Crucial visit to Iran

The Prime Minister went on to add that India is keen to enhance its investment in the Persian Gulf nation and also welcomes flow of capital and investments from the oil-rich nation. During the visit, the trilateral agreement between India, Iran, and Afghanistan to develop the Chabahar—a strategic port in the Gulf of Oman on Iran’s southern coast with Afghanistan—will reportedly be signed.

 Reports indicate that in the first phase India plans to invest around $200 million in developing terminals and cargo berths at Chabahar. In the next phase, India plans to build a 500-km railway line between Chabahar and Zahedan—located in the Sistan and Baluchestan Province of Iran. The Chabahar port is a crucial piece of infrastructure for both India and Afghanistan.

 In the absence of transit through Pakistan, the Chabahar port will prove to be India’s gateway to Afghanistan, Central Asia, Russia and beyond. For Afghanistan, it will get access to the Iranian port as an alternate to Karachi. Currently, India does not have access to Afghanistan on land due to opposition from Pakistan, which sees India’s expansive diplomacy in the region as a threat. 

The port agreement will also pose as a balance to China’s influence in Pakistan. Chabahar is less than 100 km from Pakistan’s Gwadar port. To the uninitiated, China has invested a lot of capital in the Gwadar port project. Earlier this year, India approved a credit line of $150 million towards the project in an effort to outmaneuver Pakistan and improve its access to Afghanistan. In a recent editorial, The Hindu summed up the significance of both the visit and development of the Chabahar port. “Strong ties with Iran are vital for India. 

The key factor is energy. Till (US-backed) sanctions were imposed on Iran, it was India’s second largest source of crude oil after Saudi Arabia. Once the Chabahar port in Iran is developed, it will offer India alternative access to landlocked Afghanistan, bypassing Pakistan. 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”, according to the editorial.

 These developments have come in the face of the historic Iran-US nuclear deal, which ended Tehran’s isolation from the global market. The deal has brought significant strategic autonomy for India. This is because India has vital trade and other important strategic links with both Iran and the USA. India can now resume its purchase of oil and natural gas from Iran and even seek to make investments in lucrative oil fields.

 With the US-backed sanctions off, India has already begun to pay back Tehran the $6.5 billion owed for past crude oil imports. The shackles are well and truly off. Indian refiners have cleared part of the $6.5 billion owed to Iran for crude oil imports in Euros, according to Reuters. This is the first payment to Iran by India since the lifting of sanctions. India must realise that with the sanctions off, other foreign countries and companies are rushing back and quickly sealing business deals and economic agreements. There is fierce competition for natural resources.

 Fortunately, India has not shied away from the competition. For example, India has been trying to secure rights to develop the Farzad-B gas field in Iran, an offshore block that the Oil and Natural Gas Corporation of India had discovered in 2008. State-owned ONGC has already invested over $100 million in the gas field.

 Over the past few months, Oil Minister Dharmendra Pradhan, External Affairs Minister Sushma Swaraj, and Road Transport and Highway Minister Nitin Gadkari have all visited Tehran. New Delhi is believed to have earmarked $20 billion (Rs 1.33 lakh crore) for investments in the oil and gas as well as petrochemicals and fertilisers sectors in Iran. For its part, Iran seems keen on better relations with India after Tehran announced that there was no “emergency and urgency” in getting back the $6.5 million owed for past crude oil imports. 

Iran is also home to 7.5 million Indian expatriates. More importantly, India receives $30 billion annual remittances. But beyond immediate economic interests, Prime Minister Modi will have to approach this visit with great caution in light of the delicate strategic balance that exists in West Asia. Since he took office, Modi has sought to enhance India’s engagement with West Asia. Prior to his visit to Iran, Modi undertook trips to Saudi Arabia and the United Arab Emirates. After Iran, Modi will visit Qatar and Israel.

 To the uninitiated, Saudi Arabia, Israel, and Iran comprise the three strategic poles of the region. Modi must find a way to balance its interests in the region without seeming to overtly favour any of them. Saudi Arabia is crucial to India’s energy interests. Iran is India’s potential gateway to Central Asia and a key supplier of energy. Meanwhile, Israel remains one of India’s top defence suppliers. In the past, New Delhi has often tilted in favour of Israel and Saudi Arabia. Modi must bring Iran back into the mix, without upsetting either Saudi Arabia or Israel. This is a tough balancing act indeed.