India-Iran

 

India-Iran relations span millennia marked by meaningful interactions. The two countries shared a border till 1947 and share several common features in their language, culture and traditions. India and Iran established diplomatic links on March 15, 1950.

In   1953, Iran was ruled under Shah Mohammad Reza Pahlavi. During much of the Cold War period, relations between the India and the Iran suffered due to different political interests ,primarily due to non- aligned tactic of India towards the US ,which enjoyed close ties with the Iran. Also India was leaning more towards USSR ,especially after the conclusion of Treaty Of Peace and Friendship in 1971

After Cold War , relations have been improving. Iran and India closely cooperated in supporting the Northern Alliance in Afghanistan against the Taliban in the 1990s.

Iran has emerged as India’s most viable transit option for trade with Central Asia and Russia. India, Russia and Iran signed an agreement in 2000 for sending Indian Cargo to Russia via Iran through a ‘North-South Corridor’.

But in 2006, India voted against Iran over its clandestine nuclear programme at International Atomic Energy Agency .Due to US pressure India slashed Oil imports by 40 percent and backed off from pipeline project   bringing gas via Pakistan.

This was a huge setback to India-Iran relations. However , relations were back on track in 2008 when Iranian President Mahmoud Ahmadinejad came  to India, and India promised an independent  policy towards Iran and not yield to US pressure.

India has worked hard to maintain its ties with Iran when there were international sanctions on Iran from all sides. Bilateral trade with Iran suffered due to banking and insurance censures.

Prime Minister   Modi’s historic visit to Iran in 2016   led to enhanced focus on increasing connectivity,trade,investment and enegy partnership. India, Afghanistan and Iran signed a trilateral trade treaty for developing the port project and beyond.

In 2015, India liberalized its visa policy for Iran and struck it off the prior referral category (PRC) of countries. Iran can be the key supporter of India in the wake of the growing influence of terror groups such as the Islamic State.

In April 2016, India’s Minister of State for Petroleum and Natural Gas visited Iran. India and Iran sealed the terms to develop the gas project Farzad B in the Persian Gulf. Farzad-B field was discovered by Indian explorers in 2012.

India lined up USD 20 billion as investment in oil & gas, petrochemical and fertilizer projects in Iran. In May 2016, PM Modi visited to Iran, where the historic Chabahar port agreement was signed which

is a contract for the development and operation of the port for 10 years of 2 terminals and 5 berths. There was a MoU on provision of services by Indian Railways, including financing $1.6 billion, for Chabahar-Zahedan railway line.

India will invest in setting up industries from aluminum to urea plants in Chabahar.

 

Areas of Cooperation

Energy

  • India-Iran commercial ties have traditionally been dominated by Indian import of Iranian crude oil.
  • Iran has been one of the top source of crude oil for India. India can decrease the dependence on Saudi for oil and Iran oil is comparatively cheap
  • Indian firms are willing to invest upto $20 billion in Iran’s energy sector and setup petrochemical and fertilizer plants in Chabahar Special Economic Zone.
  • Iran has the world’s second-largest reserves of natural gas, yet it is not a major exporter.The proposed Iran-Oman-India undersea gas pipeline can help India move towards clean energy

 

Connectivity

  • Infrastructure projects like Chahbahar Port, International North South Transport Corridor will help India to bypass the overland route through Pakistan  and help in better trade relations with West and Central Asia.
    • Chabahar Port

o  lies in the Persian Gulf in Iran and will help India in expanding its maritime commerce in the region

o  will allow India to bypass Pakistan to transport goods to Afghanistan and Central Asia using a sea-land route

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  • International North South Corridor

o A ship, rail, and road route for moving freight between India, Russia, Iran, Europe and Central Asia

o aims to provide the shortest multi-model transportation route linking the Indian

Ocean and the Persian Gulf to the Caspian Sea via Iran and St Petersburg.

o  The objective of the corridor is to increase trade connectivity between major cities such as Mumbai, Moscow, Tehran, Baku, Bandar Abbas, Astrakhan.

 

Terrorism/Security

  • India and Iran both face the threat of terrorism by outfits like Al-Qaeda amd Islamic State.Hence counter terrorism

 

Irritants/Challenges

  • Iran’s Proximity to China

o  Iran is a part of China’s ambitious Belt And Road initiative.This might come in conflict with India’s interests in Iran ,considering  the fact that India has been vociferously opposing China’s Belt and Road Initiative.

  • USA Sanctions on Iran

o  With USA pulling out of   Joint Comprehensive Plan of Action and imposing sanctions on Iran , it will be difficult for India to continue importing Oil and Natural gas from Iran and also to operationalise the Chabahar Port  in a full fledged manner.

  • Trustworthiness of Iran as a reliable partner

o  Iran despite displaying warmth towards India, has been a cantankerous partner,often acting against the interests of India.Some such instances are

▪   On the issue of Kashmir, Iran has been a vocal supporter of Pakistan’s stand on Kashmir.

▪     India’s ONGC Videsh Limited played a crucial role in discovering the potential of Farzad B gas fields in Iran in 2008 .Despite 10 years of discovery ,Iran has not given the rights to develop the gas field to ONGC Videsh Limited.Rather it has signed an initial pact with  Russia’s Gazprom for the purpose.

Way Forward:

  • Maintain India’s strategic autonomy: It’s high time that India strategically aligns with both countries on an autonomous and need based approach. For this, India has to take bold steps. As a leading power it cannot buckle under pressure of any country.
  • Alternate payment mode: Short term course can be developing alternate mode of payment to Iran and promoting flexibility in investment mode.
  • Carrying out high level talks with US about the security and strategic concerns of India vis-àvis China.
  • The near-term developments in its neighbourhood are a priority for Tehran even as India tries to find a balance with his stated preference to develop closer ties with both the U.S. and Israel.
  • India and Iran are looking to swiftly conclude a preferential trade agreement and a bilateral investment treaty.
  • Newly relaxed visa norms announced by Iran in addition to India’s proposal for Indian businesses to invest in rupees in Iran are all moves in the right direction.
  • Nonetheless, they may be insufficient to cement commercial ties if USA sanctions do return
  • India should give its full support for the effective implementation of the JCPOA. Only successful implementation of the JCPOA over a period of time can create the political space for additional negotiations.
  • Both the nations can take leverage of their historical and civilizational relations to steer ties so much. The visit proved to be a much-needed reality check to the India-Iran partnership

 

Chahbahar Port

Chahbahar, which is located 72 kilometres west of Pakistan’s Gwadar port, holds immense strategic and economic significance for India. Chahbahar port is a seaport located in southeastern Iran, on the Gulf of Oman. It serves as Iran’s only oceanic port and consists of two ports Shahid Kalantari and Shahid Beheshti and ten berths. The US recognised the importance of Chahbahar and exempted Indian firms involved in the port from sanctions

Recently, Iran has decided to proceed with the Chahbahar rail line construction on its own, citing delays from the Indian side in beginning and funding the project. The development of the port, and the link overland through Iran to the Afghan border, was supposed to be India’s answer to Pakistan’s denial of the trading route through Wagah to Khyber Pass into Afghanistan and beyond, to Central Asia.

 

Significance of the port for India:

Geo-strategic Importance:

  • Chahbahar Port is of particular significance to India because of its location as it is the only oceanic port of Iran that can be accessed from the western coast of India bypassing Pakistan.
  • In short, it is an unobtrusive gateway to Afghanistan and Central Asia. Pakistan denies overland transit facility to India through its soil and India’s commerce with Afghanistan and Central Asia gets hampered.
  • Herein lays the elevated strategic importance of Chahbahar port for India as it can open new frontiers of engagement with the region bringing in shared prosperity.
  • Chahbahar port can be used by India to launch humanitarian operations in Afghanistan and also in Horn of Africa regions.
  • The Zaranj-Delaram highway constructed by India can be an access point to four major cities in Afghanistan namely Kabul, Heart, Kandahar, and Mazar-e-sharif which can be accessed via the Garland highway in Afghanistan.
  • Keeping this geostrategic significance India s transport minister has termed the port as ‘a gateway to golden opportunities’.

Geo-Political Importance:

  • Chabahar’s geopolitical significance rises considerably as it is also a gateway to INSTC (International North-south Transport Corridor).
  • It will boost India’s presence in the region and hence this strategic project has been pursued by India in the right earnest.
  • Chahbahar port will also act as a check for increasing Chinese presence in the Arabian Sea as China is heavily involved in the construction of the Gwadar, a deep sea port in the Balochistan area of Pakistan. The location of Chahbahar and Gwadar ports in close vicinity of each other underlines the intense competition between India and China in the region with Pakistan siding with the Chinese. India’s spirited efforts in development of Chahbahar port underscores the point that on the strategic chessboard of geopolitical competition India is not to be left far behind.
  • The chances of an extension of ties to Indian Iran military cooperation is also possible and will be highly beneficial to counter Chinese navy in the Indian ocean too.

 

Geo-Economic Importance:

  • Costs of imports of products like iron ore, oil, sugar, and rice to India will be significantly lowered. A study commissioned by the Ministry of Commerce has found that cost of imports via Chahbahar port along with INSTC is 30% cheaper than those via Mediterranean-Suez route.
  • Economic ties between India and Afghanistan which were in limbo due to political uncertainty will significantly improve once Chahbahar is completely operationalized. India will link Chahbahar port to Zaranj-Delaram highway in Afghanistan and is keen on developing a rail link there with the cooperation of Iran.
  • India will also be developing various industries (aluminum and urea plants) in the Chahbahar Economic Zone.

 

Reasons for Iran dropping India:

  • Despite several site visits by IRCON engineers and preparations by Iranian railways, India never began the work, worrying that it could attract sanctions by the USA.
  • India has already zeroed out its oil imports from Iran due to USA sanctions.
  • The USA had provided a sanctions waiver for the Chahbahar port and the rail line but it was difficult to find equipment suppliers and partners due to worries of being targeted by the USA.
  • The ‘Comprehensive Plan for Cooperation between Iran and China’ which is a 25-year and USD 400 billion strategic partnership deal is another reason.
  • Both nations are close to finalising the deal, which will include Chinese involvement in Chabahar’s duty-free zone, an oil refinery nearby and possibly a larger role in Chahbahar port as well.
  • The cooperation will extend from investments in infrastructure, manufacturing and upgrading energy and transport facilities, to refurbishing ports, refineries and other installations and will commit Iranian oil and gas supplies to China during that period.
  • Iran proposed a tie-up between the Chinese-run Pakistani port at Gwadar and Chahbahar in 2019 and offered interests to China in the Bandar-e-Jask port 350 km away from Chahbahar, as well as in the Chahbahar duty-free zone.

Way forward

  • It will be important to operationalise the port quickly and smoothen the route to Afghanistan.
  • Keeping timelines and delivery of New Delhi’s commitments will be key to the port becoming a

regional hub for transit trade, steel and petrochemicals.

  • It will be necessary to encourage Afghan companies to use the route more.
  • Given all the competing interests over Chahbahar, it will require sustained and nuanced diplomacy to stay ahead in this game.
  • As an emerging power, India cannot remain confined to South Asia and a peaceful extended neighbourhood (Iran-Afghanistan) is not only good for trade and energy security but also plays a vital role in India’s aspirations of becoming a superpower.