India should try to become a key player in West and Central Asia, given its geographical proximity to and historical links with the two regions. To achieve this, it needs to work with both Israel and Iran, and bring the two rivals to the negotiating table
India’s relationship with Iran has been marked by geniality except for few instances, like in 2005 and 2006, when India voted against Iran in the International Atomic Energy Agency, and in 2010, when India protested against Iranian supreme leader who equated Kashmir with Afghanistan and Gaza. At present, both India and Iran enjoy amicable and harmonious relations. In recent times, however, there have been soon important events , such as the the Iranian nuclear deal, which merit a review of the India-Iran bilateral.
Trade and Investment Ties — Earlier, because of economic sanctions on Iran, India had not been able to carry out regular business with the Islamic Republic. Under US pressure, India had to bear losses evento implement sanctions against Iran. In short, the nuclear deal has opened more passages for India to do business with Iran and vice-versa.
The bilateral trade between India and Iran in 2014-15 was $13.13 billion, with a trade balance of $4.78 billion in favour of Iran. The majority of Indian exports to Iran included cereals, mostly rice ($1.24 billion), and iron and steel products ($0.78 billion). As of now, Iran is India’s top importer of basmati rice.
After the nuclear deal gets a green signal from the US Congress, where it is likely to face opposition from Republicans, most Western countries will move fiercely to invest in Iran. Also, after the removal of economic sanctions on Iran, Indian exports, especially auto components, will face stiff competition from other exporting countries to Iran; in 2014-15, India exported nearly $102 million worth of auto components to Iran. But the loss will be compensated by additional exports of farm products.
Now, India should move forward in negotiating a free trade agreement with Iran. The FTA will be beneficial for both the countries. With the FTA in place, Indian exports will face less competition from other exporting countries to Iran, and through Iran, Indian products can also get market access to Europe and Africa. India, as of now, faces a trade deficit of around $8.9 billion with Iran, which can be reduced through FTA by an increase in exports of existing products, and other products such astextiles, apparels, engineering products etc.
Infrastructure Investments: In a meeting with Prime Minister Narendra Modi in Ufa, Russia, during the Shanghai Cooperation Organisation Summit, Iranian Prime Minister Hassan Rouhani requested India to play a bigger role in Iran, and invited investments to the tune of eight billion dollars from India, to carry out strategic infrastructure projects such as building of ports, railways and roads.
In 2003, India and Iran signed an agreement to develop the Chabahar port under the first NDA Government. But due to the imposition of economic sanctions on Iran, India had not exhibited much interest in pursuing it. It was only in May this year that India signed a another Memorandum of Understanding with Iran to develop the port with an investment of $85 million. With this investment, India will construct a container terminal and a multi-purpose cargo terminal in Chabahar port.
The Chabahar port is exceedingly important for both the countries. To India, Chabahar port will give access to the large reserves of oil and gas in the Central Asian region by circumventing Pakistan. Also, India had helped Afghanistan in the construction of the Delaram-Zaranj road (Route 606) which connects Afghanistan with Chabahar port via Milak in Iran. The Chabahar port will help India with an easy entry into Afghanistan.
In future, the Chabahar port will attenuate the role of Pakistan in deciding the regional affairs. Many significant projects such as the Turkmenistan-Afghanistan-Pakistan-India pipeline and Iran-Pakistan-India pipeline have been stuck for many years because of anomalous relations between Pakistan and India.
India is also planning to develop an underwater gas pipeline known as the Middle East-to-India Deepwater Pipeline. The pipeline will bring gas from Chabahar on the southern coast of Iran and from Ras Al-Jafan on the northeastern coast of Oman to Porbandar in Gujarat. It will be developed by a New Delhi based company called South Asian Gas Enterprise, with an estimated cost of around $4 billion. After the construction, gas from Turkmenistan can also be transported to India through the SAGE pipeline.
Iran will now look to accelerate its economic growth after the removal of economic sanctions. The Chabahar port will play a vital role in rolling the wheel of Iran’s economy. The port will provide Iran a wider access to huge market of energy ravenous nations in South Asia, for the export of oil and gas, which mainly drive its economy. There are plans to integrate Chabahar port with International North South Transport Corridor in the future. After the expansion of Chabahar port, it will have a higher capacity than Bandar Abbas which is highly congested and handles much of Iranian traffic.
Chabahar port will be Iran’s first deepwater port with modern shipping standards. If in the upcoming future, Uzbekistan and Turkmenistan also join the INSTC, then Chabahar port can become the ideal route to get connected to the Gulf of Oman and the Arabian Sea. India will also benefit from this by getting access to uranium from Uzbekistan and gas from Turkmenistan through Chabahar port.
looking at the gains from infrastructure investments, India must move with alacrity to carry out strategic infrastructure projects in Iran.
The possibility of a historical role for India in Iran: India enjoys cordial relations with both Israel and Iran, and it needs support of both the countries to increase its influence in Central and West Asia. India needs Iran to fulfill its growing energy demands and Iran is India’s gateway to Central Asia. India is increasingly dependent on Israel for its defense needs, counter-terrorist operations and cutting-edge technologies in areas such as agriculture, water resources etc. The fact is, today Israel is one of India’s largest military suppliers.
India, at present, is facing threats from the Islamic State terror group which has vowed to attack this country with the help of the Taliban and Pakistan. According to an internal recruitment document of the Islamic State , it is planning a big attack on India. Help from both Iran and Israel is crucial for India to neutralise the threat of the Islamic State and meet its energy and security needs.
It is notable that Iran has supported groups like Hamas and Hezbollah, and also provided military support to Syria and Sudan to blight Israel. But then again, Iran was also the second Muslim-majority country to identify Israel as an independent state after Turkey. Iran had supported Israel numerous times in the past before the Iranian revolution and vice-versa.
India can mediate between Iran and Israel to bring about an amicable settlement of their longstanding disputes and animosity. It will not be easy, and will require persistent and nuanced diplomacy. But the gains from this effort, if successful, will be very large. Although, mediating for this cause will also pose a number of challenges for India. India enjoys analogous relationships with Arab countries also, and many Indian expatriates are present in these countries. Currently, Saudi Arabia is India’s largest supplier of oil and home to around 1.5 million Indian workers. Any mediation in the Iran-Israel dispute will be a real test of Mr Modi’s diplomacy.
The bottom line is that India should try to become a key player in West and Central Asia, given its geographical proximity to and historical links with the two regions. To achieve this, it needs to work with and have the support of both Israel and Iran, and for that it is crucial to bring Iran and Israel on the same table. For the moment, it might seem like a quixotic idea, but in the future it could become a reality especially under a proactive Modi regime.
(The writer is an associate fellow at the Pahle India Foundation)