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Tanvi Madan | February 28 2014 500pm

Indias Relationship with Iran Its Complicated

More Topics

Middle East and North Africa

India

Iran

Irans Energy Sector

Iran Foreign Policy

Nuclear Development In Iran

Sanctions against Iran

India

oil

oil and gas

foreign trade

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A colleague once noted that when people ask him what Iran might do under any given circumstance he usually has one of two answers to offer ldquoI dont knowrdquo or ldquoIt dependsrdquo When it comes to Indiarsquos relationship with Iran perhaps the best answer to most questions is ldquoitrsquos complicatedrdquo This is not however usually the way the relationship is portrayed Indian policymakers publicly tend to emphasize the historical and civilizational ties that India and Iran share In the US especially outside the executive branch it is Indiarsquos oil imports from Iran and high-level India-Iran visits that get (mostly negative) attention This week one of those visits is taking place with Iranian Foreign Minister Javad Zarif traveling to India seeking to ldquoopen a new chapterrdquo in the relationship While viewing his trip itrsquos worth keeping in mind the complexity of the relationship and the fact that there are not just elements driving Indiarsquos ties with Iran but some that limit it as well

There are certain factors that have driven Indias desire to maintain a relationship with Iran and that are likely to persist The role of the first factor often mentionedmdashhistorical and civilizational tiesmdashis often overstated They do provide a link but these ties neither prevented a frosty India-Iran relationship through most of the Cold War nor led to a close one after the 1979 revolution

Indias Energy Needs

Indias energy needs are a crucial element The country today is the fourth largest consumer of energy in the world soon likely to become the third Oil constitutes nearly one-fourth of Indian energy consumption Over three-quarters of that oil comes from abroadmdasha share that is only expected to increase India has significantly reduced its oil imports from Iran mostly as a result of sanctions but also because of the availability of other import sources and Indiarsquos preference for diversifying its dependence as much as possible However Iran still accounts for 6 of total Indian oil imports

India is also increasingly looking abroad for natural gas It does not import any from Iran but there have been (unsuccessful) discussions in the past about a long-term supply contract as well as an Iran-Pakistan-India pipeline These kinds of deals could be back on the agenda depending on how various bilateral regional and global factorsmdashincluding the nuclear negotiationsmdashplay out Additionally on the energy front Indian companies especially state-owned ones continue to have investments or interest in investing in the Iranian energy sector Till recently Iran also was a major export destination for Indian refiners

The potential development of non-energy bilateral economic ties is another factor Ironically sanctions might have given additional impetus for the exploration of such interaction With Indian companies finding themselves having to pay Iran for oil in rupees which can only be spent in India there has been a felt need to find things that Iran can buy in India While sanctions relief has meant that companies can potentially pay Iran a certain amount in dollars these cannot cover all they owe Iran Even beyond this the government and Indian companies would like to explore economic opportunities with and in Iran

Attractive Corridor to Central Asia

Potential access to Afghanistan and Central Asia through Iran is another crucial reason for Indiarsquos ties with Iran Since Pakistan is not currently a feasible transit option to the region New Delhi finds the prospect of using an Iranian transit corridor attractive Indias desire to invest $100 million to upgrade the Iranian port of Chabahar is linked to this need as well as to Chinas investment in the Pakistani port of Gwadar The impending drawdown if not withdrawal of NATO troops from Afghanistan has made this Iran routemdashas well as potentiallybroader India-Iran cooperation in and on Afghanistanmdasheven more crucial for the Indian government

A fourth element in play is domestic India houses 10-15 of the worldrsquos Shia population much of which is concentrated in electorally-significant areas This community and the even

larger Sunni one also make the Indian government sensitive to any Sunni-Shia tension in the Middle East that could potentially spillover into India

These factors donrsquot just constitute the backdrop for Zarifrsquos visit they will be items on the agenda as well They are also the reasons that New Delhi would like to cooperate with Tehran and to see a normalization of Iranrsquos relations with and standing in the international community However even if the latter occurs there are also factors in play that will serve to limit the relationship from Indias perspective

Regional Complications

First Indiarsquos energy relationship with Iran hasnrsquot been without strain New Delhi has had doubts about Tehranrsquos reliability and stability as a supplier Iran is thought to have reneged onsome deals tried to renegotiate others and given China and its companies better terms in the Iranian energy sector While an Iran under the pressure of sanctions has shown slightly more inclination to offer India and its companies better terms Indian officials note that the Iranians remain tough negotiators in this arena Tehran has also not been above using Indiarsquos oil and gas needs to pressure the Indian government in the foreign policy realm This was perhaps most evident when Iranian officials seemed to link energy deals to Indiarsquos votes at the IAEA This did nothing to increase New Delhirsquos confidence in Iran and reinforced its general tendency to diversify its dependence partly in order to limit any one countryrsquos leverage on it

Second even as India has ties with Iran it also has a number of other key relationships in the region that will keep it from getting too close to Iran Saudi Arabia and the other Gulf Cooperation Council states supply a significant amount of the oil India imports Qatar is also its largest source of imported natural gas The large Indian diaspora in these countries which is a major source of remittances and the significant Sunni population in India (over 120 million) also make these relationships crucial In addition there are existing and potential trade and investment ties at stake with these countries For Delhi a relationship with Riyadh is also particularly critical because of the leverage the Saudi government is thought to have with Islamabad

There is an overall sense in India that these countries are taking it more seriouslymdashpartly thanks to Iran partly in the Saudi case because of American urging but also because of Indiarsquos potential as a market as other consumers drop off the list These countriesrsquo interest in India has been evident in the fact that in the ten days before Zarifrsquos trip Delhi saw visits from the king of King of Bahrain the Saudi crown prince the Omani foreign minister and the chairman of the Kuwaiti national security apparatus

Indias Relationship with the United States and Israel

Beyond these Arab states in the Middle East Indiarsquos relationship with Israel has also become crucial That country has become one of Indias largest defense defense suppliers and is also seen as a major source of agricultural technology and tourism revenue Furthermore Indian companies are keen to invest in Israelrsquos technology sector The two countries are also negotiating a free trade agreement Since the Mumbai attacks shared concerns about terrorism have created additional space for bilateral cooperation

Finally Indiarsquos relationship with the United States and American (especially Congressional) concerns about Iran have also affected the India-Iran relationship Indian officials resent pressure from the US on India-Iran ties to Iranmdashthey especially find public pressure to be counterproductive but they realize that these links with Iran do create complications in the critical India-US relationship India has not been above using US concerns about Iran as wellmdashfor example with officials advocating for US natural gas exports to India suggesting that itrsquod help ease Indiarsquos energy dependence on countries like Iran

Keeping Each Other at Arms Length

There have been additional causes for strain in the India-Iran relationshipmdashsome that have played out quite publicly thus shaping the Indian publicrsquos view of Iran In 2012 a terrorist attack on an Israeli connected with the embassy in Delhi raised hackles The Indian foreign ministry played down the Iran connection publicly The Indian home ministry and law enforcement authorities however implicitly or explicitly linked the attack to Iran and complained about the lack of cooperation from Iran in investigating it Beyond concern about such acts of terror per se and about the impact on India-Israel relations if there is another such attack it puts the Indian government in a tight spotmdashfinding itself calling on other countries to criticize Pakistan for allegedly supporting terrorism on Indian soil while staying silent on Iran More recently Iran found itself in Indiarsquos bad books as a result of its nearly-month-long detention of an Indian ship transporting crude oil from Iraq to India Finally over the last few years there has been a negative reaction whenever Iranian officials and commentators criticized India for its relations with third countries A glimpse of this was evident in the reaction to an Iranianrsquos Iranians comments to Indian counterparts during a Track-II dialogue that included the critical assertion ldquoyour qibla is Washingtonrdquo

Even as Zarifrsquos visit is an opportunity for India to get an update on Iranrsquos perspective on the P5+1 negotiations and explore avenues of greater cooperation (especially if those negotiations succeed) the persistence of these concerns will likely limit the extent of that cooperation Barring a bilateral shock India will continue to seek to establish a relationship with Iran thatrsquos not too close not too far but just right This is likely to be the case regardless of who takes office in India after the national elections thatrsquoll be held over April and Maymdashthough a third front (ie non-Congress party-led or non-BJP-led) coalition government might place somewhat different emphasis especially rhetorically