The Indo-Iranian Entente; An Account [YKA SPECIAL]

Posted on April 11, 2012 in GlobeScope, Politics at Play

By Rohit Sinha:

India’s growing energy needs have hardly gone unnoticed. Maintaining high growth rate with an expanding population is definitely going to be a task for any government in power. However, do India’s relations with Iran pose a credible way ahead? Bilateral relations between the two nations have been on the upswing since the early 1990’s. Despite a few hiccups one can safely assume that both countries are looking at long-term servicing of their strategic interests.

In July 2009, Indian Prime Minister Manmohan Singh congratulated Iranian President Mahmoud Ahmadinejad on his June re-election, stating that “there is no doubt that your continued cooperation will further enhance the bilateral ties between Iran and India in a way that will serve the two countries interests”. To the world, India’s Middle East policy is increasingly being viewed through the prism of Indian-Iranian relations (Pant 2011). For years, Iran has been pursuing both a nuclear program and the development of long range missiles, uncomforting to the West. A Congressional Research Service (CRS) report of 2006 observed, ‘India’s growing energy needs and its relatively benign view of Iran’s intentions will likely cause policy differences between New Delhi and Washington’. The interest taken by the international community in Iran’s foreign relations is certainly valid, however is India really the right strategic companion assisting Iran’s progress? Or rather, is it poised to be in the future? Which one of the two stands to gain more from the other?

Relations between New Delhi and Tehran are largely underdeveloped on several fronts. The West’s obsession of the ties between the two countries, has lead them to ignore simultaneous and emerging associations with the Gulf States and Israel (Pant 2011). With the latest US sanctions, it is becoming difficult for India to do business with Iran. But it is improbable India will yield to US pressure and is exploring options of doing trade in Rupee (Hindu Business Line 2012). Nevertheless it is unlikely that India-Iran relations would derail development of US-India partnership. At the same time, given a clear Indian interest in maintaining positive ties with Iran — especially in the area of energy commerce — New Delhi is unlikely to abandon its relationship with Tehran or to accept dictation on the topic from external powers (Kronstadt et al 2006).

Economic-Energy Cooperation

Indian leaders regularly speak of “civilizational ties” between the two countries, a reference to the interactions of Persian and Indus Valley civilizations. In contemporary times, Indian-Iranian relations have come a long way, post 1990s. Narasimha Rao, the then Indian Prime Minister visited Iran in 1993, followed by a return visit paid by the then President of Iran, Akbar Hashemi Rafsanjani in 1995. These have been termed as “turning points” in bilateral relations and since then high level exchanges have increased remarkably, leading to consolidation of economic cooperation.

India-Iran’s commercial relations are dominated by Indian imports of Iranian crude oil, accounting for roughly 80% of Indian imports from Iran each year. In response to a Parliamentary Question (August 23, 2011), Indian Public Sector Undertaking (PSU) refineries have a term contract of 2,63,076 barrels/day to be imported from the National Iranian Oil Company (Parliament of India 2011). The countries share a long-term ‘economic complementarity’ that has strengthened ties. India’s large and growing demand for energy and Iran’s pool of energy resources make the two nations natural economic partners (Pant 2004). This association can only be assumed to grow larger.

The bilateral energy partnership is the heart of the strategic-economic partnership between the two countries. A major aspect of growing energy commerce is the proposed construction of a gas pipeline from Iran to India via Pakistan (IPI). This has raised strong opposition from the West. During her March 2005 visit to Asia, Secretary of State Rice expressed US concern about the pipeline deal. The project is estimated to cost around US $7 billion. However due to differences viz. pricing of gas, delivery point of gas, project structure, payment of transportation tariff and transit fees for passage of natural gas though Pakistan etc, no agreement relating to the project has been signed so far (Parliament of India 2011). Besides there are other relevant Indian concerns about the security of the pipeline through its course in Pakistan.

Other reasons believed for the pipeline not materialising is the mounting pressure from the US to economically isolate Iran. Indian Prime Minister Manmohan Singh in 2005 went on to say that he did not know if any consortium of bankers would underwrite the project, given uncertainties attached to Iran. Also the pipeline was never in support of the Indian strategic community as it gave Pakistan too much leverage over India’s energy security (Pant 2011). Thus the US floated the idea of a Turkmenistan- Afghanistan-Pakistan-India (TAPI) gas pipeline, which is expected to start in 2012 and be commissioned by 2016. The US is also in favour of funding the project. Consequently Iran will be left out of the new energy export economy, at the same time creating lucrative benefits for countries in the region, including India.

Another project that seems to be stalled is the $22 billion agreement with Iran for the export of Liquefied Natural Gas (LNG). The deal was signed in 2005 and has not produced anything yet, as it requires India to build an LNG plant in Iran. The plant would need American components, which might violate the US Iran- Libya Sanctions Act (ILSA). These are some instances wherein Iran’s reliability as an energy partner has raised questions (Pant 2004). Moreover, it appears that the Iranian gas is not the lowest-priced option for India.

Nuclear Deterrence

Recently, Indian Foreign Minister SM Krishna reiterated its position that while Tehran was free to pursue civil nuclear energy, it had to work within the UN watchdog’s “basic framework meant to address technical issues” (The Times of India 2012). Once again, the nuclear equation is equally complex between the two nations. New Delhi has made it clear that it does not wish to see a nuclear Iran and has supported international efforts to bring Iran’s nuclear program under scrutiny, even though the Indian government has been careful to not let itself be projected as pro- US. The main opposition parties in the Parliament have been critical of US-India nuclear cooperation and regularly insist that India’s relation with the US should not come in the way of positive ties with Iran. Thus the current party in power, the Indian National Congress is playing a delicate balancing act on this front (Kronstadt et al 2006).

Going back to mid-2005, there was always a major apprehension that India would oppose bringing Iran’s nuclear program before the UN Security Council. However, New Delhi did vote with the majority on an IAEA resolution finding Iran in noncompliance with its international obligations. Previously, Iran was not supportive of India’s nuclear tests in 1998 and backed the UN Security Council Resolution asking India and Pakistan to cap their nuclear capabilities by signing the Non-Proliferation Treaty (NPT) and the Comprehensive Nuclear- Test-Ban Treaty (CTBT). With the conclusion of the US-India Nuclear deal in 2008, Iran warned that the pact had endangered the NPT and would trigger new “crises” for the international community. (Pant 2011)

There were also primary concerns about India-Iran military cooperation upgrading to nuclear and missile technology level. However military ties between the nations are still in its nascent stages (Pant 2004). There seems to be no chief evidence to show major strategic alliance. In January 2003 New Delhi declaration, the two countries ‘decided to explore opportunities for cooperation in defence and agreed areas, including training and exchange of visits”. (Kronstadt et al 2006)

The crucial region where India and Iran need each other is the evolving security situation in Afghanistan. The US occupation of Afghanistan will come to an end soon. Additionally the US has failed to persuade Pakistan into taking Indian concerns regarding terrorism from Pakistan more seriously. In the event of failure of the government at Kabul, compounded by instability in Islamabad, it could be a major security concern for India. Thus to preserve its interest in case such a strategic milieu evolves, India has reasons to maintain good relations with Iran. Some may call Iran’s role in Afghanistan meddling rather than helping in reconstruction. Many taliban fighters come from Iran, as do weapons. Therefore is only clear, that India will benefit from working with Iran only if Iran is genuinely interested in stabilizing Afghanistan (Pant 2011).

Aide Memoire

A think tank based in Washington observed, ‘Since the July 2005 visit to Washington by the Indian Prime Minister, India has taken a more diplomatic position towards Iran, not only avoiding criticism of the United States, but also avoiding any sharp criticism of President Ahmadinejad’s government’. Indian diplomats have stressed the use of diplomacy to address international concerns through diplomacy rather than confrontation. (Mitra et al 2006) India-Iran relations over the recent years have created some uneasiness in the west. But to think of it as an equation-changer in world affairs would be an immature statement. The economic incentives to participate for these two countries are enormous, yet for more reasons than one it has not been exploited. The reliability of Iran as a trade partner will always be questioned, as more and more fears about Iran’s potential economic isolation are perpetuated.

As per the US Department of Energy, even if India’s nuclear energy program kicks off, it will still need traditional sources of energy. Thereby, despite the US assistance is setting up civil nuclear plants, India will still depend on Iran for oil imports. Thus we can safely assume oil and gas imports torise over the years.

Both countries have shown resolve to build a robust relationship in the future. However more needs to be done. The foundations of economic and political cooperation need to be strengthened for a long-term strategic cooperation. Moreover this relation would define the peace and stability in the region in the years to come. Looking at recent events in the Middle East, Iran has to contend itself with the idea that US is pretty much in control of its surrounding region. Thus its good relations with India could prove to be an ice-breaker in the coming years.

The author is a Legislative Assistant to Member of Parliament (LAMP) Fellow at PRS Legislative Research, New Delhi. He is also associated with the Youth Forum on Foreign Policy and writes on issues concerning India’s strategic positioning in the world.

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