Context:

India and Iran have cultural, economic and other relations with each other since the last many centuries.

During his recent India’s visit, Iran’s President has expressed willingness to share its vast oil and natural gas resources with India for the prosperity of its people and offered to simplify visa norms to strengthen the relations between the two countries.

This visit took place in the wake of a huge push back against Tehran from some of its Arab neighbours, Israel and the Trump administration.

Rising tensions in the Region:

Rouhani’s visit took place against the background of rising tensions in the region.

The situation in Afghanistan is worsening. Iran’s relations with Saudi Arabia remain tense.

Russian intervention has stabilised Syrian President Bashar al-Asad’s position. However, the fragility in the region was visible in the recent shooting down of Iranian drone by Israel, and downing of an Israeli Air Force jet by Syrian air defence.

Iran has also increased its role in Iraq, and activated links with the Taliban in Afghanistan, adding to the U.S.’s growing impatience and unhappiness.

Background: India and Iran relationship

It was during the late 1990s and the early years of the last decade that both countries achieved a degree of strategic convergence.

Ties between the two countries gained a new momentum in 2001 when ‘Tehran Declaration’ was signed which marked the areas of possible cooperation between the two countries.

Continuing the trend, Iranian President visited India in 2003 and signed “The New Delhi Declaration”. Ever since, the two countries have developed trade relations in several areas, mainly in Iranian crude oil.

India has been a significant importer of Iranian oil, with Tehran emerging as the country’s third largest oil supplier.

A highway between Zaranj and Delaram is being built with financial support from India. This highway will give access to Afghanistan through Iran.

The Chabahar port (situated in the Sistan-Balochistan province ) has also been jointly financed by Iran and India. It will give India access to the oil and gas resources in Iran and the Central Asian states. It is also viewed as a move to counter Pakistan’s Gwadar port, which helps China extend its influence across the Arabean sea and Indian Ocean.

The first phase of the port was inaugurated in December 2017. Iran had allowed a wheat shipment of 15,000 tonnes for Afghanistan through Chabahar.

With an objective of increasing Trade connectivity the International North–South Transport Corridor is planned. It is the ship, rail, and road route for moving freight between India, Russia, Iran, Europe and Central Asia.

Why was India’s relationship with Iran strained?

After, the U.S. declared Iran as part of the ‘axis of evil’, Iran’s President Mahmoud Ahmadinejad accelerated Iran’s nuclear enrichment programme.

This led to more sanctions against Iran and India’s economic engagement with Iran was impacted.

India’s vote against Iran in the International Atomic Energy Agency (IAEA) generated unhappiness in Tehran.

The JCPOA, spearheaded by the Obama administration, eased sanctions, helping India increase its oil imports from Iran and reactivate work at Chabahar.

But with Mr. Trump, Iran’s uncertainties are increasing. In January, President Trump renewed the 120-day sanctions waiver but announced that this was the last time he was extending it.

What is JCPOA (Joint Comprehensive Plan of Action)?

JCPOA is an international nuclear deal agreed between Iran and P5+1(China, France, UK, USA, Russia and Germany) and EU.

The initial framework lifted economic sanctions on Iran and in return Iran would restrict country’s controversial nuclear energy programme.

The JCPOA was unanimously supported by the United Nations Security Council (Resolution 2231) enabling Security Council sanctions to be lifted.

What is the problem now?

The U.S. has imposed multiple and often overlapping sanctions on Iran pertaining not only to nuclear activities but also to missile testing, human rights, and terrorism.

Since Trump election, the threat of the U.S. snapback has increased. It means that third country companies may now attract U.S. sanctions if they commit any relations with Iran.

In addition to it, unrest took place in Iran with growing corruption. Part of the reason for the economic grievances is the slower than promised sanctions relief.

US anti-Iran sentiment has been backed by Israel and Saudi Arabia. Both blame Iran for aggressive behaviour — the former with regard to the growing influence of Iran and Hezbollah in Syria and the latter for the prolonged war in Yemen which was initiated as a quick operation in 2015 by the Crown Prince to restore President A.M. Hadi.

Russia, China, and the European countries have indicated their full support for the JCPOA.

Highlights of Iran President’s India visit

1. India conveyed its support for the full and effective implementation of the JCPOA.
2. India also expressed the need for strengthening consultations on Afghanistan, and enhancing regional connectivity by building on the Chabahar.
3. Nine MoUs were signed relating to avoidance of double taxation, visa simplification, cooperation in diverse fields including agriculture, traditional systems of medicine, health and medicine, postal cooperation, trade remedial measures, and a lease contract for an interim period of 18 months for Phase 1 of Chabahar.

What are the challenges?

1. The negotiations on the Farzad-B gas field remain stuck, with both sides blaming the other for shifting the goalposts. It was remained on paper because of Iranian unhappiness over India’s stand in the IAEA.

2. There was just a talk about an aluminium smelter plant and a urea plant to build up Indian investments in the Chabahar free trade zone.

3. The railway link has been mentioned in the context of connectivity to Afghanistan but the economic rationale for the $2 billion investment has been missing.

4. An agreement on exploration of a rupee-rial arrangement was made which could provide an alternative channel for economic and commercial transactions in case of U.S. sanctions. The sanctity of this will need to be tested.

5. Trade between the two countries has hovered around $10 billion, with two-thirds of it accounted for in terms of oil imports from Iran while in contrast, that between India and the United Arab Emirates is $60 billion.

Way Forward

The near-term developments in its neighbourhood are a priority for Tehran even as India tries to find a balance with his stated preference to develop closer ties with both the U.S. and Israel.

India and Iran are looking to swiftly conclude a preferential trade agreement and a bilateral investment treaty.

Newly relaxed visa norms announced by Iran in addition to India’s proposal for Indian businesses to invest in rupees in Iran are all moves in the right direction.

Nonetheless, they may be insufficient to cement commercial ties if USA sanctions do return.

India should give its full support for the effective implementation of the JCPOA. Only successful implementation of the JCPOA over a period of time can create the political space for additional negotiations.

Both the nations can take leverage of their historical and civilizational relations to steer ties so much. The visit proved to be a much-needed reality check to the India-Iran partnership.