Iran- India relations
This is a collection of articles archived for the excellence of their content.
Imposition of economic sanctions by the UNSC
The Times of India, Jul 20 2015
Following the report by the International Atomic Energy Agency regarding Iran’s noncompliance with safeguard agreements and Iran’s nuclear activities, the UNSC imposed a series of economic sanctions. The first of these sanctions were imposed in December 2006. An analysis of India’s trade with Iran shows a significant increase after these sanctions. Iran’s exports of goods to India were 1.8% of its total exports in 2000. This increased to 15.9% in 2014. In this period, Iran’s imports from India as a proportion of its total imports also increased from 1.8% to 5.1%.
Importance of Iran despite US sanctions
India can live without Iranian energy, but Tehran will remain a very important part of New Delhi’s foreign policy. As the US under Donald Trump takes an extreme view of sanctions against Iran, it may constrain India’s manoeuvring space significantly, if New Delhi is not careful.
Iran moved back into third place as a source for energy in 2016, soon after the Joint Comprehensive Plan of Action (JCPOA) unshackled global engagement with Tehran. But with the US openly calling for “zero” (oil imports) by November 4, things begin to look difficult. Notwithstanding the government’s brave words, Indian companies, banks, even oil PSUs, are scaling back.
During the earlier round of sanctions, India, like China and Japan, got a sanctions waiver because they “demonstrated” reductions (about 20% every 6 months). The trouble with buying Iranian oil in Indian currency remains the same — while Iran has tons of things it wants to buy from China, there’s very little it wants to buy from India beyond basmati rice and some pharmaceuticals. Post sanctions, the rupeerial deal has not yet taken off.
A bigger issue is connectivity. Energy may have dominated the last round of sanctions, but the focus is on multi-modal connectivity now. India needs Iran for a link to Central Asia and Russia. India wants to use the Chabahar port not only as an access point for Afghanistan, but also as athe International North-South Corridor (INSTC). India’s connectivity ambitions were made clear after it signed on to the TIR Convention and the Ashgabat Agreement on multi-modal transport.
Transport Minister Nitin Gadkari has promised to make Chabahar fully operational by 2018. But now that’s uncertain. The project is a win-win — it connects India but also provides a viable alternative to Pakistan as a route. Chabahar and INSTC is key to India’s geo-political ambitions of providing an alternative to China’s One Belt, One Road with a very different collaborative philosophy.
A carve-out for Chabahar was written into the US sanctions the last time round, as it was connected to Afghanistan. Logically, India could hope for a similar provision this time too. But Washington is seen as unpredictable these days. In addition, there has been virtually no high-level contact between the Modi government and key members of the Trump team in the past few months.
In the 1990s, India and Iran were on the same page regarding Afghanistan, when both countries supported the Northern Alliance against the Pak-Saudi supported Taliban. Now, Iran is on a different wavelength. Iran, like Russia, is more sympathetic to the Taliban, seeing them as a buffer against US presence and the growing footprint of IS. That has put a wedge with New Delhi. But as a friendly nation to the west of Pakistan, Iran remains invaluable to India.
India’s Iran woes have few sympathisers — not the US, and definitely not India’s closest partners in the Gulf and Middle East, all of whom have so far held their noses at New Delhi’s ties with Tehran. Israel and Saudi Arabia would lead the cheering squad if India has to scale back ties with Iran, as would the UAE.
India opposes terrorism as much as it opposes another country acquiring nuclear weapons in its neighbourhood. That puts India in a very different space, and much closer to the US. While India welcomed the JCPOA when it was signed in 2015, a decade prior, it had voted against Iran twice at the IAEA signalling its opposition to Tehran’s budding nuclear programme.
The question is no longer whether India can survive US sanctions. It can. But with its economy becoming more integrated with the world, does India want to subject itself to secondary sanctions from the US, specially with a vast private sector that would take the rap? The EU revived an older law that promises its companies compensation if they come under US sanctions. Despite this, energy biggies like Total and Shell have already pulled out from Iran.
India needs Iran for a link to Central Asia and Russia. India wants to use the Chabahar port not only as an access point for Afghanistan, but also to link it to the International North-South Corridor
Nine pacts deepen ties further
Iran may be faced with US sanctions but that did not come in the way of India looking to further ramp up its economic ties with Tehran with focus on connectivity, energy, trade and investment when PM Narendra Modi met Iranian President Hassan Rouhani here on Saturday. The two countries signed nine agreements, including a lease contract which will allow an Indian company to take over for 18 months operational control of facilities at Shahid Beheshti Port in Chabahar.
Thanking Rouhani for his contribution to the development of Chabahar port, Modi said India will support construction of the Chabahar-Zahedan rail link in Iran to allow Chabahar gateway’s potential to be fully utilised.
Port project a message to US that India is committed to Chabahar
We want to expand connectivity, cooperation in the energy sector and the centuries-old bilateral relationship, said Modi.
The port project is important for India as it will allow it to bypass Pakistan in accessing not just Afghanistan but also central Asian countries. The agreement is also a message to the US that India remains committed to Chabahar despite the US threat to tighten sanctions on Iran.
India and Iran also signed an agreement for avoidance of double taxation and prevention of fiscal evasion “with respect to taxes on income”.
Amid growing bonhomie with Israel, India is hoping that Rouhani’s visit and also Modi’s own recent visit to Palestine will help dispel the notion that its West Asia policy is no longer on an even keel. For trade and investment, the two leaders recognised the need to put in place an effective banking channel.
Significance of Chabahar port
With the web of US sanctions tightening, Iran faces a host of challenges as it looks to an isolated port in the country's far southeast to maintain the flow of goods.
The port in Chabahar, only about 100 kilometres (62 miles) from the Pakistan border and located on the Indian Ocean, is Iran's largest outside the Gulf.
It is also the only Iranian port with exemptions from unilateral economic sanctions reimposed by the United States in 2018.
That is due mainly to the pivotal role of the port, and a planned railway line, in breaking landlocked Afghanistan's dependence on Pakistan for trade with the world, especially India.
Afghan trade as well as plans for a trading route by rail between central Asia and the Indian Ocean called the North-South Corridor are the main reasons the Islamic republic has invested one billion dollars in Chabahar's Shahid Beheshti port, official sources say.
"We will keep on developing this port... our rail network, road network and airport are all being developed, so that we can implement the North-South Corridor," Roads and Urban Development Minister Mohammad Eslami told AFP while visiting Chabahar for a development conference.
More than 200 hectares (almost 500 acres) of land have been reclaimed from the sea for the project and over 17.5 million cubic metres (618 million cubic feet) dredged, creating a 16.5-metre (54-foot) draught.
But more than a year since the new installations became operational in December 2017, business has yet to pick up.
The ships that officials say have docked in the past year have only loaded and unloaded 2.1 million tonnes of cargo, a far cry from the port's annual capacity of 8.5 million tonnes.
Only 20 ships have docked at the new section of the port and most of its three kilometres of waterfront remains unutilised, with new machinery and neatly lined-up cranes standing idle.
But authorities remain upbeat about the prospects for growth.
Hossein Shahdadi of the provincial ports and maritime authority said that in the first 11 months of the past Iranian year, which started on March 21, 2018, "there has been a 56 percent increase in cargo handled at the port compared with the previous year".
"We've also had a 25 percent rise in the number of ships calling at the port" on the Gulf of Oman, he said.
Arun Kumar Gupta, managing director of India Ports Global Limited which has a 10-year concession at the new port, played down the startup issues.
"Any port will have a gestation period, there will be lulls but we are very sure that traffic will pick up," Gupta told AFP.
The Indian company began work in December and has so far handled only an average of 60,000 tonnes of cargo per month.
But Gupta is counting on the port's proximity to India and Afghanistan to attract business.
Chabahar's location, however, carries its own risks as it lies in the volatile Sistan Baluchistan province where militant jihadists operate.
In December, a suicide attack on the local police headquarters killed two policemen.
During an investment conference in February, security was tight with many roads cut off and hundreds of armed security personnel deployed to protect delegates.
Apart from security concerns, US sanctions banning financial transactions with Iran make it ever harder to pay or receive payments.
Some like Afsaneh Rabiani, who runs a freight forwarding company, see Chabahar as an opportunity for "those willing to take the risk".
"I've been researching Chabahar for the past year and a half, and the infrastructure is now in place to do serious work here," she said.
As for the sanctions, Iran's roads minister said the challenge was nothing new.
"We were born with sanctions. Ever since the (1979 Islamic) revolution, we have been under sanctions and we are working on how to counter them," Eslami said, as he oversaw the unloading of a first shipment of Afghan goods lined up to be re-exported from Chabahar.