India-Iran ties have not lived up to the rhetoric
With Iranian President Hassan Rouhani in New Delhi, both sides must move ahead on economic issues
In a display of New Delhi’s ability to balance competing interests in West Asia, India is hosting Iranian President Hassan Rouhani. He’s on a reciprocal visit after Prime Minister Narendra Modi’s visit to Tehran in 2016, which resulted in a trilateral agreement on transit between India, Iran and Afghanistan. After Israeli Prime Minister Benjamin Netanyahu’s visit to India in January and Modi’s visit to the Arab world this week, Rouhani would be hoping to galvanise the relatively underwhelming India-Iran ties.
Rouhani comes to India at a time when he is facing serious domestic and global challenges. The Donald Trump administration has threatened Tehran with sanctions and has made clear its disdain for the Iran nuclear deal. Though Tehran has maintained a brave front, the economic impact of US threats is visible. The Iranian Rial has lost a quarter of its value in six months. Domestically, the Rouhani government faced massive protests in numerous towns and cities underlining deepseated frustration with economic stagnation, corruption, and growing income inequality.
Rouhani will be looking at India primarily as a partner to revive its economy. India has been a major buyer of Iranian oil and gas and the two nations maintained trade ties even when Iran was globally isolated, between 2012 and 2016. Though it is expanding, India-Iran trade stood at $12.89 billion in 2016-17.
India’s investment in Iran’s Chabahar port will give a much-needed boost to bilateral trade, besides expanding India’s trade with Afghanistan and energy-rich Central Asia by circumventing Pakistan. The two nations are likely to sign an agreement allowing India to run operations in the first phase of the Chabahar port project during Rouhani’s visit.
But there are concerns in Iran that the project is not moving fast enough. This is partly due to uncertainty surrounding Washington’s approach towards Iran as western banks remain reluctant to support Iran-based projects. Iran has also suggested that it is not averse to an eventual role for Pakistan and China in the project, something that would go contrary to India interests. The two nations have also been quibbling over delays in awarding a contract to develop a major gas field in the Persian Gulf which was discovered by State-run Oil and Natural Gas Corp.
India’s stakes in the Arab world and Israel are growing at a time when new fault lines are emerging in West Asia. Israel and the Sunni Arab world, worried about growing Iranian power, are closely coordinating their actions even as Tehran is intent on challenging the status quo. As New Delhi welcomes Rouhani, the two sides will be hoping to assuage each other’s concerns even as they will try to build partnership, which has often struggled to match the rhetoric surrounding it.