New Delhi/Tehran | June 2025 | www.externalaffairs.in
India’s multi-dimensional engagement with Iran has entered a renewed phase of strategic importance, with major investments reaffirming New Delhi's commitment to regional connectivity, energy security, and multipolar diplomacy in the West and Central Asian region. The Indian government has steadily advanced key infrastructure and economic projects in Iran despite persistent geopolitical headwinds and U.S. sanctions.
🔹 Chabahar Port: India's Strategic Gateway to Central Asia
At the heart of India-Iran cooperation lies the development and operation of Chabahar Port — a project of geopolitical and economic significance. India Ports Global Limited (IPGL) currently operates two terminals at the Shahid Beheshti port under a 10-year agreement, marking India's first overseas port management operation.
India has invested $85 million in upgrading the port, supported by a $150 million line of credit for procurement of equipment and logistics. Since operationalisation in 2018, the port has handled over 8 million tonnes of cargo and emerged as a key node for trade with Afghanistan and Central Asia — bypassing Pakistan’s land route.
Chabahar also plays a pivotal role in India’s strategy to connect with landlocked Central Asian republics through the International North-South Transport Corridor (INSTC) — offering a cost-effective alternative to the Suez route.
🔹 Chabahar–Zahedan Rail Link: Strengthening Transit Infrastructure
India is also involved in the development of the Chabahar–Zahedan rail corridor, designed to link the port with Iran’s broader rail network and eventually with Afghanistan. Indian Railways’ IRCON Ltd is providing technical assistance and financial commitment toward this project. A line of credit from EXIM Bank has been earmarked for this purpose.
The rail line will boost India's trade connectivity with the region and reinforce its strategic autonomy in engaging with Iran on regional connectivity.
🔹 Energy Diplomacy: Reviving the Farzad-B Gas Field
India’s energy cooperation with Iran continues to focus on the Farzad-B gas field, jointly discovered by an Indian consortium comprising ONGC Videsh, IOCL, and OIL. While direct development was delayed due to international sanctions, Indian officials have reiterated their long-term interest in tapping the reserves, estimated at over 21 trillion cubic feet.
The field remains a vital asset in India’s quest to diversify its hydrocarbon sources, especially at a time when energy markets are undergoing shifts due to geopolitical volatility.
🔹 Bilateral Trade and Financial Innovation
India-Iran bilateral trade stands at over $3.5 billion annually, with India exporting basmati rice, pharmaceuticals, tea, and machinery, while importing fertilisers and petrochemicals. Due to sanctions, both countries have relied on rupee-rial trade arrangements and are now exploring digital payment solutions to ease cross-border transactions.
Recent discussions have included the integration of UPI-based platforms and the possibility of expanding financial cooperation via Chabahar's Free Trade Zone.
🔹 Diplomatic Momentum: High-Level Engagements
In May 2025, India’s National Security Advisor Ajit Doval held talks with his Iranian counterpart Ali Akbar Ahmadian in Tehran. The focus was on advancing connectivity projects, enhancing regional security cooperation, and reiterating India’s strategic autonomy in dealing with Iran amid shifting regional dynamics.
The Indian embassy in Tehran has also intensified efforts to support Indian companies exploring partnerships in metallurgy, shipping, and renewable energy in the Chabahar Free Trade-Industrial Zone (FTZ).
🔹 Geopolitical Implications and Balancing Act
India’s calibrated approach to Iran reflects a desire to maintain a fine balance between its strategic partnership with the United States and Israel on the one hand, and its longstanding cultural and economic ties with Iran on the other. As China deepens its 25-year cooperation deal with Tehran, India is keen to assert its independent economic footprint and strategic relevance in the region.
Despite U.S. sanctions, India secured a waiver for Chabahar Port development, citing its humanitarian and developmental value for Afghanistan and Central Asia.
🔹 Conclusion: A Resilient, Forward-Looking Partnership
India's sustained investment in Chabahar, ongoing discussions around Farzad-B, and cooperation in trade facilitation signal a long-term commitment to enhancing regional connectivity and deepening bilateral ties with Iran.
This strategic engagement reinforces India’s larger regional vision: establishing itself as a connectivity power, a reliable energy partner, and a bridge between East and West Asia. As New Delhi walks the tightrope of global power rivalries, Iran remains a critical partner in ensuring strategic depth and access in the region.
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