India – Iran relations: Prospects and challenges

In past few years both India and Iran have been working towards managing its energy and economic cooperation under the shadow of the United States (US) and European Union (EU) sanctions. Despite the tightening of sanctions, India cannot halt the import of crude oil from Iran given its dependence on Iranian oil. Equally important is the regional security dynamics, particularly the developments in Afghanistan in the post-2014 scenario. In addition, the unfolding of Syrian crisis and the impact of the ‘Arab Spring’ has implications for both India and Iran. This paper attempts to bridge the various views and ideas on bilateral relations between India and Iran and the onus on the former to steer its diplomacy and national interest without undermining the fundamentals of its partnership with key allies such as the USA, Gulf Cooperation Council, and Israel. The results indicates that while India is concerned with balancing of forces to maximize its national interest Iran strives to shape a postsanctions foreign policy that is reflective of the regions ancient links and the traditional Euro-centric foreign policy leanings. The gains from cooperation therefore becomes dependent on a new diplomatic momentum that is devoid of interference and victimization from outside.


INTRODUCTION
The India and Iran relations span centuries marked by meaningful interactions. The two countries shared a border till 1947 and share several common features in their language, culture, and traditions. Both South Asia and the Persian Gulf have strong commercial, energy, cultural and peopletopeople links. Independent India and Iran established diplomatic links on 15 March 1950

Demography
Islamic Republic of Iran,capital Teheran,currency: Rial,area: 16,48,0000 Sq.Km,population;78,868, 711 other large cities; Esfahan, Mashad, Languages; Persian (Farsi) Turk, Kurdish, Arabic, Religions; Shia's Muslim 89 per cent, Sunni Muslims 9 per cent, Zoroastrian, Jewish, Christian and Baha'i 2 percent, Literacy; 91 per cent, Life expectancy; 71 years. Iran, formerly Persia, lies between Caspian Sea and the Persian Gulf and consists of central plateau surrounded by mountains. A popular revolution of Islamic charter swept the long-ruling Shah Mohammed Reza Pahlavi from power and installed a strict clerical leadership under Ayatollah Ruhollah Khomeini, spiritual leader of the Shia Muslim community. Iran is a country of great antiquity celebrated alike for its culture and military velour. Agriculture employee's 30 per cent of the labor force. The Chief products are wheat, barley, rice, fruits (largest producer of dates), wool and sugar beets. Iran is one of the biggest oil-producing regions in the Middle East. It owns 7.5 per cent of total world oil reserves and 15 per cent of global gas deposits. Emeralds and other gems are found in Khorassan and Kerman. Persian carpets, made on handlooms are famous.

Nuclear
India has publicly supported Iran's right to peaceful nuclear technology, but [now former] Indian External Affairs Minister Pranab Mukherjee has said that Iran must pursue a nuclear enrichment program "in accordance with its own international commitments and obligations, (and must) satisfy the international community that its program is indeed peaceful" (Pranab Mukherjee 2008). Although India voted in 2005 to take the issue of Iran's enrichment activities to the UN Security Council, it has since repeatedly insisted on a peaceful resolution to the conflict and stated it will not support any threats of violence made against Iran for its nuclear program. On December 31, Iranian Foreign Minister Manouchehr Mottaki expressed his country's disappointment to his Indian counterpart Somanahalli Mallaiah Krishna over India's vote in favor of a recent resolution by the International Atomic Energy Agency (IAEA) regarding Tehran's nuclear program. In his letter, Mottaki drew a parallel between Iran's nuclear program and India nuclear tests.
India and Saudi Arabia have together backed ongoing international efforts to resolve the controversy over Iran's nuclear program through dialogue and have requested that Tehran respond positively to efforts that could remove "doubts." In a declaration issued after a March 2010 meeting between visiting Indian Former Prime Minister Manmohan Singh and Saudi King Abdullah, the two leaders called for continuation of these efforts. In March 2010, the Indian government stressed that it now perceives additional sanctions against Iran as counter productive.

Economic relations
Iran-India bilateral trade has increased in recent years, totaling $14 billion in 2010 -$1.4 billion increase over the previous year's numbers. Iranian hydrocarbon exports to India constitute most of this trade. India has sought to buy oil and gas from Iran to help feed its energy needs, generated by the country's rapid development. India's cooperation with the United States, however, has slowed the development of relations with the Islamic Republic, particularly as the US and Iran have clashed over the latter's nuclear enrichment activities.
The two countries have long been exploring the feasibility of the Iran-Pakistan-India Pipeline (IPI), which would provide India with a steady source of Iranian natural gas. The project has been opposed by the United States as it would provide Iran with extra revenue, undermining sanctions targeting the Iranian nuclear program. As of May 2009, India remained noncommittal due to a combination of factors, including price disputes with Pakistan, anti-Iranian pressure from the United States, security concerns (and the possibility of less expensive domestic alternatives). Consequently, that same month, Iran and Pakistan signed a deal to begin construction without India's participation. Iranian Foreign Minister Manouchehr Mottaki has said that, in lieu of cooperation from New Delhi, China is keen to join the Pakistan-Iran project. Mottaki noted that work on the gas pipeline would begin soon and that Beijing is likely to join the project. According to a poll taken in February 2010, majority of Pakistanis believes that the project would be more useful if China join.
Although India's participation in the Iran-Pakistan-India pipeline appears in doubt, India and Iran nonetheless expanded in other endeavors, with the two entering into a new round of negotiations in July 2009 regarding the development of the Farzad B offshore gas field. According to the Iranian Mehr News Agency, a consortium of Indian oil firms intends to invest $4-5 billion in the first phase of the project, located in the Persian Gulf.
In June 2009, India's Reliance Industries Ltd halted gasoline exports to Iran to avoid possible restriction on sales in the United States, which has increased pressure on companies selling gasoline to Iran. A joint-venture between India's state-owned Oil and Natural Gas Corporation and the Hinduja Group has obtained a 40% stake in Phase 12 of Iran's South Pars gas field. The agreement for the project, which is, in total, valued at $7.5 billion, was announced in December 2009. Iran had previously assigned 60% of the project to the Indian pair, however reduced the share due to concerns over slow progress and US pressure on India (Zeenews, October 4, 2009).

Dipolmatic / military relations
Although India has voted in favor of imposing UN sanctions against Iran for its nuclear program, the two countries have continued to pursue a cordial diplomatic relationship. As two powerful countries in close proximity, India and Iran share geopolitical interests as well as commercial interests, which arise from Iran's capacity to provide India with the energy it requires. According to Iranian President Mahmoud Ahmadinejad, Iran and India "must get prepared through strengthening bilateral ties for big changes in the world and filling the power gap in the region" ( In February 2010, Iranian Ambassador to India Seyed Mehdi Nabizadeh expressed his country's support for India's opposition to the concept of "good" and "bad" Taliban, dismissing recent western overtures to members of the militant organization. "Our experience is not to believe in the 'good-and-bad' Taliban theory. Taliban is Taliban. Extremists should not be part of any government in Kabul"(Nabisadeh, 2010) . He cautioned that the return of the Taliban would cause the regional security situation to further deteriorate and advocated a regional approach, involving India, to address the Afghan issue, saying that Tehran, like New Delhi, has a large stake in the stability of Afghanistan. Indian Former Foreign Secretary Nirupama Rao met with Iranian leaders in Tehran in February 2010 to discuss bilateral relations between the two countries. During her two-day visit, the sides exchanged views on issues including Afghanistan, crossborder terrorism, as well as other matters of regional and global importance. Rao was in the Iranian capital for the seventh round of Foreign Office Consultations/Strategic Dialogue between the two countries at the invitation of her counterpart, Deputy Foreign Minister for Asia and Oceania Mohammad Ali Fathollahi.
During a May 2010 meeting of the G-15 developing nations, the two touched on the issue of security in Suresh and Ramesh 381 Afghanistan and Pakistan, with the Iranian president "underline the desirability and need for India and Iran to be in touch and work together." Indian officials had previously stressed in March 2010 that "Iran is an important ally when it comes to dealing with Afghanistan and its help is crucial to ensure that elements hostile to India don't have a free run in Afghanistan, allowing Pakistan the strategic depth which it so dearly seeks over India." (The Times of . West Asia is going through the political transition. With the changing global and regional security environment, new geopolitical alignments as well as changing balance of power are taking place. Iran, an important player in the region is confronted with both internal and external challenges. Domestically, it is preparing itself for the upcoming presidential elections in June and struggling to manage its economy because of the sanctions. Externally, it is trying to overcome its current isolation because of its standoff with the West on its suspected nuclear weapons programme. So far Iran has been able to manage both challenges by developing strong political, economic and strategic relations with the states in the region and beyond, hoping that such ties can it through the difficult times. While the region reorganises itself, Iran and India look towards consolidating their bilateral relations. Both countries are significant actors, whose role can't be overlooked in terms of their political and economic involvement in the region. Today, the regional complexities demand new ways and means of cooperation between India and Iran. This is yet another diplomatic push towards strengthening the existing partnership between the two regional actors. Earlier, the visit of India's Former Prime Minister, Manmohan Singh to Iran on August 28, 2012 to participate in the Non Alignment Movement (NAM) summit was a clear indication of New Delhi's desire to give new impetus to bilateral relations and enhance economic cooperation. The former Prime Minister of India said: "there is lot of interest in doing business with India and getting Indian investment in infrastructure. There are of course difficulties imposed by western sanction, but subject to that I think we will explore ways and means of developing our relations with Iran". After the Prime Minister's visit, a new thrust was given to the bilateral relations. Sub-sequently, several high-level visits have taken place on both sides. Significant among the various interactions has been the recent 17th India-Iran Joint Economic Commission meeting held in Tehran on May 4, 2013.

Regional connectivity
Regional connectivity, both sides agreed to work on a trilateral transit agreement involving Afghanistan. A draft agreement is expected to start soon. India's participation in port of Chabahar project has been under discussion for the last few years but the decision to upgrade the port of Chahbahar was conveyed during the External Affairs Minister's (EAM) visit. As a follow up, India's Secretary from the Ministry of Shipping will visit Tehran to discuss the cost and related aspects on port project. It is important to note that the Iranian port of Chabahar (previously Bandar Beheshti), located on the Makran Coast of the Sistan and Baluchistan Province of Iran criss-cross some of the most important international corridors -East-West, North corridors, South corridor and Transport Corridor Europe-Caucasus-Asia (TRACECA) and can be considered one of the most strategic transit locations. It is often referred to as the 'Golden Gate' to the landlocked Commonwealth of Independent States (CIS) countries and Afghanistan. Chabahar has immense potential to connect the business centres in South Asia (Mumbai, Jamnagar, etc), the Middle East (Dubai), Central Asia (Turkmenistan) and Afghanistan (Milak). It is close to the mainline shipping routes connecting Asia and Europe and is 700 km away from the capital of the province of Zahedan and 2,200 km away from Tehran. The distance from Chabahar to Milak on the Afghan border is 950 km; it is 1,595 km to Dogharoon on the Afghan border; 1,827 km to Sarakhs on the Turkmen border; and 120 km from the Pakistan border. Iran plans to use this port for transhipment of a variety of goods -tea, eatables, electronics, building materials, heavy equipments, etc.to Afghanistan and Central Asia and equally maintain the Bandar Abbas port as a major hub for trade with Russia and Europe. From India's point of view, the strategic importance of Chabahar is immense. It not only gives access to the oil and gas resources in Iran but also provides access to Central Asian Republics. India and Iran have already taken initiatives to enhance connectivity through bilateral agreements. In April 2008, an important initiative was taken by both countries when India and Iran signed an agreement to establish a new rail link between Iran and Russia. India offered assistance for technical training of personnel, railroad signalling projects as well as the supply of locomotives and spare parts. The trilateral agreement between the governments of India, Iran and Afghanistan to develop the Chabahar route through Melak, Zaranj and Delaram will also facilitate regional trade and transit and thus contribute to regional economic prosperity.
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.5 During the current visit of the EAM, the proposed North-South corridor linking Russia with Iran was also discussed with the objective of clearing the hurdles. The potential of these corridors are immense. While new initiatives by India, Iran and other regional countries offer many opportunities, the challenges, however, limit the full realisation of these corridors. These challenges mainly concern the security situation in the region, lack of economic resources, the Iran-US standoff and finally the impact of current US and EU sanctions. India's recent decision to invest USD100 million in free trade zone in Chabahar can be viewed as a forward movement in terms of enhancing bilateral ties. Projects of such scale and size demand more time and assessment.

Enhancing bilateral trade and economic cooperation
The need to increase trade and economic cooperation between India and Iran is a strong imperative though the current level of economic engagement does not reflect the close relations between the two. India -Iran bilateral trade during 2011-2012 was USD 15,968.03 million as compared to 12,887.52 million in 2007-2008. The largest portion of this trade is imports of petroleum products by India from Iran. Therefore, in order to sustain the level of trade, it is important that Iran imports more from India. Agriculture, pharmacy, medical equipment and aeronautics are some of the identified areas where cooperation in future could be enhanced. It is ironical that Iran imports wheat from the US while it can do the same from India. During the EAM's visit, both countries have decided to increase bilateral trade to USD 25 billion in the next four years. Another significant area where cooperation can be expanded is banking. In addition, India and Iran have agreed to explore the prospects of joint investments. These can happen in both oil and nonoil sectors like electronics, automobile, information technology, and infrastructure. Iran is offering Production Sharing Contracts (PSCs) on exploration of oil block to Indian companies. This offer of PSCs was repeated by the Iranian foreign minister during the recent Joint Commission meeting in Tehran. The Indian EAM reacted by saying, "We have an offer…to participate in one of their oil fields …We must now respond" (The Economic Times, May 6 2013). Despite attractive PSCs, Indian firms are not sure about investing large sums as the risks are still too high owing to the sanctions. Production capacity in the industrial sector of both countries was highlighted and both sides agreed to diversify their cooperation.
While economic diplomacy remained the highlight of the EAM's visit, there was neither mention of the Iran-Pakistan-India (IPI) pipeline nor the liquefied natural gas (LNG) deal. In the case of the IPI, there is security and pricing related problems while on the LNG deal, Iran is yet to respond. After India voted against Iran in the IAEA in 2005, Tehran called of this deal. It was communicated by the Iranian Foreign Ministry Spokesman that "Iran will revise these (economic) relations, and these countries (that voted against Iran) will suffer. Our economic and political relations are coordinated with each other"(Amit Baruah 2005). Iran is a significant source of crude oil for India and will remain so in India's future energy demands. In recent times, India has had to reduce its crude imports from Iran because of the prevailing sanctions which impose restrictions on shipping and payment options. India and Iran are trying to find ways to overcome this problem. While India complies with UN sanctions, it does not recognize unilateral sanctions imposed by third countries. Despite these difficulties, India will continue to import crude oil from Iran because of its proximity and also because Iran has remained a reliable partner. Iran has regularly supplied crude oil to Indian refineries despite the recent difficulties of delayed payment. More so, it is not possible to reduce the imports drastically from Iran. Mangalore Refinery and Petrochemicals Ltd (MRPCL), India's biggest buyer of Iranian crude, declared earlier in January 2012 that it would continue to purchase Iranian oil. However, the very nature of sanctions imposed by US and EU has made the international trade environment significantly restrictive vis-à-vis Iran.
According to recent reports, Iran will develop three of its oilfields -Tossan, Esfandyar and Soroushwhich are located in the Persian Gulf. Iran has also announced that it will implement 11 plans by July-August 2013 with the goal of increasing oil production by 175,000 barrels per day. Its oil minister has stated that Iran's oil output is projected to increase by 1.5 million bpd by 2016. There are other ways of enhancing energy cooperation between the two countries. Since Iran, as has been suggested, has a strong petro-chemical base, it would provide investment opportunities to Indian companies and they can export finished products to India. Moreover, the feasibility study of deep sea pipeline project has been carried out and the prospects will soon be discussed. If Iran expects India to be its true partner in energy cooperation it must give due attention to revisit the India-Iran LNG agreement signed in January 2005, according to which Iran was to export 7.5 million tons of LNG per annum over the 25 years starting in 2009.

Co-operation on regional security issues
The region is passing through a turbulent phase in its socioeconomic and political development. There are huge political uncertainties particularly in Afghanistan, Syria and some of the West Asian countries. Without Iran's inclusion regional security architecture will not be sustainable. Iran controls the entry and exit points to the Straits of Hormuz through which vast amount of oil passes. Uninterrupted oil supplies from the Persian Gulf remain important for India and the global economy. Any military attack on Iran can interfere with the general security of oil supplies through the Straits of Hormuz. Military conflict in the region can lead to massive rise in oil prices thus affecting the global economy. Iran is equally an important player in Afghanistan and had played constructive role after 9/11 by offering full support Both support the Geneva Communiqué, which includes the "6-Point Plan of Kofi Annan". For Iran, stakes are high in Syria, and not surprisingly is thinking about diplomatic initiatives to resolve the Syrian crisis by getting the major non-aligned countries together.12 However, it needs to be seen how far Iran's proposal of involving NAM countries would reach and to what extent India will be willing to play more active role in resolving the Syrian crisis under the initiatives of Iran. For India, its relations with the Gulf Cooperation Council (GCC) countries are equally important. In fact, the stakes are high in the Gulf, where more than six million Indians work. The GCC countries are India's largest trade partner with trade in 2011-12 amounting to about $124 billion, far outstripping the financial volumes of such ties with any other region of the world.

Enhancing cultural and people-to-people contact
To give further push to the cultural ties and increase people to people contact between the two countries, the Indian Cultural Centre was inaugurated in Tehran during the EAM's visit. India did not have a single Culture Centre while Iran had many Culture Centers in India. Therefore, opening up of the Centre is significant in a historical and cultural context. To enhance people-to-people contacts, the two sides felt the need to liberalize their visa regime.
During this visit the following three MoUs were signed Iran's controversial nuclear programme has been a sensitive issue with India since India's vote against Iran at the IAEA in 2005. Iranian perception has been that because of its historical ties and as a founding member of the Non-Aligned Movement, India should have been more sensitive towards Iran and not have followed the Western line. India's position has been very clearly articulated on this issue. It has been emphasized that Iran has a right for peaceful use of nuclear energy while fulfilling its obligations owing to its membership of Nuclear Non-Proliferation Treaty (NPT). India has urged all sides to resolve the issue diplomatically through discussions and negotiations. During the recent visit of EAM, Iranian shared information on its nuclear programme and informed about the resumption of talks with P5+1 which is likely to start this year.

Prognosis
The recent visit of the EAM can be viewed as continuation of new bilateral push despite economic sanctions. In this new phase, both sides are attempting to re-energise economic cooperation and enhance regional connectivity. If India is exploring ways and means to give a push to its Iran policy, Iran, on the other hand, wants "sincere and deep-rooted relations"(Government of India, Ministry of External Affairs, August 30, 2012). Iran's relationship with India in the last decade has been built on the strong underpinning of ancient links and goes beyond bilateral ties. The future of India-Iran relations will depend on two factors: First, how India manages to balance its relations with Israel, US and the GCC countries on the one hand and Iran on the other? Second, what will be the nature and level of Iran's engagement if its relations improve with the US and EU? Will Iran's foreign policy then be more west-focused or east-centered? In the past, during the Cold War, Iran under the Shah was in the camp of the West but after the revolution their relations went sour. The West Asian region including Iran is highly Eurocentric and therefore if Iran-US relations improve, the foreign policy direction would be more towards Europe/US than towards Asia.

Conclusion
For India, Iran continues to remain important for various reasons: energy security, countering Pakistani Taliban in Afghanistan, access to trade and transport connectivity with Central Asia and Afghanistan and, to some extent,managing the domestic political dynamics. India does not want to be a victim of the US policy in West Asia. However, equally important for India is its strategic partnership with the US. In the current context, the real test for India and Iran is to maintain and sustain the current momentum.