India – Iran relations

  • Category
    International Relations
  • Published
    14th Jun, 2019

Issue

Context

One of the most difficult tasks that the Indian foreign policy-makers has been facing on and off is to balance their relations with Iran while enhancing their proximity with the global superpower, the United States.

About:

Present advice of the U.S. administration to the oil importing countries to stop all oil purchases from Iran is definitely not a good news for New Delhi.

Iran was until 2006 India’s second-largest supplier of crude oil. But it dropped to number seven by the end of 2013-14 importing only 6 per cent.

However, India continues to be Iran’s second-largest buyer, next only to China. In terms of quantity, India’s imports came down from 27.14 million tonnes in 2016-17 to 17.62 million tonnes during 2018-2019.

More than oil, the current diplomatic tussle gives an opportunity to analyze the criticality of:

  • How to re-balance and stick to long term policy alignments in the wake of USA's shifting stance?
  • Can USA guarantee stability in Oil supply and price levels post departure of Iran's oil from the market?
  • Who would 'tame' OPEC's hegemony and why?
  • If not Iran, where else will India go to access Central Asia?

Background:

  • India’s indifferent relations with China and Pakistan mean that Iran provides the only access to the untapped markets of Afghanistan and Central Asia for Indian goods, as well as India’s only option for tapping the vast untapped energy and other mineral resources of the region.
  • Iran also provides India the shortest access to the vast energy resources of the Caspian basin and the Caucasus region.
  • The growing Indian economy not only requires the vast untapped markets of the central Eurasian landmass, but also needs newer sources of energy supplies.
  • For five centuries prior to the British rule, the Persian language was the second language in most of South Asia. It became the language of the elite in many princely states and the medium for higher education.
  • The Urdu language, which is the official language of Pakistan and is spoken widely across India and other countries in South Asia, is written in the Persian script and is deeply influenced by the Persian language. There are similarities between the oldest Indian scriptures, the Vedas, and the Iranian Avesta.

Analysis

Criticality of the Civilizational links:

  • Iran has come to symbolise the aspirations of Shias worldwide. Accordingly, in India, there is strong support for the Iranian viewpoint amongst the Shia clergy as well as the masses.
  • In cities like Lucknow, this pro-Iran sentiment is clearly discernable to any observer. There are approximately 25 million Shias in India, who visit various places of pilgrimage in Iran and look up to Iran and the Iranian clergy for spiritual guidance.
  • Besides Shias, the miniscule but economically significant Parsi (Zoroastrian) population of India has its centres of pilgrimage in Iran. It also has a small Zoroastrian minority still living there, with whom Indian Parsees have emotional bonds
  • One of the oldest continuously inhabited civilizations, it forms a bridge between the Semitic world and the Indo-Aryan civilization of South Asia and has had strong historical linkages with the Indian civilization.
  • Despite strong convergence, Indo-Iran relations in recent times have been affected by Iranian relations with the US.
  • The identification of Shiite masses with Iran allows it a significant role in Afghanistan, which not only is a neighbouring country, but also has a substantial Shia population.

Geo-economic significance of Iran:

  • The main contributory factor to Iran’s significance continues to be its huge hydrocarbon resource, which contributes to 80 per cent of its exports.
  • Moreover, Iran’s energy resources have gained further significance with the depletion of energy resources in other oil producing states.
  • From India’s point of view, Iran’s energy resources provide one of the closest and cheapest energy resources available to fuel India’s growth.
  • Accordingly, India has been looking at the North South Transport Corridor and Iran-Pakistan-India (IPI) gas pipeline to resolve its energy shortages.
  • The IPI was proposed as a pipeline that would transport 36 billion cubic metres of gas every year from Bandar Abbas to Calcutta. Of this, 70 per cent gas was meant for India while 10 and 20 percent were meant for Iran and Pakistan respectively.
  • Despite huge oil reserves, Iran lacks adequate refining capacity and as against an annual consumption of 64.5 million litres of petrol, its refineries can refine only 43 million litres, which forces it to import approximately one-third of its consumption.
  • Iran has been a major destination for the products of some Indian refineries in the private sector, which are unable to market their products locally as the petroleum products are subsidised by the government.

Strait of Hormuz dilemma:

  • One of the most significant capabilities of Iran is its ability to disrupt maritime access to the Persian Gulf through the narrow Strait of Hormuz.
  • The disruption of oil and gas production or its transportation through the Strait of Hormuz, would lead to a big spurt in the prices of oil and gas, which, in all probability, would create a major global economic crisis.
  • Even if the strait is not closed, any conflict in the region could increase the global oil prices drastically.

Iran factor can influence remittance earning:

Iran has the capability to create disturbances in any of the Persian Gulf states. The presence of a substantive Shia population in most of these states further increases Iran’s leverage.

There is a huge Indian Diaspora in these states and a major source of foreign exchange earnings for India are the remittances sent by overseas Indians. In fact, India tops the global list of countries receiving remittances.

But, is it all bonhomie?

The issue that has drawn maximum attention on Iran in recent times is its attempt to set up a uranium enrichment facility. It does not serve India’s interests to have another nuclear state in its vicinity. Iran’s bomb may lead to an arms race in the Gulf.

Despite the recent bonhomie between India and Iran, successive Iranian regimes have, by and large, taken an anti-India stance on Kashmir. Iran had provided material support to Pakistan during both the 1965 and 1971 Wars.

Anyhow, Iran is geo-politically important for India:

Iran’s significance for India as gateway to Eurasia, its growing role and levers in West Asia and Afghanistan make it difficult for India to abandon Iran under the U.S pressure.

Regionally, India needs Iran both for its connectivity projects INSTC and Chabahar, support and engagement in Afghanistan and its cooperation to maintain balanced ties with China, Pakistan and Russia.

Summing up:

  • To conclude, it would not be incorrect to state that Iran’s unique geography, its population and nature have bestowed upon it a unique strategic significance, making it one of the important players in the global arena.
  • From India’s perspective, good relations with Iran are an essential imperative for India’s sustained growth and development.
  • Its energy resources could easily speed up India’s growth and its landmass could provide Indian manufacturers’ access to Central Asia and the Caucasus.
  • On the other hand, Iran’s nuclear weapons programme does pose a threat to regional and global peace. It could also irrevocably disturb the balance of power in the geo-strategically significant Persian Gulf.
  • Any disturbance in the region could adversely affect India’s economic well-being. The recent accord between the West and Iran has given diplomacy a chance.

Learning Aid

Practice Question:

Isolating Iran is not likely to bring any peace and development in the region. Mitigating hostility is likely to deliver better results not only for the US and Iran but bring greater benefits for the larger international and regional community as well. Discuss criticality of India-Iran relations within this perspective.

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