Iran-India Relations: Time to go beyond the symbolic friendship

For decades, Iran and India have been struggling to move beyond the symbolic friendship to reach new heights of cooperation but still the nature of their relation is something between buyer-seller and strategic oriented depend on different issues of cooperation.
15 April 2023
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Masoud Hamyani

For decades, Iran and India have been struggling to move beyond the symbolic friendship to reach new heights of cooperation but still the nature of their relation is something between buyer-seller and strategic oriented depend on different issues of cooperation. A deeper analysis of past official statements shows that the two sides are facing problems in turning their good intentions into reality. For, example, some of transformative initiatives and projects such as connectivity projects including Chabahar port and The International North–South Transport Corridor (INSTC) repeatedly have been cited in these statements without sufficient progress, let alone be able to draw up a comprehensive roadmap for the future of relation, the same that Iran did with China.

However, the enduring friendship between Iran and India has survived during difficult times and both have been successful to retain their political engagements and even reinforce it further during previous years, amidst the unwelcomed constraints on the relations.

Geopolitical fissures:

The geopolitical factor has always been one of the most significant barriers in Iran-India relations. It’s worth noting that even before the Islamic revolution, two countries were belonged to rival blocs of powers and still it seems that the future dynamics of their relationship to some extent will be defined by geopolitical factors as the latest developments also show some divergences in the two countries’ approaches towards regional and global issues. Here, the key questions are: where two countries stand amidst of geopolitical reconfiguration in Asia and the world? Will the long-lasting relation between Iran and India overcome their differences in geopolitical approaches?

The first external factor which has always been detrimental to Iran-India friendship is U. S’s obsession to limit Tehran’s strategic autonomy. As a result, since 2011, the U.S. sanction has been preventing to develop a closer economic ties between Tehran and New Delhi.

On the other hand, India in its turn as a country with global aspirations that is motivated to gain a seat at the global high table, since 2014 has been expanding a strong strategic partnership with U.S on a wide range of diplomatic, economic and security issues. Now a main priority for New Delhi is cooperation with the U.S. and its like-minded partners across the world specially in the Indo-Pacific region.

The second factor which may has some impacts on Tehran-New Delhi ties is geopolitical rifts between India and China. Ironically, despite being India’s largest trade partner by volume, Indian strategic community sees Beijing as a rival who seeks to challenge New Delhi’s positions in South Asia and the Indian Ocean region.

However, since 2011 and after the first round of sanctions was imposed, Iran began to turn to the East in an attempt to explore non-western markets, capital, and technology. The “Look East” Policy was aimed to have more engagement with regional powers, particularly opening a new level of cooperation with China, Russia, India and other Asian powers. In this context, now Tehran is working on a strategic comprehensive agreement with Beijing which has been interpreted as New Delhi's loss by some Indian strategist circles.

On regional issues, while Indo-Persian bonhomie has lost its momentum, a new chapter has been opened in India’s partnerships with the Persian Gulf states and Israeli regime which has been manifested in so called “i2u2” minilateral mechanism comprising U.S.A, India, U.A.E and Israel’s regime. However, the interests of Tehran and New Delhi have traditionally converged when it comes to Afghanistan. Both countries not only have common concerns on extremism, but they are looking at Afghanistan in a larger picture of Eurasia in recent years. In this context, Tehran looks at New Delhi as a relevant potential economic partner. Iran, which is being directly affected by events in Afghanistan, has tried to persuade the Taliban that an inclusive regime and stability in Afghanistan is key to materialize the connectivity projects including Chabahar port and INSTC to bridge the Eurasian and South Asian’s Markets.

Therefore, Afghanistan has been the key focus of Indian and Iranian officials during their talks. “Iran and India can play a constructive and useful role in ensuring security in the region, especially Afghanistan, and Tehran welcomes New Delhi’s role in establishment of security in the region”, as the President Raisi mentioned.

-New drivers to boost Iran-India Friendship:

These differences in the geopolitical approach of the two countries have made their economic ties as the most challenging aspect of relationship. It seems that without an establishing meaningful economic tie, Iran and India relationship cannot go beyond symbolic ties and the relations simply would be focused on political outreaches.

To understand the poor state of trade ties between the two, it would be better to have a look at overall trade in recent years. While the trade volume was reached to roughly US$ 17 billion in 2018, the figure for 2020 shows that because of India's compliance with the sanctions, trade volume has been dropped to less than US$1.5 billion in last year without showing any signs of vitality and growth in a foreseeable future.

Against this backdrop, Iranian – Indian policy makers have realized the necessity of new drivers to draw a strong bilateral cooperation and immunizing the relations against third party’s disruptive factor. To expand their bilateral agenda, now is time for Tehran and New Delhi to identify more favorable fields of cooperation and boost their engagements.

Therefore, as Iran looks at East as an alternative source of trade and investment to the west, both countries need a roadmap to conduct bilateral trade, investments and mutual settlements in national currencies. To give some idea, like Russian proposal, the trade in rupee settlement mechanism would be a transformative driver to boost the trade relations between Iran and India as Iranian rupee reserves with the Indian banks including Industrial Development Bank of India (IDBI) and UCO Bank have been depleted in recent years.

Moreover, our connectivity projects including INSTC and Chabahar could be seen as the axis of a wide range of partnerships between Iran and India within the Great Eurasia where their interests are converging. Both countries can work on a road map for energy partnership as Iran always has been a reliable source of energy in terms of affordability, accessibility and security of energy’s flow to India. There are multiple ways to expand the energy ties with Indian growing markets. On natural gas cooperation which is out of US unilateral sanctions, a long-term supply agreement would be a possible option to ensure steady flows of energy to India. There are also possibilities for Indian Small and medium-sized enterprises (SMEs) to invest in Chabahar Economic Free Zone (EFZ) for setting up the petrochemical and fertilizer plants either independently or through joint ventures with Iranian public-private companies. Finally, the pending negotiations on Preferential Tariff Agreement (PTA) need to be resumed vigorously after five rounds of negotiations have been held so far.

The bottom line is that in the light of stagnation of economic ties, only a strong political will from both sides, could navigate the bilateral relations to new horizons amid the geopolitical transition in Asia and the world.

 Masoud Hamyani, Expert at the Center for Political and International Studies

(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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