One of the few areas of agreement between the Trump and Biden administrations has been the so-called India-Middle East-Europe Economic Corridor (IMEC), with both outgoing Ambassador to India Eric Garcetti and President Donald Trump endorsing the project earlier this year. Such endorsements came at a time when India, a major partner in the project, was being increasingly courted by countries like France, Greece, and the UAE to renew its efforts at bringing the project to fruition. Although the end of the Gaza ceasefire certainly complicates plans for IMEC, as it relies heavily on use of Israeli ports, this has not deterred efforts in the past. One could easily conclude that the White House’s renewed commitment to the project represents business as usual for New Delhi.
Yet there is one major discontinuity between the Trump administration and its predecessor, especially as it relates to regional policy: Iran. The White House’s plan to place “maximum pressure” on Iran contrasts sharply with the Biden administration. Such a strategy has seen the Trump administration order airstrikes against the Houthis, despite the then-ongoing ceasefire in Gaza, and threaten to revoke Iran sanctions waivers, including those for India’s port at Chabahar. This change in policy alters New Delhi’s regional trade ambitions significantly: whereas India had some latitude to choose trade strategies without having to directly break with the U.S. agenda, Washington’s current policy, whether intentionally or unintentionally, seems to restrict this freedom significantly. Such a restriction may very well prove to be an obstacle for good relations between New Delhi and Washington at a time when India is crucial to the United States’ strategy for countering China.
Red Sea
The Red Sea and the Gulf of Aden are critical for India to reach Europe’s markets, a priority reflected in India’s defense policy. In 2023 and 2024, no country was visited more often by Indian naval vessels than Oman, with ships frequently making calls at ports there on their way to patrol the Gulf of Aden and the Red Sea. Any disruption to this access would substantially curtail India’s ability to access maritime routes westward, and give it much less leeway in its choice of trade connections.
This is, in fact, exactly what happened last year, when India had to scramble to replace its sources of Russian crude due to disruptions in the Red Sea, a shock that contributed to a decline in petroleum exports, as well. As the largest exporter of crude to India, Russia’s access to Indian markets (typically via the Red Sea) is critical to the health of the Indian economy. Restriction of that access could have serious consequences for New Delhi.
Yet, such a restriction seems to be the outcome of the maximum pressure policy. The current administration’s change in sanctions policy has ratcheted up tensions with the Houthis. Within days of taking office, the administration redesignated the Houthis a terrorist organization, and the Treasury Department began targeting some of the Houthis’ revenue-raising networks. In a way, Washington’s decision to launch airstrikes against the Houthis last week (and the equally aggressive response from Sanaa) represented an increase in tensions that had been brewing since January. Although the status quo ante was hardly perfect, there is evidence that it did have some modest impact on shipping in the Red Sea. Shipping volumes during the ceasefire compared to the same time last year had increased somewhat, and the average cost of shipping globally had declined in the months since the ceasefire was implemented.
An escalation in regional conflict will have two effects for India. The first, alluded to above, is restriction of trade access via the Red Sea, particularly to Russian crude, which Moscow prefers to transit via the Bab el-Mandeb. This could drive New Delhi into the arms of GCC members, just as it did last year, as it searches for new sources to replace Russia.
The second impact regards IMEC itself. In the past, paradoxically, the commencement of hostilities in the Red Sea, despite accompanying fighting in Gaza, actually increased the usage of trans-Arabian shipping routes, like IMEC, in order to skirt the uncertainty caused by the Houthis’ strike campaign. We may see this occur again; at the very least, the uncertainty will likely motivate India to pursue IMEC as a viable alternative.
The end result of both impacts, therefore, remains the same: India is incentivized to work more closely with the Gulf states, especially as it relates to trade. It should be noted that this is not Washington’s proffered intent, but it does track closely with its ardent support of IMEC.
So long as India does not play a role in Red Sea security, New Delhi’s ability to defend its trade interests vis-a-vis the Houthi conflict will be limited. An obvious solution is that India might play a more active role in Red Sea security. The idea is not terribly far-fetched. IMEC partners France and Greece, both having sent naval assets to the Red Sea, have cooperated with India on naval security in the region and endorsed India’s presence in the Red Sea, respectively. Its positive relations with the Iranian Navy, who frequently operate in the region, positions New Delhi well to act as guarantor of peace in the conflict. Far from placing maximum unilateral pressure on Iran and incentivizing the creation of IMEC, Washington may get the exact opposite result: the incentivization of India to pursue its own security interests in the Red Sea and the fortification of an alternative trade route to IMEC.
Iranian Plateau
Access to the Iranian Plateau has been, for the last 20 years, a key concern of India as regards its plans for the International North-South Transportation Corridor (INSTC). Just last year, New Delhi made a substantial step toward the realization of this project when it signed a 10-year lease agreement with Tehran for the port of Chabahar, in the far southeast of the country. Although the project is far more nascent than India’s historic reliance on the Red Sea, the INSTC has some promise, especially as it relates to Russia. Trade between the two along the corridor nearly doubled in 2024, demonstrating that the corridor could become a viable, sanctions-proof link to Russia. The two have even experimented with using the route as an energy corridor, helping alleviate both countries’ reliance on the Red Sea.
To that end, restriction of access to the INSTC, while not having the same serious economic consequences that Red Sea disruptions might, does prevent India from diversifying away from the former, compounding the impacts that any disruptions might have in the first place. Just as before, however, such a restriction seems to be the aim of the maximum pressure policy.
The most obvious way this has manifested has been the removal of a waiver that India had for its investments in the port of Chabahar. Even if this waiver is reinstated, though, Washington’s policy threatens other parts of the route as well. Take, for example, the Astara-Rasht line, a critical portion of the INSTC in Iran whose construction plans are being finalized with Azerbaijan and Russia. Absent a sanctions waiver, outside actors like India will have a limited role in being able to develop the line, to say nothing of whether the U.S. Treasury Department will place sanctions on Azerbaijan and Russia if they continue with their financing plans for the project. More generally, infrastructure improvements like these are critical to the success of INSTC, and yet investment in such improvements becomes highly uncertain under a maximum pressure regime.
Similar to the Red Sea, the alternative to the INSTC is IMEC. This is hardly a new development, either. When faced with uncertainty for the INSTC amid the Armenia-Azerbaijan conflict in September 2023, New Delhi looked to IMEC as a viable alternative. It was only the subsequent attacks by Hamas on southern Israel a month later that truly tempered India’s resolve on this issue. Given India’s recent rhetoric, particularly toward IMEC partners like the United States, France, and Greece, this seems to be the direction that India is currently moving on the issue.
India’s vulnerability, however, should not be conflated with abandonment of the INSTC project altogether. Just as with the sanctions on Russia, there are workarounds, to some extent, that India can rely on to transit goods via the INSTC. The outcome of Washington’s policy here is the same as before: rather than its unilateral isolation of Tehran and the development of IMEC, the end result may be the preservation of the regime’s economic lifelines and the growth of a competitor to IMEC, the INSTC.
Conclusion
The interaction of IMEC with Washington’s changed policy regarding Iran creates tradeoffs for New Delhi between cooperation with the United States and its IMEC partners, on the one hand, and more unilateral pursuit of its trade interests in the Red Sea and the Iranian Plateau, on the other. These were, historically, not tradeoffs that India felt it had to make; the prior waiver for Chabahar demonstrates as much.
In restricting New Delhi’s ability to pursue and protect its trade interests, Washington treads a risky path. Not only does the United States want to cooperate with New Delhi on a host of other issues, but it is putting stress on New Delhi’s interests at a time when it views India as increasingly critical in the competition against China. The Trump administration’s tariff plans will only add to the pressure on New Delhi. These policies may well see India take a more unilateral approach in the future.
Beyond China, a softening of the United States’ approach toward India’s interests may have knock-on effects for other important foreign policy initiatives, notably its peace talks with Russia. If the Trump administration’s goal is to peel Russia away from China’s orbit, isolating Moscow from India, a major economic partner, seems to work at cross-purposes with that end. Far from advancing the same policy as the previous administration, there is a persuasive argument that a recalibration of the current administration’s sanctions policy toward Tehran may be a carrot in negotiations with Putin.
Although the relationship between the Trump administration and New Delhi has yet to be fully hashed out, the current status quo does not appear to be sustainable. For its part, India is getting, more or less, the same deal with the current administration as it had with the prior one, albeit at a much steeper cost. The Trump administration, in turn, may end up with more than it asked for when India reacts to this state of affairs. A realignment of the relationship seems all but inevitable.
