What are the Challenges to Indo-Iranian Relations?

With territory, population, resources and political willingness at its disposal – between India and Morocco – Iran is the only country that qualifies as a regional power. While it’s Sunni neighbour, Saudi Arabia, may be powerful in terms of resources, people and territory but lacks in military and political capabilities. Similarly, Israel has all the ingredients mentioned above but the territory. Hence, Iran stands alone as a regional power in the real sense of the term and thus it is an important player to its friends and adversaries alike.

Iran was India’s immediate neighbour until 1947 and therefore there has been a civilisational and cultural linkage between the two countries. However, even though India formalised its relations with the Persian state in 1950, the relations were not cordial between 1947 till 1991. Areas of convergence until this period was minimal because of two reasons, first, the two sided with opposite blocs during the Cold War. Secondly, with the emergence of Islamic revolution in Iran in 1979, precedence to Islamism was once again in contrast to the Indian secular approach in international relations. If this is not enough, Iran had been supportive of Pakistan time and again whenever there was a conflict between India and Pakistan. Hence, until 1991 there were no commonalities between India and Iran!

Despite that, Indian leaders such as the first Prime Minister Jawaharlal Nehru visited the Persian state in 1959 followed by visits from Prime Minister Indira Gandhi and Prime Minister Morarji Desai in April 1974 and June 1977 respectively; there were no efforts made by the leaders in Iran. Moreover, post-Islamic revolution in 1979 there was a diplomatic lull in the relations and it took almost one and a half decade for the next high level visits to take place in 1993 when Prime Minister Narasimha Rao visited Iran immediately after the normalisation of relations with Israel. It is interesting to note that the first state level visit from the Iranian side also took place only after India normalised its relations with Israel in 1992 when President Rafsanjani came to New Delhi in 1995. Indian Vice President K R Narayanan went to the Islamic Republic in 1996.[i] Therefore, it is clear that efforts were made by both the sides only in the 1990s.

Moreover, in1991, after the disintegration of Soviet Union India was in the need of new partners. This was also the time when Iraq was under UN imposed economic sanctions and to secure its energy requirements India was willing to have renewed relations with Iran. Similarly, the latter was also in search of new partners to come out of its self imposed isolation. It was in this context that Indo-Iranian relations were built upon. The growth in relations were marked by increasing political visits to and fro, energy and trade relationship, and convergence of relations over Pakistan, Afghanistan and Central Asia etc. However, there are various prospective challenges facing the two and there is a need to highlight on the points and areas that might undermine both the countries in developing a meaningful relationship.

The first and foremost challenge is to convince the US – the most important external player in the Indo-Iran relations – on building and increasing relations with the Islamic Republic. In 2000s India was seeking for Civilian Nuclear Proliferation and wanted waivers from the US for its proliferation considerations. This has to be seen within the context of India’s hesitance to sign the Nuclear Proliferation Treaty (NPT) which it considered to be discriminatory. Later on Indian stance towards the Treaty changed because of energy considerations. This development coincided with the international concerns and the US discomfort about Iranian nuclear policy. Having tested the nuclear weapon India could not ask Iran not to do that. In other words, India could not take a stand on the matter and hence adopted a delicate line of asking Iran to sign the NPT and to “live up to it”. This was the only position that India had over Iranian nuclear ambitions.

However, it proved difficult for New Delhi to seek for civilian nuclear cooperation with the US on one hand and take a not-so-friendly position towards Iranian regime on the other. Washington was vigilant on India’s growing relations with the Persians and same raised questions during Indian delegation’s visit to the US to start the nuclear agreement process.  It was during this time that Iran became a major agenda in the Indo-US negotiations and thus came enormous American pressure on the subject. For instance, during the 2003 Delhi Declaration meet both India and Iran showed interest in developing energy partnerships, however, it was not possible to take it forward because of American pressure. The enormous sanctions imposed against Iran over its energy sector by the US along with the European Union limited India’s investment in the Persian state’s hydrocarbon to US$40 million annually. This amount was subsequently reduced to US$20 million per year! The limit on investment meant that India could not go for any exploration in Iran for a long term production.

Secondly, the dormant status of the Iran-Pakistan-India (IPI) gas pipeline which never took off partially because of Indian concerns over the Baluchistan issue in Pakistan is yet another example of Indo-Iran partnered development at a standoff. Even though the reason cited was “Pakistan factor” but several political analysts believe that the project did not have the US nod and hence was not successful. Notably, since its birth in 1990s till now the pipeline project popularly known as the “Peace Pipeline” is still “under-construction”.[ii] Only recently in 2017 there were parliamentary debates in India to revive the project but soon enough sanctions were again levied on Iran by the US.

The third aspect of Indo-Iranian relations is India’s inability to pay for the oil it imports or had imported in the past. During the time of sanctioned Iran there was increase in freight charges and stock holdings; this meant importing Iranian oil was a costly affair to India. Added to this, India’s stakes in Iran were high owing to increasing imports from the Persian state which resulted in a negative trade balance (larger imports than exports). To repay sanctioned Iran India was trying to figure out various means in terms of rupee payment which did not seem to be a viable option as exports from India was too less. The only option left was to repay the amount once the sanctions were removed; hence, during the Nuclear Deal India settled its bill with Iran overnight by paying US$6.5 billion. Hence, combination of all the three challenges together; namely, limit on imports of oil, dormancy of IPI pipeline, and inability to pay on time, meant India had to reduce the import of oil from Iran. The reduction in quantity of oil imported was a drastic change from 2008 level of 16 per cent imports to 2016 level of 8 per cent. In less than a decade the quantities were reduced by half!

Added to these complexities, owing to miscommunications India’s voting in the international agencies on Iran also changed. For instance, during the International Atomic Energy Agency (IAEA) resolution of 2009 India voted against Iran and joined the US in “censuring the Islamic nation over its controversial nuclear programme and demanding that it stop uranium enrichment”.[iii] Remarkably, once the sanctions were lifted during the Obama administration, India could not fetch more from its relations with Iran except for settling the US$6.5 billion bill. China and Russia, on the other hand, could capitalise as the Iranian market opened. While India was still trying to figure out ways to invest in Iran, Washington had a new president! Under the Trump administration not only Washington withdrew from the Joint Comprehensive Plan of Action (JCPOA) but re-sanctioned Iran. The re-imposition of sanctions meant further reduction of imports from Iran to India to upto 300 million barrels which was similar to pre-sanction time in 2011.

Nevertheless, despite all the challenges posing the relations of the two countries there have been few areas of convergence as well. The most interesting progress in the Indo-Iran emerging relations is the development of Chabahar port. Under the condition of Afghanistan reconstruction the port development is a healthy proposition. The US wants India to play a “more active role” in Afghanistan and this could be the reason to provide waiver on building the Chabahar port.[iv] And these developments are the new concerns rising in the relations. Hence, India’s role in building the port is in congruence with the US’s wish and the latter plays a vital role as a major external player in the Indo-Iranian relations. Therefore, New Delhi needs to perform a balancing act vis-á-vis its relations with both the countries and other major regional powers in the Middle East. Hence, the US factor is a major hindrance in the relations between India and Iran.

Balanced and not-too-much tilt towards Iran needs to be avoided as some of the Iranian programmes and projects are not in New Delhi’s interest especially the missile development plan. The Iranian missile development programme is allegedly devised against Israel; however, missiles do not travel uni-directionally! Hence, as a strategic community the onus lies on India to view the plan as a serious challenge posing its security concerns. India needs to be mindful of the implications caused by Iranian missiles as “foreign policies are made not merely on intentions of the nations but on their capabilities”.

Another aspect of relations between the two countries is the Arab-Israel conflict. India normalised its relations with the Jewish state in 1992 and since then the relations have been growing. Interestingly, India’s interest with Israel and that f with Iran do not concur! While Iran was the foremost country to oppose the Madrid Peace Conference of 1991; it refuses to accept Israel as a state and does not accept the political settlement between Israelis and Palestinians. The Persian state has been vocal on “annihilation and eradication of Israel” as the only solution to the conflict.[v] This is in direct conflict with the Indian position on the issue and even with the Arabs position. The Arabs support the Palestinian right and a Palestinian state that coexists with Israel and not a one in its place! Similar has been Indian position, its initial federal plan highlighted on the same principles. Therefore, there is a fundamental contradiction between Indian and Iranian position on the peace process! Iran has been alleged to be at the forefront of the anti-Semitic literature propagator and is a major proponent of “eradication of Israel”. This has led to India’s relations with Israel at times being suffered. For instance, owing to growing relations with Iran India has often been questioned by Israel on probability of leakage of military technology supplies to Iran. The same was expressed by Israel in 2003 when Rafsanjani came to India during Delhi Declaration Summit.

Another emerging concern is oil. Deals signed with Iran are subject to approval by the Supreme leader and hence are not a reliable venture. The most important example in this aspect is the new oil field explored by Indian oil company ONGC Videsh Limited (OVL) called the Farzad-B gas field which now Iran is negotiating to provide to Gazprom. This angered India and it decided to cut its imports from Iran by a fifth in 2017-18. Iran in retaliation raised the freight rates of oil transport to India and finally signed a MoU with Russian gas monopoly Gazprom.[vi]

Moreover, careful dealing with Iran is also required for India as it is home to second largest Shia population in the world and hence sectarian angle plays one of the major roles in the development of relations. Sympathy towards the Persian state in India is there and hence the relations needs to be handled delicately. Formation of any policy on Iran without the Shia factor is not a viable option.

Hence, even though closer geographical proximity of Iran with Pakistan and to Afghanistan which is the new found interest of India makes it necessary for India to have closer and tighter relations with the Persian state. India’s quest for oil exploration in the region is another reason for the building up of the relations. However, it is probably imperative for New Delhi to be cautious of the challenges posed in the relations and to tackle them strategically will be in Indian interest.