Rebooting ties with Iran- Modi’s visit to Iran

Rebooting ties with Iran

  • Prime Minister Narendra Modi’s visit to Tehran on May 22-23 will be an important marker in New Delhi’s attempt to instill momentum in bilateral ties.

India’s interests in Iran

  • Historic” links with Iran- longstanding civilizational ties.
  • “Extended neighbour”
  • India’s core interest remains energy.  Till sanctions were imposed on Iran, it was India’s second largest source of crude oil after Saudi Arabia.
  • Significant overlap in their economic and security space.
    • 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.
  • Connectivity has become a major thrust area. India is keen on developing Iran’s Chabahar port. New Delhi has made it a strategic priority since access to Afghanistan and Central Asia is important to Indian interests.
  • While India has the natural advantage of proximity and is widely seen as a reliable partner

Past trend – During sanctions

  • The relationship had gone cold over the years following the imposition of international sanctions against Iran. 
  • India had voted against Iran at the International Atomic Energy Agency 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.
  • It let down by India during the period when sanctions were in force, and oil imports from Iran had dropped significantly. While agricultural and pharmaceutical products were outside the ambit of the sanctions, and wheat was imported from the US even then, Tehran once made an SOS call to Delhi for cheaper cancer drugs. India sent delegations from pharma companies, but dithered — and Iran was left looking for other options.
  • The Iranians have expressed their frustration at the situation many times, as the sanctions hit them really hard. After Iran’s nuclear deal was been concluded with the P-5+1 countries,
  • India was accelerating a plan to pay nearly $6.5 billion it owes Teheran for crude oil imports. Turkey’s Halkbank has been identified to facilitate the payment and the money will be paid in euros
  • The removal of sanctions on Iran following the nuclear deal has ended its isolation, and enabled its return to the economic and diplomatic mainstream. Over the last few months, Iran hosted several high-profile visitors. However, Tehran has been busy hosting international competitors for the last few months.
  • Over the past few months several Iranian officials have made the case for faster decision-making by the Indian government on projects of mutual interest.

Significance from the visit

  • Will seek to build on these commonalities by focussing on specific cooperation in regional connectivity and infrastructure, developing energy partnership, boosting bilateral trade, facilitating people-to-people interaction in various spheres and promoting peace and stability in the region,
  • New Delhi will be looking at Tehran as a strategic economic partner with whom it can work out tax and investment agreements.
  • For Iran, the new phase of the relationship will rest on the four pillars of security, economy, energy and infrastructure.
  • Infrastructure projects- the Chabahar port, International North-South Transport Corridor (INSTC), and Trilateral Cooperation with Iran and Afghanistan are towards the top.
  1. CHABAHAR PORT
    • The Port of Chabahar (or Chah Bahar) is a seaport in Chah Bahar in southeastern Iran. Its location lies in the Gulf of Oman. It is the only Iranian port with direct access to the ocean.
    • India is to equip and operate two berths in Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.
    • The Chabahar port is crucial to enhance connectivity with Afghanistan and Central Asia.
    • During External Affairs Minister Sushma Swaraj’s visit to Iran last month, the two sides agreed that the contract and modalities for a $ 150 million credit for the port would be signed soon.
    • The Centre has also approved a $ 400 million line of credit for the supply of steel rails from India, and IRCON officials are expected to visit Iran for discussions on the Chabahar-Zahedan railway link.
    • It will also help in gaining access to markets in Afghanistan through Zahedan in the West Asian country, bypassing Pakistan.
  2. TRILATERAL AGREEMENT WITH AFGHANISTAN AND IRAN
    • The text of the Trilateral Agreement among India, Afghanistan and Iran on Transport and Transit Corridors (Chabahar Agreement) was finalised during the second meeting of experts in Delhi on April 11, 2016.
    • The Agreement will facilitate better connectivity among the South, Central and West Asian regions, and will significantly improve India’s connectivity with Afghanistan and Central Asia.
    • It will allow Indian exporters to utilise the Chabahar Port
  3. INTERNATIONAL NORTH-SOUTH CORRIDOR (INSTC)
  4. ASHGABAT AGREEMENT
    • Iran has 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,
    • is an important corridor connecting Central Asia with the Persian Gulf.
  • Energy– India is looking at concluding the Farzad-B gas field agreement.
  1. Farzad B gas project
    • is another low-hanging fruit for Delhi’s energy needs and Delhi is likely to move further ahead on this during the visit.
    • OVL, along with Oil India Ltd and Indian Oil Corporation Ltd, had earlier invested about $100 million in the Farzad B gas field, but production could not be started as Indian companies found it difficult to stay engaged in the hydrocarbon sector due to sanctions imposed by the US and the European Union.
  2. Delhi has already conveyed that Indian firms are willing to invest up to $ 20 billion in Iran’s energy sector, and
  3. are also interested in setting up petrochemical and fertiliser plants, including in the Chabahar SEZ, either through a joint venture between Indian and Iranian public sector companies, or with private sector partners.
  4. A series of other pipelines — the Iran-Oman-India undersea pipeline and the Turkmenistan-Iran-India pipeline among them — still hold promise.
  • Expected to bridge the trust deficit in bilateral cooperation and boost energy and trade ties while expediting India’s connectivity plans
  • 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.
  •  Mr. Modi’s visit assumes greater significance in the larger context of his own policy of enhanced engagement with West Asia.
    • 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 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
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