INDIA-IRAN RELATIONS

IN NEWS:

Iran has decided to proceed with the construction of rail line from Chabahar port to Zahedan on its own citing delays from the Indian side in funding and starting the project.

HISTORY OF INDIA-IRAN RELATIONS:

• The relations between India and Iran can be traced back to 1950 when both signed a Treaty of Friendship and Perpetual Peace.
• However, Iran’s involvement in the Cold War politics separated New Delhi and Tehran in converging their relations until 1990s.
• In 2001, the two countries signed the “Tehran Declaration” which set forth the areas of possible cooperation between the two countries.
• In 2003, both countries signed “The New Delhi Declaration” which set forth the vision of strategic partnership between India and Iran.
• Since then, both countries have kept good relations, extending to areas of trade, cultural exchanges and diplomatic visits.

WHY INDIA NEEDS IRAN:

• Geostrategic: Its proximity to the Hormuz strait gives Iran the ability to influence maritime activity along the Persian Gulf. Any disruption along the Strait of Hormuz would lead to a big spurt in the prices of oil and gas, which in turn would create a major global economic crisis.
• Geopolitical: With the recent deal with US and potential US retreat from Afghanistan, Taliban is expected gain foothold in the region. In this regard, India needs Iran on its side. Strategic presence in the region is also vital for India to counter the ‘deep state’ theory of Pakistan and to encourage the development of war ravaged Afghanistan.
• Connectivity: India’s indifferent relations with China and Pakistan mean that Iran provides the only access to the untapped markets of Afghanistan and Central Asia for Indian goods.  Iran is a major point in major connectivity projects such as the International North South Transit Corridor.
• Energy security: The country today is the fourth largest consumer of energy in the world, soon likely to become the third. The growing Indian economy needs newer sources of energy supplies. Iran is the third-largest source of oil for India after Saudi Arabia and Iraq. Also, Iran free shipping of products and an extended credit period.
• Fiscal benefit: An agreement had been signed by the Indian and Iranian government for oil payment in rupees. This has benefited India in saving forex reserves and strengthening Indian rupee.
• Market: India’s future growth requires the vast untapped markets of the central Eurasian landmass, particularly Central Asia and Eastern Europe. Iran is considered to be the gateway to these markets. The vast untapped energy and other mineral resources of the region offers potential areas for investment to Indian agencies.

AREAS OF COOPERATION:

• Trade: The India-Iran bilateral trade during the fiscal year 2018-19 stands at USD 17.03 billion. This represents an increase of 23.8% from previous year. Major Indian exports to Iran include rice, tea, iron and steel, organic chemicals, metals, electrical machinery, drugs/pharmaceuticals, etc. Major Indian imports from Iran include petroleum and its products, inorganic/organic chemicals, fertilizers, plastic and articles, edible fruit and nuts, glassware, pearls, precious stones etc.
• Investment: Indian govenment has made several strategic infrastructural investments in Iran. For instance: In 2016, India signed a deal with Iran entailing $8 billion investment in Chabahar port and industries in Chabahar Special Economic Zone. India has also built a 240-km road connecting Afghanistan with Iran.; US withdrawal
• Cultural: The Indian Cultural Centre was established in 2013 in Iran. It was later renamed the Swami Vivekananda Cultural Centre (SVCC) in 2018. As India has a Shia population second only to that of Iran, religious tourism is strong between the two countries.
• Diaspora: The Indian community has a strong presence in Iran, comprising of around 4000 Indian nationals. Likewise, there are Iranian diaspora in Hyderabad. There is an Indian school in Tehran run under the aegis of Embassy of India. India provides various scholarships to Iranian students through initiatives such as the ITEC. 
• Diplomatic: Iran has its Embassy in New Delhi and two Consulates General in Mumbai and Hyderabad and two Cultural Centres in New Delhi and Mumbai. India, in addition to the Embassy in Tehran, has two Consulates in Iran, one in Bandar Abbas and other in Zahedan.

AREAS OF CONCERN:

• US Sanctions: The political and economic sanctions imposed on Iran has led pressure on New Delhi to curb diplomatic ties with Iran. Since May 2019, India has brought down the oil imports to zero due to the threat of US sanctions.
• Iran’s nuclear ambitions: India has never supported Iran’s mission to build a nuclear bomb. India has even voted against Iran in the International Atomic Energy Agency in 2005. However, with the US withdrawal from JCPOA and Iran resuming its experiments, India may be forced to act against Iran in the future.
• Weak fiscal strength: The reinstatement of US sanctions, particularly those imposed on the energy, shipping and financial sectors has caused foreign investment to dry up and weaken the country’s economy. This has raised concerns over Indian investments in the country.
• Chinese influence: Beijing is also looking to solidify its relations with Iran in the Middle East. China has announced its intent to infuse $400 billion worth of investments in Iran’s oil and gas, infrastructure and transportation sectors. This raises concern for India.
• Shia-Sunni dynamics: India houses a strong Shia population, much of which is concentrated in electorally-significant areas. This community and the even larger Sunni one make the Indian government sensitive to any Sunni-Shia tension in the Middle East that could potentially spill over into India.
• Other neighbours: India has a number of key relationships in the region that will keep it from getting too close to Iran. For instance, India has close ties with Israel and Saudi Arabia, both of whom have strained relations with Iran.
• Iran’s stand on Kashmir: successive Iranian regimes have, by and large, taken an anti-India stance on Kashmir. Iran had provided material support to Pakistan during both the 1965 and 1971 Wars.

WAY FORWARD:

• Multilateral approach: India needs to continue the balancing act in West Asia that allows it to have good relations with Saudi Arabia, Iran and Israel alike. At the same time, maintaining distance from regional fractures and conflicts would allow India to pursue its economic and geo-strategic aims in the region.
• Proactive: Iranian officials have cited delay in the proposed $400 million funding from India as the reason for dropping India from the rail project. Such instances should be avoided in the future. India should avoid such instances in the future. A dedicated mechanism should be established.
• Prospect alternatives: India should have in place alternative plans if its relations with Iran or sanctions upon them gets worse. For instance, Guyana offers an alternate energy source for India, as it has large source of untapped oil reserves.

PRACTICE QUESTION:

Q. Iran – China strategic partnership would be of vital interest to India not only in its relations with Tehran, but also that with the Indian Ocean region. Examine?