What an unexpected 180 degree turn for a nation from being the second largest crude oil importer from Iran to seeing it cut its Iranian oil imports to half in the wake of US trade sanctions that were kicked in November. But have we ever wondered the cause, the reasons and the events that lead to the structural framework and economic ties between these 2 nations? And what all geopolitics situations that pushed the Nation like India and China to cut their respective import of oil from Iran.
To begin with, there is a quite contrary belief that India Iranian relation did start with oil. Surprisingly, It began more than thousands year ago with inter-mingling population and Aryan influenced culture. It can be witnessed in the form of art, music and traditions as well in the form of contributions of the Iranian Parsi community in the building of modern India. In the pre-Independence era, India and Iran had once shared a porous 950km long border but due to the separation of India with Pakistan in 1947, Iran was completely cut off from the rest of India. And thereby strategically, Iran need to develop the diplomatic ties with Pakistan.
The cold war, which has divided the world into 2 blocks, had somewhat shaped the Indo Iranian relations as non-aligned India fostered its strong military links with the Soviet Union, while its counterpart – Iran showed its close ties with the United States.
It occurred during the reign of Mohammed Reza Shah, who took effort to mark the beginning of the pro-American phase of Iran’s foreign policy, and closeness with Pakistan, which too was a US ally. Although Iran supported India in the 1962 war against Communist China, it overtly backed Pakistan during the 1965 and 1971 Indo-Pak wars. Similarly, India’s ties with the Sunni majority Arabian nations of Egypt, Saudi Arabia and UAE were not viewed positively in Iran. But Pakistani attempts to propagate Pro-Arab and anti-Shia sentiment brought Iran and India closer.
The Shah began to realise that limiting Iran’s foreign policy solely towards USA and Pakistan wouldn’t help them grow. Iran started developing the diplomatic trade with India by merely sending oil to India. During the crises of 1973, when oil prices have skyrocketed and India was in danger of food shortages, it was Iran which turned out to be a reliable crude oil supplier during the time, as against Arab nation. In 1979, Iran’s pro-American foreign policy perished with the crowning of Ayatollah Khomeini and as Islamic Republic was established. Khomeini now led a policy of “neither east, nor neither west” refusing to bow to external pressures. Indo-Iranian ties took a back seat during his reign. Delhi and Tehran differed over the Kashmir conflict and the Soviet invasion of Afghanistan.
After Khomeini’s death in 1989, ties normalized after the signing of the strategic Tehran and Delhi Declaration in 2001 and 2003 respectively. But even before these could bear fruit, relations strained yet again with Iran’s hot nuclear pursuit. The Bush administration in the US referred to Iran, Iraq and North Korea collectively as an axis of evil and under US pressure, India voted against Iran in the UN. The move was a stark contrast to its official stand of supporting Iran’s right to peaceful use of nuclear energy. Iran retaliated by putting on hold LNG projects signed with India.
Post 2010, fearing an American invasion like the one in Iraq, Iranian President Ahmadinejad managed to carve out a nuclear deal. Under this deal, the 6 nations (includes 5 permanent members and Germany) outlined the terms and conditions for the Iranian Nuclear Programme. A Joint Comprehensive Plan of Action in which Iran has agreed to eliminate the stockpile of medium enriched uranium by almost 98% and also agreed not to build any new heavy water facilities. In addition to that, International Atomic Energy Agency (IAEA) would have the regular access to all Iranian Nuclear facilities. However, Iran was said to have gone back on it with multiple missiles tests in 2016 and 2017 and thereby breached the provisions of the nuclear deal between Iran and other nations.
This reignited American fears of Iran developing nuclear weapons. In May 2018, Donald Trump unilaterally pulled USA out of the deal. To add to the Iran’s woes, Trump has placed economic sanctions on the country, expecting all other nations to follow the suit. Iran has threatened to abandon the deal and continue with Uranium enrichment if the sanctions aren’t revoked.
What is next for Indo-Iranian ties?
The Iranian President Rauhani signed 9 MoU with India during his visit in February 2018 with the aim of boosting economic ties with India. But with the stagnant economic growth and dwindling list of partner nations the Rouhani government in Iran, is facing a virtual internal revolt, is trying to salvage its trade relations with India. The Chabahar Port Development Project, signed by PM Modi during his Tehran visit is crucial to Indo-Iranian economic relations and is a part of the Trilateral Transit agreement between Afghanistan, India and Iran. Complementing the port is a 500km long railway project connecting Chabahar and Zahedan on the Afghan border.
Along with rebuilding of the Afghan economy, Iran and India also share a common goal in their fight against the Afghani Taliban. Devoid of a direct link to the interiors, Iran remain India’s Golden Gateway to Central Asia and Russia, forming a vital east-west and north-south transport corridor. Chabahar is also India’s strategic answer to Pakistan’s Gwadar Port, only 100km TO THE EAST OF Chabahar, being developed under China’s OBOR initiative.
India is the second biggest importer of Iranian oil after China and has invested heavily in gas exploration projects in the Farzad gas fields. The oil sanctions will come into effect on 4th November and India would be forced to make alternate provisions to replace Iranian supply. It will be extremely difficult as major Indian refineries are configured to process Iranian crude, obtained via free shipping, free insurance and a 3- month credit period. Sourcing from elsewhere will have cost and time implications, adding to already high fuel prices.
India needs to continue pushing for US waivers on its trade with Iran while keeping in mind it’s nuclear and defence deals with the US. India also maintains relations with oil rich GCC nations, whom Iran has accused of manipulating the oil markets. It also has defence partnership with Iran’s bugbear, Israel. Thus, for India, its’ a matter of balancing its ties with Iran on one hand and US, Israel and other Arab nations on the other. And need to think that whether it should continue to keep it relation with Iran but then it may have to face the macro instability as US would continue to put pressure by putting more and more sanctions on the nation or to rely on US and other Arab nations for future fuel requirements but then it will question the sovereignty of India and would even subdue it.
What we need to understand is that India can’t cut down the oil imports from Iran immediately as it needs alternatives with similar terms and conditions. And until and unless, it will not meet, India should continue to maintain the diplomatic relations and wait for US to take further actions and then react suitably. It would be interesting to see the future events that will shape their diplomatic and strategic ties between these two nations.
Written by Ayush Bansal for The Connectere.