Iran war set to determine India’s trade route to Europe

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The escalating U.S.–Israel war with Iran is now compelling New Delhi to reassess the two major trade corridors it had been quietly developing to cut transit costs and time to Europe — one of its largest trading partners, with whom it recently finalized the “mother of all trade deals.”

One route runs north. The International North–South Transport Corridor — a project designed to facilitate transport of Indian goods to Russia, Europe and Central Asia via Iran’s Chabahar Port.

Another runs west. The India–Middle East–Europe Economic Corridor, which would link India to Europe through Gulf ports, and Israel’s Haifa Port via a railway corridor.

As the U.S.-Israel war with Iran rages on, experts say that only one of India’s two grand connectivity bets has a realistic future to support India’s export ambitions: IMEC.

“If Israel and U.S. win, IMEC will likely be Israel’s preference over the revival of Chabahar,” said Rafiq Dossani, an economist at U.S.-based think tank RAND.

The IMEC corridor has powerful backers. U.S. President Donald Trump called it “one of the greatest trade routes in history” during his meeting with Indian Prime Minister Narendra Modi last year.

Israel’s Prime Minister Benjamin Netanyahu has described it as the “largest cooperation project in our history,” that will change the face of Middle East.

Iran’s uncertain future is also central to the equation shifting in favor of IMEC.

“If Iran does not lose the war, it will remain under sanctions. If it does lose the war, the sanctions may be lifted but the benefits will be captured by the winners,” Dossani said arguing that India’s route through Iran is a dead end.

As Tehran faces the fire of U.S. aerial attacks, structural realities are reinforcing pessimism around the Chabahar trade route.

Chietigj Bajpaee, senior research fellow for South Asia at Chatham House, points out that the Chabahar-Zahedan railway — a key component of the INSTC — due for completion in 2026 will likely face “indefinite delays.”

The uncertainty comes on top of doubts already surrounding India’s more than $120 million investment in the Shahid Beheshti terminal at Iran’s Chabahar Port. The U.S. waiver that allowed India to operate the terminal despite sanctions is due to expire this April.