangladesh was also halved to ₹60 crore, reflecting strained ties following the political upheaval in Dhaka.

Conversely, Bhutan- a close development partner- remains the top recipient of Indian aid (over ₹2,200 crore), showing India is prioritizing stable, reliable partners while pausing in high-risk zones like Iran.

India's Role In Chabahar Project

India’s engagement with Chabahar spans over twenty years, sparked in 2002 during high-level security talks when when Hassan Rouhani- Iran's National Security Advisor under President Syed Mohammad Khatami held talks with his Indian counterpart, Brajesh Mishra. It was then formalized in 2003 by then Prime Minister Vajpayee and Iran's President Khatami during his India visit.

This partnership was born of necessity- the 1947 partition had severed India’s traditional land routes to the west, a loss that grew critical as India’s economy opened up.

Strategic cooperation solidified in the late 1990s as India and Iran backed the Northern Alliance against the Taliban. Facing a persistent blockade from Pakistan, New Delhi prioritized Chabahar as the essential solution for regaining access to Afghanistan and Central Asia.

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