INDIA – IRAN

PM Modi and Iranian President Hassan Rouhani Meet (July 2015)

• They met on the sidelines of the BRICS and SCO summits being held in Ufa.

• This was the first high-level interaction between the two nations, after the new
government came to power in New Delhi.

• The talks included countering the continuing menace of terrorism in the region, along
with connectivity, energy, trade and investment.

Iranian Foreign Minister’s visit to India (August 2015)

• His visit was with the aim to lay the groundwork for increased bilateral cooperation.

• The two sides also discussed Indian investment in the strategically critical Iranian port
of Chabahar.

18th India-Iran Joint Commission Meeting (New Delhi, December 2015)

• It was co-chaired by India’s External Affairs Minister (EAM) and The Commerce and
Industry Minister from Iran.

• India’s EAM mentioned that India considers Iran as an important partner and expressed
satisfaction at the growing bilateral interaction in diverse area.

• She underlined the efforts underway to enhance bilateral economic cooperation in

energy, infrastructure – including shipping, ports and railways - and trade and
commerce. She stressed that connectivity afforded by Indian participation in
Chahbahar Port will facilitate linking Afghanistan and Central Asia with India.

• The Iranian side suggested participation of India’s public and private sectors in
development of Chahbahar Port and Chahbahar Free Trade Zone (FTZ) and in setting
up industrial units in the FTZ.
• The EAM emphasized the need for early completion of all necessary procedures for
India’s participation in Farzad-B field and pointed out India’s desire to participate in
other oil and gas explorations in Iran as well.
 • The two Ministers reviewed the progress in trade and economic cooperation and a
number of related matters, and discussed the possibilities in cooperation in railways,
including by supply of rails, rolling stock, signalling and other works and India’s
participation in Chahbahar – Zahedan -Mashhad railway line.

Petroleum Minister Dharmendra Pradhan’s visit to Iran (April 2016)

• This was the 1st visit by an Indian minister since the lifting of sanctions on Iran.

• India had indicated a willingness to invest $20 billion in the near future.

• It also indicated interest in setting up petrochemical and fertiliser plants, including in

the Chabahar SEZ, either through joint venture between Indian and Iranian public
sector companies or with private sector partners.



External Affairs Minister Sushma Swaraj’s visit to Iran (April 2016)

• The two sides agreed that the contract and modalities for a $ 150 million credit for
the Chabahar port would be signed soon.

These ministerial visits reflected not only New Delhi’s desire to re-invigorate bilateral
cooperation but also to ensure that tangible results ensue from the prime minister’s
forthcoming visit to Tehran. 

PM Modi’s visit to Iran (May 2016)

• It was the first bilateral visit to Tehran by an Indian prime minister in 15 years, and
was aimed to provide the timely thrust to the relations. It was expected to bridge the
trust deficit in bilateral cooperation and boost energy and trade ties while expediting
India’s connectivity plans.

• Chahbahar Port: India pledged $500 million for this project. The strategic location of
the port will allow India to access Central Asia through Afghanistan, more importantly
skipping Pakistan, and the Persian Gulf as it is the only Iranian port with access to the
Indian Ocean. The bilateral agreement signed will provide India the right to develop
and operate two terminals and five berths with multipurpose cargo handling capacities
in the port of Chabahar for 10 years. 

• Trilateral Transport and Transit Corridor connecting Chahbahar with Afghan road and
rail network was also signed by India, Afghanistan and Iran.

• The new corridors have been rightly described by PM Modi as “new routes for
peace and prosperity”.

• He also said that the arc of economic benefit from this agreement could extend to
the depths of the Central Asian countries. When linked with the International North
 South Transport Corridor, it would touch South Asia at one end and Europe at another.”
Even the fact that the Afghan President travelled to Iran to sign the deal, shows
the importance of the agreement.

• Vowing to jointly combat terrorism and extremism, radicalism and cyber-crime as the
two strategic partners, India and Iran agreed to share intelligence in a bid to fight the
menace that is “rife and rampant” in the region.

• They also agreed to explore the possibility of manufacturing aluminium metal by

setting up of a smelter on joint venture basis in Iran.

• Other MoUs signed were related to science and technology cooperation, cultural
exchanges, projects involving National Archives and policy dialogue involving think
tanks and foreign ministries.

• They also decided to step up the momentum of economic engagement through early
conclusion of a Preferential Trade Agreement (PTA), preferably within a year. The two
leaders also directed that Double Taxation Avoidance Agreement (DTAA) and Bilateral
Investment Treaty (BIT) should be concluded before the end of the year.

• Modi’s visit was also significant as it came a month after Modi’s visit to Saudi Arabia,
indicating the necessity of ensuring “parallel levels of engagement”.

Joint Naval Drills (June 2016)

India and Iran conducted joint naval drills which focused on the Strait of Hormuz. This was
the first exercises held after the lifting of sanctions on Iran.

BACKGROUND
Even though PM Modi, during his recent visit described the relationship between India and
Iran as “'dosti' as old as history”, bilateral ties between India and Iran took a beating during
the sanctions years. India had voted against Iran at the International Atomic Energy
Agency (IAEA) over its clandestine nuclear programme and, under pressure from the U.S.,
slashed oil imports from the country by up to 40 per cent during the period. New Delhi had
also backed off from a pipeline project that aimed to bring natural gas from Iran to India
through Pakistan. 

But with sanctions removed and foreign countries and companies rushing back to Tehran to
seize business and economic deals, it is important for India to reboot relations. Iran also
seems keen on pursuing stronger ties with India.

Mr. Modi’s visit also assumes great significance in the larger context of his own policy of
enhanced engagement with West Asia. 
Moreover, the Iran visit comes after his trips to the United Arab Emirates and Saudi
Arabia and ahead of visits to Qatar and Israel. The government appears to be trying to
reach out to the three poles of the region. While it will pursue good ties with the Sunni Gulf
for energy supplies, Iran would act as a gateway to Central Asia besides enhancing India’s
energy security. Israel remains one of India’s top defence and technology suppliers. The
success of this policy, thus, depends on New Delhi’s capacity to do the balancing act. The Iran
visit is an opportunity to restore equilibrium in India’s foreign policy, which, of late, was seen
to be skewed towards Israel and Saudi Arabia.

However, India will have to ensure that its engagement is not taken as an approval for
regional power politics by any of the regional big players.”

CONNECTIVITY AS A MAJOR FACTOR

The issue of reliable connectivity through Iran has become paramount in the wake of India’s
growing ambitions in the Central Asian region. This connectivity is critical to two major
initiatives.

1. First, it is needed to gain access to the oil and gas fields of Central Asia to fuel India’s
growing economy and to open up the Central Asian markets for Indian products.

2. Second, India needs easy land access to Afghanistan, enabling New Delhi to strengthen
its strategic and economic ties with the country. With Pakistan effectively blocking any
direct land route from India, Iran must be a reliable transit point.  

There were various projects that were envisioned to fulfil the above objectives, two of which,
Chahbahar port and Trilateral Transit Corridor have also been translated into corridors.

Apart from those, Iran has also supported India’s inclusion in the Ashgabat Agreement, of
which Turkmenistan, Iran, Oman and Uzbekistan are founding members. It came into force on
April 23, 2016, and is an important corridor connecting Central Asia with the Persian Gulf.

Moreover, while officials say that the much-delayed Iran-Pakistan-India pipeline is best
forgotten, a series of other pipelines — the Iran-Oman-India undersea pipeline and the
Turkmenistan-Iran-India pipeline among them — still hold promise.

CHABAHAR PORT
The project involves developing Chabahar port (which is barely a thousand kilometers from
Kandla, Gujarat) with road and rail connectivity linking it to Zaranj, on the Afghan-Iran
border, 900 km to the north. Once the Chabahar port in Iran is developed, it will offer India
alternative access to landlocked Afghanistan, bypassing Pakistan. It is the first foreign project
that India is involved in developing to such a large extent. This plan has been hanging fire
since the 2000s and only now, after the Chinese put in their bid to develop it, did New
Delhi get its act together.
It is situated in South Eastern part of Iran, and on the northern coast of Gulf of Oman. It is
surrounded by Afghanistan in the North, Pakistan in the North-East and India in the East. It is
the only Iranian port with direct access to the ocean. 

According to C. RAJA MOHAN, although India has taken long to get it off the ground, the
Chabahar project has the potential to alter the hostile regional geography that Delhi had
inherited in 1947. The partition of the subcontinent and Pakistan’s control of parts of Kashmir
had left India without physical access to Afghanistan. Pakistan, which resented Kabul’s special
relationship with Delhi, had no desire to provide overland transit rights to India or facilitate
an expansive cooperation between Afghanistan and India.

Chabahar’s significance also rose, as China began to develop Gwadar and unveiled ambitious
plans for linking its far western province of Xinjiang with the Arabian Sea with a transport
corridor running through Pakistan.

The agreement signed during Modi’s visit marks a new level in India’s overseas ambitions,
establishing a genuinely strategic presence not just in one of the world’s great energy
markets, but potentially giving Indian business access to some of the fastest-growing
economies of the future.

The deal will also allow India to expand its strategic presence in Afghanistan, allowing
businesses in both countries to bypass a Pakistan that has proven reflexively hostile to
allowing transit rights to trade between them. In short, the deal signals that India, like
China, has big-league ambitions.

INSTC
Coupled with the Chabahar Port, the International North-South Transit Corridor (INSTC) can be
the cornerstone of the India-Iran relationship. The INSTC trade corridor, running through Iran
and Afghanistan, is a consolidated transportation network, including rail, road, and water
transport connecting Mumbai to Moscow, via Bandar Abbas in Iran.  It would allow India to
bypass the overland routes through Pakistan and China to Central Asia. Not only does the
INSTC have the potential to serve as a strategic counterbalance to China’s One Belt, One-Road
Initiative, it would also allow India to integrate with Eurasian markets and firmly establish
itself in Central Asian oil and gas production.

This is also significant as the Central Asian Republics, which were in the vortex of competition
between the US, Russia and China a decade ago, have now been anxious to see a larger Indian
presence in the region.

ENERGY SECURITY
Strong ties with Iran are vital for India. The key factor is energy. Till sanctions were imposed
on Iran, it was India’s second largest source of crude oil after Saudi Arabia.
Given that India is a net importer of energy and Iran a net exporter, this sector provides a
foundation for bilateral relations. Iran’s abundant oil and gas fields have the potential to
meet India’s ever-growing demands.

India’s bid to develop the Farzad B gas field also remains in contention after Iran’s
initial refusal to give India the project. India’s diplomatic activism revived
negotiations thereafter, but did not lead to any conclusion over the issue. The signing of
an agreement to develop the Farzad-B gas fields, therefore, would be a welcome step in this
direction.

Iran would also serve as a safe and stable transit point for Central Asian gas and oil, either via
pipelines or other means. India must however act decisively so as to not lose any advantage in
this critical area.

However, there has also been a major issue of contention arising out of India’s energy ties
with Iran. India owes $6.5 billion in lieu of oil imports, which is possibly the thorniest of the
current issues between the two countries. India is the second biggest customer of Iranian
crude after China. But it has built up a backlog of payments over three years while Iran was
under sanctions over its nuclear program. Although a settlement plan has been reached, India
should expedite the clearing of this payment backlog as soon as possible.

IRAN & CHINA

In a state visit to Iran, Xi Jinping emphasized China’s place as Iran’s biggest trading partner
for six years in a row. This relationship will only grow stronger as both countries have agreed
to increase trade to $600 billion over the coming decade. The Chinese filled a void created by
Western sanctions and earned trust and goodwill with the Iranian people. Given their deep
cultural and civilizational ties, India’s absence was conspicuous.


IRAN & AFGHANISTAN

Iran has maintained contact with the Taliban, to ensure its eastern borders remain free of
influence from the self-proclaimed Islamic State, participants said. However, given the
theological differences between the Taliban and Iran, this contact will not have long-term
consequences. India must ensure Iran’s objectives in Afghanistan are clearly outlined to
determine their convergence with New Delhi’s goal of a peaceful and stable Afghanistan, they
concluded.

Both Iran and India share the goal of a stable government in Kabul free of the Taliban’s
influence. Globally, New Delhi and Tehran are on the same page in their opposition towards
groups like al-Qaeda and the Islamic State.

VIEWS OF IMPORTANT PERSONS:

-C. Raja Mohan

• The rare trilateral agreement with Afghanistan and Iran underlines the extraordinary
strategic opportunities that continue to present themselves for India in the region.
This agreement, along with the one for Chahbahar port project, raises hopes for
reordering India’s geopolitics to the north-west of the subcontinent.

• Delhi’s vote against Iran at the International Atomic Energy Agency (IAEA) on the
nuclear issue has done a lot less damage than India’s inability to find practical ways to
advance the relationship on the ground. 

• The real challenge in India’s engagement with Iran was not about holding up the high
principles of “strategic autonomy”, but of effectively navigating the international
complexities surrounding economic and energy ties and seizing upon the few
opportunities that were available for building a partnership under adverse conditions.
India’s performance here has been underwhelming.

• The problem has been less about the definition of new grand strategic objectives for
Indian foreign policy. It was largely about the institutional competence to translate
them into outcomes. Even when consensus existed on some key issues and relevant
international understandings were hammered out with some diplomatic skill, Delhi has
struggled to implement them. Overcoming Delhi’s internal incoherence has often
turned out to be a bigger challenge than the arguments within the political class.

-Srinath Raghavan:

• There has been absence of a strategic view of Iran. Barring some exceptions, South
Block regarded our ties with Iran as purely transactional, essentially a buyer-seller
relationship centered on energy. Although there were some difficulties posed by
President Mahmoud Ahmadinejad, but the fact remains that New Delhi did not squarely
reckon with the upshots of a strategic relationship with Iran. For starters, we could
have accessed eyes-and-ears on the Makran coast to monitor not only the Gwadar port
being developed by the Chinese, but also Pakistani naval activity under the UN
umbrella in the Persian Gulf.

• The basic point is that Iran has always potentially been the most important power in
the region. It has a unique geopolitical location owing to its reach in Central Asia and
Caucasus as well as in West Asia and the Persian Gulf. Because of its geography, Iran
was historically an important arena of great power jostling for influence.

• With respect to Pakistan: New Delhi must avoid any facile assumption that Mr. Modi’s
trip has already positioned us better vis-à-vis Pakistan or Afghanistan. Tehran has also
reset its ties with Islamabad following a successful visit by President Hassan Rouhani.

• With respect to Afghanistan: As far as Afghanistan is concerned, it is clear that Iran

does not share India’s opposition to any attempt at reaching out to the Taliban. With
increasing turbulence in Iraq and Syria and the possibility of the Islamic State
 expanding into Afghanistan, Iran wants to keep its northern frontiers stable. So, while
the trilateral transit agreement showcases cooperation among India, Iran and
Afghanistan, it is unlikely to translate into effective political cooperation between
them.

India’s fundamental problems in Afghanistan persist: lack of strategic presence or

leverage, and the absence of any regional partners. Hence, India will remain marginal
to the evolving political situation in that country — unless we rethink our approach.

-Rakesh Sood:

• For the deals done with Iran, the challenge for India will be to ensure timely
implementation. Delivery is key for a nation that wants to make up for lost time, and
Tehran has no dearth of suitors from east or west, at the moment
• The regional backdrop is more complex today compared to 2003. Developments in
Iraq, Syria and Yemen, strains in Iran’s relations with Saudi Arabia and rising
sectarianism in the Islamic world are exposing new fault lines. In these troubled times,
there is much that can draw India and Iran together provided a degree of trust can be
restored.

-K C Singh (Former Ambassador to Iran)

• Iran will on the one hand play China and Pakistan against India selectively, and on the
other seek from the West high technology for advanced manufacturing. The latter can
make it a competitor for India in energy intensive industries, as it has nursed self-
reliance due to sanctions.

• If Indian diplomacy has to succeed, the skill needed to engage this new Iran will have
to be greater and sensitivity to their concerns adequately factored in when partaking
the theatre of GCC sheikhs and the Indian diaspora.

-Kanchi Gupta

While the challenge for Prime Minister Modi will be to secure India’s place in Iran’s economic
and strategic calculus, his visit also signals a more assertive Middle East policy. Even though
the Middle East political climate may have eclipsed relations with Iran, Modi’s visit will boost
the pursuit of India’s strategic priorities in the region. The simultaneous efforts to strengthen
economic and strategic relations with Iran and Saudi Arabia will give greater purpose to
India’s profile in the region.

-Amb Dinkar Srivastava (Former Ambassador to Iran)

 • India should not view its relations with Iran as a subset of her relations with other
countries, keeping in mind other countries of West Asia and Pakistan.

• Post–sanction, while Iran seeks to emerge as a regional power and mainstream itself
into the international order, India finds in Iran a potential stabilizer in Afghanistan.

• Iran is also increasingly important for India, insofar as keeping an eye on China’s
growing activities in the Indian Ocean is concerned. India’s assistance to develop Iran’s
Chabahar port, barely 72 nautical miles from Pakistan’s Gawadar port, is largely
perceived as India’s answer to Pakistan’s habitual intransigence, provided India walks
the extra mile and helps Iran connect the Chabahar port with the hinterland and
beyond.

-Talmiz Ahmad

The signing of the Chahbahar port agreement and the trilateral trade and transit
agreement during Modi’s recent visit will have the potential to significantly change
strategic equations in the region. These agreements will put in place geo-economic, political
and military relationships that will pull India out of the narrow straitjacket of South Asia
and make it a role-player in the security and stability of its extended neighbourhood.