Modi’s Visit to Iran: Re-Building the Strategic Partnership
May 25, 2016, 5:00 am

Indian Prime Minister Narendra Modi with the President of Iran, Hassan Rouhani, in Jomhouri Building, at Saadabad Palace, in Tehran on May 23, 2016 [Image: PMO, India]

India’s diplomatic activism to engage Iran comes at a time when Iranian leadership is trying to build new equations with countries at regional and global level after lifting of the sanctions. Europe, China, Russia, Japan, South Korea and many other countries are looking at establishing long-term trade and energy ties with Iran in the post Joint Comprehensive Plan of Action (JCPOA) period.

To cement this strategic partnership, India has inked 12 agreements in the area of connectivity, trade, culture, education, science and technology including investing billions of dollars in infrastructure and setting up of joint ventures in aluminium smelter and urea plants in Chabahar free trade Zone. The visit was intended to develop an all-out comprehensive strategic economic cooperation with Iran.

From the Iranian side India’s increasing effort to strengthen the cooperation was endorsed by none other than Supreme Leader Ayatollah Khamenei, Iran’s highest authority.

“The Islamic Republic of Iran welcomes expansion of relations with India, which is one of the emerging and progressive economies in the world, and (Iran) is serious in implementing bilateral agreements and is not influenced by any policy,” Khamenei said.

The most significant agreement signed between the two countries has been the bilateral contract on Chabahar Port for port development and operations between India Ports Global Private Limited (IPGPL) and Arya Banader of Iran. This contract envisages development and operation for 10 years of two terminals and 5 berths with cargo handling capacity.

The signing of trilateral agreement of transit and transportation corridor between India, Iran and Afghanistan signals the increasing effort on part of three countries to improve regional connectivity between South-West and Central Asia.

This is a significant development for all the three partners since this will provide direct access to India bypassing Pakistan to Afghanistan and Central Asia via Iran. The MoU between Indian Railway PSU IRCON and Construction, Development of Transport and Infrastructure Company (CDTIC) of Iran will enable IRCON provide services for the construction of Chabhar-Zahedan railway line thus connecting India-Afghanistan and Iran.

India has committed to invest around $1.6 billion in this project. The Chabahar deal clearly reflects the strategic component of the evolving relations between the two countries. This deal clearly lays down the ground for deep, long-term strategic partnership between the two countries.

The importance of cooperation on Chabahar port was emphasised by both Indian and Iranian leadership. President Rouhani said that Chabahar port serves not only as point of connectivity between the two countries but also between India and Afghanistan.

In addition, “it can also play a pivotal role in Iran-India cooperation on various industries including aluminium steel, and petrochemicals”. Highlighting the bilateral and regional significance, Prime Minister Modi said that “The agreement to develop Chabahar Port for which India will provide USD500 million is a key milestone” and opens a new chapter in India-Iran strategic partnership. Besides, the construction of the Chabahar-Zahedan-Mashhad railway line can boost bilateral economic cooperation between India and Iran as well as with other regional countries.

From the Indian perspective, Chabahar is definitely a land mark deal for which New Delhi has been trying since 2003. Because of sanctions and related problems movement was very slow on this project. However, improving US-Iran relations and lifting of sanctions have opened many opportunities for India. Development of the Chabahar port on the long term bases also provides India access to Afghanistan and Central Asia which has been denied by Pakistan since 1947.

For many experts this is also a fine balancing act by India and Iran to balance China and Pakistan in the region. Though Iran has endorsed the Chinese initiative of one Belt one Road (OBOR) and India has not opposed this project. However, diversification in its commercial relations would pay rich dividends to Iran. India would want to build its relations with Iran separate from its bilateral ties with China, Saudi Arabia and Israel.

At the same time, this is also reflective of India’s regional economic strategy where it believes that geo-economics is a necessary pre-condition for regional security. A senior Indian official at India’s Foreign Ministry, earlier this year, has very rightly argued that “political instability can be offset through greater economic engagement with the region”.

In the past India-Iran and Russia have been working very closely to improve the connectivity in the region through the International North South Transport Corridor (INSTC) project. Now there is a forward movement on this project as well. This is a regional project aimed at enhancing trade and economic cooperation among the regional countries of South, Central and West Asian countries with Russia and Europe.

The commercial potential of the INSTC will increase many fold if countries of East Asia also get connected. India-Iran-Russia along with Afghanistan and Central Asian countries are looking at greater cooperation in the changed security paradigm in the region.

Despite these positive developments in India-Iran ties, both the countries will have to manage their relations addressing new threats and challenges to sustain the momentum of cooperation built during Modi’s visit to Tehran.

Meena Singh Roy is a Research Fellow and Coordinator West Asia Centre at the Institute for Defence Studies and Analyses in New Delhi.