India and Iran share centuries of close cultural & civilizational affinities. The two countries have in the past influenced each other in fields of culture, art, architecture and language.  Close links between the two countries have continued over contemporary times. Iran’s nuclear issue and its isolation in West Asia, including its strained relations with Israel creates another cause of concern.India and Iran both are interested inforging a long term strategic relationship built around energy security and transit arrangements so diplomacy of balanced relationship in the West Asia is the need.

Mutual Interests

Iran’s large energy reserves and India’s large energy deficiency, together with India’s strengths in industrial and managerial know-how and science & technology make for long term economic complementarity between the two countries. 

Significantly, Iran (as also China) had in 1994 played a critical tactical role in restraining Pakistan from pressing for a vote against India at the U.N. Human Rights commission in Geneva.

The Iranians realise that with the Indian economy set to grow at a rate of over seven per cent in coming years, India will be a natural and logical market for its immense resources of natural gas and oil. Iran has the second largest resources of natural gas in the world. While there is some concern and interest at the directions our growing relations with the United States and Israel may take, Iranian leaders recognise that given our independent foreign policies and economic and military potential, Iran and India are natural strategic partners. We have made it clear that given the chronic instability and medieval intolerance of the Taliban, we see Iran as a natural and long-term partner as a transit point for our economic, trade and energy ties with Central Asia. There is also a growing realisation in India that the competitiveness of our exports to Russia will improve vastly when there are reliable transit routes to Russia through Iran. We are trying to develop a sea route to the Russian port of Astrakhan through Bandar Abbas.

India and Iran have shared geo-political interests in the pursuit of which this part of Asia can be knit into networks of economic cooperation with increased stability as a consequence.

Iran’s Nuclear Issue

Iran is a nuclear non-weapon signatory state of the NPT and the application of Safeguards is in force since the signing of the Safeguards Agreement between Iran and the IAEA in December 1974. With a moderate beginning in late 1970s, Iran has been pursuing consistently a planned nuclear research programme since the mid-1980s. By virtue of Iran being a member of the NPT that has renounced the option of developing weapons, it has the right to the development of nuclear fuel cycle related technologies, subject to the fulfillment of its IAEA safeguards obligations. Yet, Iran has in recent years been facing hurdles to exercise its legal rights because of IAEA suspicion based on lack of transparency and absence of full reporting.

The contentious issue between Iran and the IAEA and now the UNSC is of non-compliance with the Safeguards agreements in accordance with Iran’s commitments as a non- nuclear weapon state party to the Nuclear Non-Proliferation Treaty (NPT). The present stalemate has emerged due to a collapse of diplomatic engagement between the EU-3 (France, Germany and Britain) and Iran, followed by Iran’s breaking away from its voluntary suspension of enrichment related activities.

In all 27 of the 35 states, including India and the five permanent members of the UNSC, voted for a resolution at the Board of Governors meeting in Vienna on February 2013.

India also had voted in favour of the IAEA resolution at the Board of Governors meeting of September 24, 2005.

In July 2014 after protracted and multiple rounds of negotiations, Iran and the six world powers (China, France, Germany, Russia, the United Kingdom, and the United States), known as the P5+1, reached the agreement after three rounds of talks with Tehran’s new negotiating team.

Iran’s stockpile of 20 percent-enriched uranium is a primary concern for the P5+1 because it can be more easily enriched to weapons grade. Iran currently has about 200 kilograms of uranium enriched to this level in its stockpile, according to a Nov. 14 report from the International Atomic Energy Agency (IAEA).

According to the agreement, Iran is required to eliminate its stockpile of uranium enriched to 20 percent and maintain its stockpile of 3.5 percent-enriched uranium at its current size.

In return, Iran would be able to gain access to about $4.2 billion in frozen assets from its oil sales. Among other benefits for Tehran, the United States would suspend certain sanctions on Iran’s auto sector, petrochemical exports, and trade in gold and other precious metals. The “core architecture” of the sanctions regime, namely sanctions on the oil and banking sectors, “remains firmly in place” as negotiations continue

Recent Developments

• Iran was India’s second largest supplier of oil but now it has slipped to sixth position due to sanctions imposed by US and EU which impose restrictions on shipping and payment options. Despite the tightening of sanctions, India cannot halt the import of crude oil from Iran given its dependence on Iranian oil. India is trying to diversify the trade basket by adding other commodities like tea, pharma, automobile, electronics, spare parts and agricultural products.
• In the 17th India-Iran Joint Economic Commission meeting held in Tehran in May  2013 discussed critical bilateral and regional issues in areas of: Regional connectivity, Enhancing bilateral trade and economic cooperation, Cooperation on regional security issues and Enhancing cultural and people-to-people contact
• Both countries are endeavoring to build the regional transport networks – International North South Transport Corridor, which will help connect South, Central and West Asia to Europe for regional economic development.
• India is interested in investing in the Chabahar container terminal project as well as the Chabahar–Faraj–Bam railway project. From Bam, which is on the Afghan border, goods can be taken through the Zarang–Delaram road, which is linked with the garland highway connecting all major Afghan cities. There is also the possibility of extending this road to Tajikistan and Uzbekistan, which would give further impetus to regional trade and transit.
• Trade ties between countries are heavily skewed in Iranian side. In order to sustain the level of trade interaction, it is important that Iran imports more from India. Agriculture, pharma, medical equipments and aeronautics are some of the identified areas where cooperation in future could be enhanced.
• India and Iran have agreed to explore the prospects of joint investment. These can happen in both oil and non-oil sectors like electronics, automobile, Information technology, and infrastructure. Iran is offering production sharing contracts (PSCs) on exploration of oil block in Iran to Indian companies.
• Geopolitical realignments in Middle East; Syrian crisis, Rise of ISIS and the impact of the ‘Arab Spring’ has implications for both India and Iran. Today, the regional complexities demand new ways and means of cooperation between India and Iran.

How India gains from the Iran N-deal

Iran was until 2006 India’s second-largest supplier of crude oil. But it dropped to number seven by the end of 2013-14.The cause is the US’ Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, which also punishes companies and individuals aiding Iran’s petroleum sector.

As news of an agreement between Iran and the P5+1 nations emerged, global oil prices began to fall.According to a Reuters survey, Iran produces about 2.8 million barrels per day (bpd), but exports about 1 million bpd. The Reuters report claims, “(Iran) is keeping about 30 million barrels of crude on a fleet of tankers ready to be shipped when allowed, into a market already flooded with supply.”

 The Economic Survey (2015) estimates that a $1-a-barrel fall in international crude oil prices is likely to reduce India’s net import bill by $0.9 billion a year.

There are two recent projects that are worth mentioning. First, Farzad-B gas field in the Persian Gulf. This field was discovered by ONGC Videsh Limited in 2008 but India has since not pursued the project aggressively due to US sanctions against Iran. It is estimated that the gas field holds gas reserves of 21.68 trillion cubic feet (tcf), of which 12.8 tcf are recoverable. The reserves of Farzad-B are said to be almost thrice of the largest gas field in India.

And the second project relates to building a gas pipeline between India and Iran, which has the world’s second-largest natural gas reserves.

Re Imposition of Sanctions on Iran by USA

• The sanctions regime against Iran, according to the US’s official claims, is one of the toughest the world has known
• Their objective is not just about getting Tehran to renegotiate the terms of the nuclear agreement of 2015 that Iran signed with the US and the international community but also to change the “behaviour” of the regime if not the regime itself
• It is an economic war against Iran that could escalate into a military conflict.
• Many of Iran’s Arab neighbours, including Bahrain, Egypt, Saudi Arabia and Egypt, support the Trump Administration’s offensive against Tehran
• This is due to the fear Iran’s growing power and the assertion is threatening to undermine their national coherence and security

The unfolding normalisation of relations between Israel and the Gulf countries

• The tone for new thinking was set at the highest levels in the region by Oman’s Sultan Qaboos bin Said who received the Israeli Prime Minister Benjamin Netanyahu in Muscat last month
• This was the first time in more than two decades that an Israeli PM was travelling to the Gulf
• Beyond this high-profile visit, there is growing engagement between Israel and the Gulf across a broad spectrum
• Apart from sport and culture, there have been unconfirmed reports on the growing intelligence exchanges and security cooperation between Israel and some Gulf countries
• A new framework for peace between Israelis and Palestinians
• The Trump Administration is promoting this new framework
• The Trump Administration, which has discarded the traditional approaches to peace in the region, is betting that Saudi Arabia and other Gulf Arabs will help nudge the Palestinians into accepting a new deal
• For Washington, the political crisis over the killing of Khashoggi has come in handy to pressure Saudi Arabia into facilitating peace deals in Palestine and beyond in Yemen and Syria

Why the US is assertive about the transformation of the middle east?

• The idea of a grand transformation in the Middle East has tempted other American presidents before
• The US invasion and occupation of Iraq in 2003 was driven by the ambition to promote democracy in the region
• Now again, the Trump administration is hoping that a renewed confrontation with Tehran will create the conditions for the overthrow of the Islamic Republic and rearrange the regional order
• It thinks that the threat from Iran can be leveraged to build a new Middle East Security Alliance of Sunni Arabs and help settle the Palestine question

Way forward for India

• Trump has embarked on a bold new course in the Middle East
• As its stakes in the region grow by the day, Delhi needs to devote ever great amounts of diplomatic and political energies to deal with the unfolding changes in the Middle East.