Testing The Waters

The President of the Islamic Republic of Iran, Hassan Rouhani, paid a three-day State visit to India from February 15 at the invitation of Prime Minister Narendra Modi. It may be recalled that Prime Minister Modi had paid a State visit to Iran in May 2016. In times of de-hyphenation, India’s foreign policy is exerting the right mix of pragmatism and legacy-led “isms”.

There were no hiccups after the visit of Prime Minister Netanyahu of Israel. That was no mean task. The stake is high here for India, when India looks forward to opening an alternative narrative on the world stage, which may otherwise, be irreconcilable on the western front. But let’s go beyond the sentimentality of the visit of President Rouhani to India. To what extent did it impact bilateral relationships to be called a milestone? Or, was it in reality, transactional at best?

Rouhani’s visit took place amidst rising tensions in the region. The intensity of the conflict in the region was evident in the recent shooting down of an Iranian drone by Israel, and downing of an Israeli Air Force jet by the Syrian Air Defence. Iran’s relations with Saudi Arabia now pitch to an all-time low. The boycott of Qatar by Saudi Arabia-led the Gulf Cooperation Council (GCC) has created an unnerving situation in the region. Saudi Arabia’s military intervention in Yemen has deepened the animosity between Iran and Saudi Arabia. Besides, President Rouhani’s visit to India takes place after Prime Minister Modi’s personalised outreach to Saudi Arabia, the UAE and Israel.

Prime Minister Modi sought to champion his policy of de-hyphenation and revoked the ancient ties with Iran, hoping that the visit would provide an impetus to the various projects in Iran that India has already taken or aims to expand. So, trade was the agenda on their minds — it suits both sides — and, the India-Iran joint statement of  February 17 reflects this reality. India needs an assured supply of oil and gas, and in times of rising oil prices and widening trade deficits, it gets an advantage paying in rupees. Iran needs investments, markets for its petroleum resources and to keep India handy, if the sanction comes calling amidst the rhetoric of revisiting the nuclear deal by President Trump.

The two sides recognised the unique role of Iran and India in promoting multi-modal connectivity within and across the region.  India and Iran signed nine agreements. The successful inauguration of Phase-1 of Chabahar Port in early December 2017, the ratification of the Trilateral Agreement between India, Iran and Afghanistan on Establishment of an International Transport and Transit Corridor by all sides and the successful shipment of wheat assistance from India to Afghanistan through Chabahar Port, have opened up a new gateway to and from Afghanistan, Central Asia and beyond. Both sides reiterated their commitment for early and full operationalisation of Shahid Beheshti Port at Chabahar. The Iranians sought investment from India in industries such as fertilisers, petrochemicals and metallurgy in the Chabahar free trade zone (FTZ) on mutually beneficial terms.

In this context, both leaders welcomed the lease contract for the Shahid Beheshti port of Chabahar during the interim period between the Port and Maritime Organisation (PMO), Iran and India Ports Global Limited (IPGL). The highlight was the recognition of the need to put in place an effective banking channel for business transactions. It was noted that permission to the Iranian Pasargadbank to open a branch in India was under active consideration. It was also agreed that a joint committee of officials would be set up to examine feasible options, including the Rupee-Rial Arrangement and the Asian Clearing Union mechanism to establish functional payment channels. India has such arrangements with only two neighbouring countries — Bhutan and Nepal.

The Grey Areas
Though strategic in political terms, the Chabahar-Zahedan railway link, debated for long, would not help Afghan or Central Asian connectivity as any trans-shipment from port to train and back to truck within Iran, will be time-consuming and cost escalating. Iran wants infrastructure development at India’s expense.  And, that does not sound good to Indian companies, who apprehend that doing business with Iran would jeopardise their investment plans in the western world and invite an embargo from the U.S. In the early 2000s, the Tatas and Essar had planned steel plants near Bandar Abbas. The same fear will resurface now.

Energy could align Iran’s interest with India, but here too Iran tends to mix commercial transactions with its political impulses, as has often been evident in the past. The Rouhani government could not give Indian oil companies control over fields where they have made discoveries. The Farzad B gas field is an example of such undue entanglements by the Iranian government.

 Nevertheless, energy is the core of India-Iran relations, as President Rouhani pointed out in Hyderabad, expressing his keenness to share his energy with India.  As Seema Vaidya, a member of the faculty at the Center of West Asian Studies at the School of International Studies, JNU, aptly says, “India should increase its oil imports from Iran, defying the downward trend for the last two years. Oil will keep the relations going and make it stronger now and in future as well”. If not quite a milestone, Rouhani’s visit is a more diversified approach to Indo-Iran relations, focusing on an uncharted path.