Prime minister Narendra Modi’s recent visit to Iran marks a new beginning in bilateral relation and beyond. The trip was basket of agreement on the development of the Chabahar port and onward connectivity with Afghanistan. India is one of the biggest buyers of Iranian crude, and is set to import at least 400,000 barrels per day (bpd) from Iran this year. Iran has the world’s Second-Largest reserves of natural gas, yet it is not a major exporter. Iran has been eager to enter into the market with a boom. However, Iran has serious challenges to overcome before it can become an energy supplier to western and Asia.
Facts related Agreement:
12 business agreements were signed during Modi’s visit to Tehran. India is increasing its consumption of energy, and we can import a lot of goods and services, including high technology from India.
Memorandum of Understanding on provision of services by Indian railways, including financing to the tune of $1.6 billion, for the Chabahar-Zahedan railway line- a line that is also part of the trilateral agreement between India, Iran and Afghanistan on transit and trade corridor.
$500 million was invested by India for developing Iran’s Chabahar port leading to Afghanistan and onwards to central Asia. A contract for the development and operation for 10 years of two terminals and five berths. The extension of credit lines of $500 million for the port and of Rs. 3,000 crores for importing steel rails and implementation of the port. In the most important deal that India would invest about $500 million building two terminals and five cargo berths at the Iranian seaport of Chabahar.
India would pay back its $6.5 billion it Iran, for oil imports, by using turkey’s Halkbank-which now operates in Iran.
Importance of geo-political aspect:
Iran has always potentially been the important power in the region. Because of its geography, Iran was historically an important arena of great power jostling for influence. It has a unique geopolitical location owing to its reach in central Asia and Caucasus as well as in west Asia and Persian Gulf.
From the last decades of the 19th century to the mid-20th century, the British and Russian empires vied for influence in Iran and eventually settled for a condominium.
US sanctions remain in place, on the ground that Iran violates human rights and supports terrorism. Hence, no Western bank has dared to open business in Iran, for fear of running afoul of U.S. regulations. Iran’s energy infrastructure-long neglected as a Western sanctions-requires major upgrades to make it capable of sustained energy exports. This will require massive foreign investment.
The strongest pressure against strengthening relation between India and Iran has been from the United States. Since 2002, fear of developing nuclear facilities in Iran had resulted in economic sanctions being placed on the country by the US and EU. The US had been persistent in their attempts to stop India from importing oil from Iran and furthering economic ties. The US pressure gained further currency when India signed the India-United States Civil Nuclear Agreement. However, citing strategic autonomy and necessity to keep the country’s interest first, the Indian government decided to join the US-EU forces in enforcing sanctions on Iran. Defying international pressure, India used the Chabahar port for the first time in 2012 to transport 100,000 metric tonnes of wheat to Afghanistan as part of humanitarian aid. However, the economic sanctions on Iran made it difficult to develop Chabahar to the extent necessary.
The U.S and Europe lifted sanctions in January under a deal with Iran to limit its nuclear programme but some restrictions to trade remain, tied to issue such as human rights and terrorism. U.S sees its relationship with India as critical, partly to counterbalance China’s rising power.
In early 2016, Iran agreed to cut down on the scope of its nuclear activities. This was followed by the economic sanctions on Iran being lifted, there by widening the scope of relations between India and Iran.
India’s interest in Chabahar since the 1990s:
India has largely focused on the Chabahar deal, first mooted on by India and Iran in 2003 on the side-lines of the Non-Aligned Movement Summit in Tehran.
Relations between India and Iran took off in the 1990s, when the two countries came together to support the northern alliance in Afghanistan against the Taliban. Since then, there has been persistence, but slow efforts at boosting economic ties between the two countries. One of the largest suppliers of oil to India, Iran has always been of huge strategic importance to the country despite international pressures to halt friendly relations between the two sides.
The Chabahar port was partially developed by India in the 1990s. Since the partition of the country in 1947, India’s trade access to Afghanistan has been thwarted by Pakistan. While no Indian goods can move to Afghanistan through Pakistan, only a trickle of goods from Afghanistan can reach India. Trade interests in Afghanistan and in central Asia, made it imperative for India to look for an alternative route, which was provided by Chabahar.
In 2003, the then Prime minister Atal Bihar Vajpayee had announced the decision to build a port at Chabahar giving access to Afghanistan and Central Asia. However, sanctions applied on Iran by western countries made it difficult for India to make progress in developing the project. The sanctions were lifted on January 16,2016, opening up an opportunity for India to once again concentrate efforts on enhancing economic ties with Iran.
Importance of Chabahar Port:
India signed a contract to build and operate the port of Chabahar on the southern Iranian coast that is aimed at boosting connectivity with Afghanistan and central Asia. For energy served India, Chahabar will provide a vital link to the resource -rich central Asia states and Afghanistan, where India has important commercial interests. A new transportation network that link not only Iran and India, but also Afghanistan -a country that’s also huge mineral resources are in need of investment and customers. For Afghanistan, Chabahar, together with the India Financed zaranj-Delaram highway, will provide the land locked country access to the India Ocean and allow it to trade with India by entirely bypassing Pakistan.
Extension of a credit line by India for the development of infrastructure related to Chabahar, an agreement to establish a trade transport corridor, further Indian assistance in building rail infrastructure to improve Afghanistan’s connectivity via Iran, and a bilateral understanding to consult on combating terrorism, radicalism, drug trafficking, and cybercrime. Prime Minister of India Narendra Modi, Iran President Hassan Rouhani, and Afghanistan president Ashraf Ghani at the signing of the tripartite agreement is a testament to the significance being attached to the project.
Counter to China-Pakistan Strategy:
Chabahar is located near the Iran -Pakistan border, and is a little over 60 miles from the Pakistani port of Gwadar that is being developed by the Chinese. The proposed transit route through Iran and Afghanistan also appears to be a response to the China-Pakistan Economic Corridor(CPEC). By investing in Chabahar port, India has an eye on china as well, what china is doing not just in Pakistan…. but also with countries in the Middle East. However, Chabahar is just one piece of India’s strategy in Iran.
Bilateral Agreement between India and Iran was a success. India’s commitment to work with Iran for the development of the Chabahar port that would have far reaching benefits, not only for the people of India and Iran but also for the Afghanistan and entire Central Asia region. Start with Chabahar today, but its end will be an all-out comprehensive development, and economic, cultural cooperation. One of the defining partnerships of the 21st century. It is one of the fastest growing countries which are no political problems, no disputes with theme at all in the world. Rouhani observed that “the agreement today is not only an economic document; it is also a political and regional one too.
Author: Srinivas Akkapaka, Research Scholar (World Organization of Students and Youth- WOSY)
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