Balancing different relationships

Iranian Foreign Minister during his visit to New Delhi in January 2019 reiterated the point, that it takes its ties with India seriously. Said Zarif, ‘We are working with our traditional partners like India, like China, like Russia so that we continue to work in the interest of  our people

This article will examine some of the key economic links between both countries, why the relationship is important from the geopolitical angle and other potential areas of cooperation.

India-Iran ties the key propellants.

In recent years, two factors have been the driving forces for the NewDelhi-Tehran relationship. The first is, India’s dependence upon Iranian oil, and the second is India’s involvement in the Chabahar Port — which will provide India access to Afghanistan and Central Asia.

Oil and the India-Iran bilateral relationship

The importance of oil in the bilateral relationship is clearly evident from the fact that even after the imposition of US sanctions, New Delhi found ways to circumvent the US sanctions. As mentioned earlier, it stood its ground and made it clear to Washington, that it would not be able to reduce oil imports from Iran. This in spite of the fact, that Washington was not comfortable with New Delhi’s close ties with Tehran – many senior officials of the US administration expressed their discomfort with the growing relationship between New Delhi and Tehran.

The India-Iran relationship is not merely restricted to imports of oil from Iran, Tehran will also be investing in the expansion of Chennai Petroleum Corp (a subsidiary of Indian oil corporation) in the state of Tamil Nadu.

Payment in Rupees 

As a result of Indian pressure on the US, India—alongside China and South Korea—received a U.S. waiver allowing it to continue purchasing a limited amount of Iranian oil.

Apart from this waiver, India and Iran signed an agreement, for oil payment in rupees (November 2018), and half of those funds had been earmarked for exports.

Why this mechanism is important 

Significantly, this mechanism had been used earlier when sanctions had been imposed, but this time 100%  payments will be in Rupees because certain EU countries were not keen to offend the US, and the SPV would take time. 

Chabahar Port 

If one were to look at the Chabahar Port (Which is India’s potential gateway to Afghanistan and Central Asia), New Delhi has invested in Phase 1 of the Project (capital investment of over 85 Million USD and annual revenue expenditure of nearly 23 Million for a 10-year lease). India will operate two berths in Phase 1.

In December 2018, India has formally taken over operations at Iran’s strategic Chabahar Port, a move, that could have significant geopolitical ramifications in the region. On December 25, 2018, India Ports Global Limited opened its office, taking over operations at the Shaheed Beheshti port at Chabahar, Iran.

While an agreement was signed during PM Modi’s visit in May 2016 not just for India’s involvement in the Chabahar Port, but also for greater connectivity between India-Iran-Afghanistan connectivity. In February 2018, during President Rouhani’s visit, an agreement was signed between both countries.

Beyond economics and geopolitics 

Both countries have historic ties. In terms of Soft Power, there is scope for more cooperation. This includes tourism and education.
Currently, the number of Indian tourists visiting Iran ranges from 70,000 and 80,000 while Iranian’s visiting India is estimated at 40,000 (this includes medical tourists).  With Iran offering a visa on arrival facility, there is scope for an increase in Indian tourists visiting Iran, since there are a number of sites which would be of interest to Indians.

Likewise, India needs to look at liberalizing visas for Iranians so that it can attract more tourists. Similarly, there is scope for more cooperation in the sphere of education. The number of Iranian students studying in India is estimated at 7,000-8,000. With further improvement of ties, this number can go up.

Conclusion

Apart from governments, it is the role of Chambers of Commerce, Civil Society Organizations as well as Universities to ensure that New Delhi and Iran look towards a multifaceted relationship where the commonalities between both countries play an important role.  It is important to rekindle historical linkages of the past and utilizing them for fulfilling the economic needs of the future. All stakeholders need to play a role in strengthening the bilateral relationship.