Executive Summary
Iran’s strategic location and energy abundance have made it a target of investment for both India and China, though the two countries have approached this engagement very differently. India’s investments of around $120 million are concentrated in the Chabahar port, while China has built a broad-based, multi-sectoral presence across Iran, with a $400 billion 25-year partnership framework in place. The current Iranian crisis has put both investments under stress, but in asymmetric ways. China’s depth of engagement has provided it with more economic vulnerability in terms of value invested, but also given it preferential Strait access. India’s narrower footprint in Iran left it more diplomatically dependent while economically less exposed in terms of value invested. This analysis examines both investment strategies: their scale, their sectors, their relative strength, and the ways forward for each country.
Introduction
Because of its strategic position and energy abundance, Iran has been on the books of both India and China. Iran is a gateway that connects the Middle East, Central Asia, Europe, and South Asia. It also provides transit access, energy resources, and geopolitical mileage. Seeing the geoeconomic and strategic benefits, both India and China have invested in Iran, and this engagement has become prominent, particularly in the last decade. Though both countries have their stakes in Iran, their investments differ in terms of approach, sectors, ticket size, divergence, and commitment. India has mostly focused on regional connectivity, while China’s investments span several sectors, including energy, infrastructure, transport, industrial parks, and telecommunications.
India’s Investment: Chabahar and Connectivity
India’s investment in Iran is most visible in the Chabahar port, a strategic Indian bet currently reeling under the threat of US sanctions. Iran’s Chabahar port may provide India with access to Afghanistan and Central Asia, bypassing Pakistan. However, India’s engagement in Chabahar has been slow due to US sanctions and COVID-19. Table 1 shows the port’s development over the years. Despite these hurdles, the port has handled over 450 vessels, 1,34,082 TEUs (Twenty-foot Equivalent) of containerised cargo, and more than 8.7 million tons of bulk and general cargo since India Ports Global Limited (IPGL) took over in 2018 (Government of India, Ministry of External Affairs).
Chabahar, long viewed as a strategic counter to Gwadar port in Pakistan, developed by China under the Belt and Road Initiative (BRI), may lose its operational value despite its huge potential for north-south connectivity under the INSTC framework (Sruthi, 2020). Indian engagement in Iran was expected to go beyond Chabahar. In 2016, both countries signed an MoU to develop a rail link between Chabahar and Zahedan, near the Iran-Afghanistan border. However, progress remained slow due to financing constraints, technical issues, and US sanctions. Citing delays in funding and implementation from the Indian side, Iran decided in 2020 to proceed with the project on its own, while indicating the possibility of cooperation with India at a later stage (Government of India, Lok Sabha Secretariat).
| Year | Milestone |
| Early 2000s | India identified the strategic potential of Chabahar Port |
| 2003 | India and Iran signed a Memorandum of Understanding (MoU) on Chabahar |
| 2015 | Momentum accelerated after the Iran nuclear deal and the easing of sanctions |
| 2018 | India Ports Global Limited (IPGL) took over and began operations at Shahid Beheshti Terminal |
| 2020 | India shipped 75,000 MT of wheat to Afghanistan through Chabahar |
| 2024 | IPGL signed a 10-year contract worth $370 million with Iran’s Ports and Maritime Organisation (PMO) |
| 2025 | India confirmed the fulfilment of Chabahar-related commitments worth $120 million |
Sources: Government of India, Ministry of External Affairs, Question No. 44: Chabahar Port Project, Rajya Sabha. Available at: https://www.mea.gov.in/rajya-sabha.htm?dtl/38631/QUESTION+NO+44+CHABAHAR+PORT+PROJECT; Research and Information System for Developing Countries, Policy Brief. Available at: https://www.ris.org.in/en/node/606.
Table 1: A brief timeline of the Chabahar Project
China’s Investment: Full-Spectrum Partnership
Unlike India’s, China’s economic relationship with Iran is not based on any standalone project; it is broad-based. In 2021, China and Iran signed a Comprehensive Strategic Partnership—a 25-year agreement covering economic, political, and technological cooperation—under which China promised to invest around $400 billion in Iran in exchange for a steady supply of discounted crude oil (Rehman and Barrech, 2021). The agreement is comprehensive: $280 billion is directed toward the oil, gas, and petrochemical sectors, while $120 billion is earmarked for transportation infrastructure and manufacturing. China is not just an outbound investor in Iran; it is also a co-investor with Iranian entities across critical sectors. Chinese state-owned enterprises, development banks, and insurance firms function in tandem, providing an integrated ecosystem. However, little of the promised investment has been realized due to the hesitancy of Chinese companies (US-China Economic and Security Review Commission).
Moreover, China’s investment in Iran is deep and diverse. Between 2005 and 2025, China cumulatively invested around $25 billion across different sectors. The energy sector accounts for the largest share (43%), followed by transport (21.5%). Other sectors include metals, chemicals, utilities, and real estate, as shown in Table 2.
| Sectors | Value (in billion USD) |
| Energy | 10.74 |
| Transport | 5.38 |
| Metals | 4.96 |
| Utilities | 2.25 |
| Chemicals | 1.53 |
| Real Estate | 0.16 |
| Total | 25.02 |
Source: American Enterprise Institute, China Global Investment Tracker. Available at: https://www.aei.org/china-global-investment-tracker/ (Accessed: 30 April 2026).
Table 2: Cumulative Investment of China in Iran (2005-2025)
Investment Strategy Comparison
In India’s case, although the Shahid Beheshti Terminal remains undamaged, the same may not hold if the conflict prolongs. Hence, the operational readiness of the port may not remain the same even if a waiver is granted again. A few reasons explain this. First, on 4 February 2025, the U.S. administration rescinded sanctions waivers related to Iran’s Chabahar port project. However, following India’s representations, the US extended the 2018 waiver, effective from 29 September 2025 to 26 April 2026 (Government of India, Ministry of External Affairs). While India is actively engaging with both the US and Iran on Chabahar, expectations of another waiver may be limited given the ongoing conflict.
Second, to mitigate risks arising from US sanctions, India is considering divesting its port stake to an Iranian entity as a temporary arrangement. Rather than remaining the sole owner or operator, India prefers to act as a partner, financier, or technical advisor. However, a similar arrangement did not materialize in the case of the Chabahar–Zahedan rail link. Perhaps, in the Chabahar case, the Indian government anticipated such a situation. In February this year, for the first time in a decade, it did not allocate any funds for Chabahar port in the Union Budget (Chakraborty, 2026). Earlier budgets had earmarked between ₹100 crore and ₹400 crore for the project. This decision suggests that the government does not want to engage itself in this project actively now.
India’s engagement in Iran is limited compared to China’s. Although India’s investment is relatively small, it remains vulnerable to US sanctions. In other words, India’s exposure in terms of investment value is low, but its vulnerability is high. On the other hand, China, having adopted a more confrontational stance toward the US, is less likely to withdraw from its projects in Iran. Even if it considers doing so, the scale and spread of its investments across sectors make such a move difficult. As a result, China is more exposed in terms of investment value but less vulnerable to disruption. Table 3 compares the investment strategies of both countries.
These strategies have both advantages and disadvantages. On the positive side, a country with lower value exposure may face limited economic losses. For instance, India’s investment exposure remains manageable even if the US does not grant another waiver. Another advantage is preferential treatment. In the event of a Hormuz closure, China was reportedly among the first countries to receive unhindered maritime access, whereas India had to negotiate similar access. On the downside, such strategies create uncertainty for businesses operating in the host country. Even China remains keen to avoid being drawn into any such conflict (Bicker, 2026).
| Investment Dimension | India | China |
| Total capital deployed | ~$120M (in Chabahar Port) | ~$25B |
| Capital Committed | $370M (IPGL and PMO agreement) | $400B (25-yr framework) |
| Sectors coverage | Narrow; limited to Port operations | Broad-based; spanned acrossOil, gas, rail, ports, chemical, etc |
| Strategic agreement | 10-yr port operating agreement | 25-yr Comprehensive Strategic Partnership |
| Sanctions exposure | High; waiver-dependent; expires Apr 26, 2026 | Low; operates outside the Western financial system |
| Corridor anchor | INSTC (International North South Transport Corridor) | BRI (Belt and Road Initiative) |
| Crisis Implications (2026) | Stake transfer; possible operational pause | Preferential strait access; markets stable |
| Iranian dependency risk | Low (India is a small partner for Iran) | High for Iran; China buys 90% of Iranian crude |
| Strategic leverage in Iran | Weak; frequently overridden by US pressure | Strong; Iran cannot afford to alienate China |
Table 3: Head-to-Head comparison for India and China investment strategy
Policy Implications
The economic exposure of both India and China creates challenges and opportunities. The crisis times also provide a guiding path for the future in a turbulent global environment.
India:
· Since New Delhi seeks to maintain ties with Iran, it also values strategic relations with the United States. Therefore, India’s policy space is narrower than China’s.
· India should preserve Chabahar as a strategic foothold, even if near-term investment remains under a cloud. Infrastructure options, once lost, are difficult to rebuild.
· In the short term, New Delhi should continue diplomatic engagement with both Tehran and Washington with a strategic balance.
· In the mid-term or long-term, India should explore the options of multi-country investments in connectivity projects, like INSTC, to reduce the threat or vulnerability. In such a case, even if India unfortunately exits any project, such projects of great strategic value will be saved.
China:
· Even Beijing has limits here. It has not fully backed Iran during crises because it wants to protect much larger economic stakes elsewhere in West Asia.
· In the future, China may focus on phased projects, state-backed financing, or faster-return projects rather than just mega deals.
· Since Beijing is also involved in other West Asian countries, an optimal strategy for China would be to maintain its relations with each of its partners rather than aligning with any one of them.
Conclusion
The comparison between India’s and China’s investments in Iran ultimately reflects two different theories of strategic engagement. India has invested carefully, within the limits of its alignment with the United States, while China has invested boldly, across sectors and decades, providing crisis dividends in terms of strategic access and stable crude supply. Yet neither position is without its limitations. India risks losing a strategically significant asset not because the investment failed, but because the geopolitical milieu keeps swinging. China now has to manage the growing tension between its Iran relationship and its much larger economic stakes across the Gulf countries. The lesson, in short, is that the investment buys access, but it does not buy certainty.
References
Government of India, Ministry of External Affairs, Question No. 44: Chabahar Port Project, Rajya Sabha. Available at: https://www.mea.gov.in/rajya-sabha.htm?dtl/38631/QUESTION+NO+44+CHABAHAR+PORT+PROJECT
[iii] Government of India, Lok Sabha Secretariat, Chabahar-Zahedan Rail Link, Unstarred Question No. 282. Available at: https://sansad.in/getFile/loksabhaquestions/annex/175/AU282.pdf?source=pqals
[iv] Rehman Malik, S.U. and Barrech, D.M. (2021) ‘China–Iran Strategic Partnership: Implications for India’, Chinese Journal of International Review, 3(2), p. 2150008.
[vi] Government of India, Ministry of External Affairs, Question No. 1103: Revocation of Sanctions Waiver on Chabahar Port, Lok Sabha. Available at: https://www.mea.gov.in/lok-sabha.htm?dtl/40404/QUESTION+NO+1103+REVOCATION+OF+SANCTIONS+WAIVER+ON+CHABAHAR+PORT