Indian Prime Minister Narendra Modi’s visit to Iran later this week, little over a month after his visit to Saudi Arabia, indicates Indian urgency to expand relations with both countries individually. Iran was not on the Modi government’s list of high-level engagements until External Affairs Minister Sushma Swaraj visited Tehran in April 2016. India’s political neglect of Iran was becoming especially evident given that between Modi and Swaraj, they had already visited the United Arab Emirates (UAE), Oman, Bahrain, Saudi Arabia, Egypt, Turkey, and Israel. While the challenge of navigating deteriorating relations between Iran and the Gulf Cooperation Council (GCC) states may have overshadowed New Delhi’s engagement with Tehran, critical economic and strategic convergences between the two continue to drive the relationship.
Politically, Modi’s visit is significant for three reasons. It comes a month after Modi’s visit to Riyadh, indicating the necessity of ensuring “parallel levels of engagement.” Second, this trip follows Swaraj and Minister of State for Petroleum and Natural Gas Dharmendra Pradhan’s visit to Tehran, signaling urgency to secure vital commercial projects in the aftermath of the lifting of Western sanctions, including the Chabahar port project. Third, despite speculation that Modi would focus on elevating ties with Israel, other regional states have taken precedence. This could be an indication of Modi’s attempt to balance political interaction with key regional states after the initial emphasis on Israel, and pave the way for a possible visit to Tel Aviv later in the year.
Economically and strategically, it is anticipated that Modi’s visit will inject a momentum into India-Iran relations that has been expected since sanctions on Iran were lifted. Even though neither Modi nor Swaraj have visited Iran even after two years since being sworn in, the Modi government has made some effort to realize common commercial objectives during this time. Minister for Shipping Nitin Gadkari and Foreign Secretary S. Jaishankar traveled to Iran in May and June 2015 respectively, to conclude negotiations on the Chabahar port project, which had been in limbo for more than a decade. Even though the parameters of an agreement on Chabahar were finalized after Swaraj’s April visit to Iran, the deal is yet to be inked. Outreach from Tehran was in the form of Foreign Minister Javad Zarif’s visit to New Delhi in August 2015, following which Iran invited India to invest in infrastructure projects worth $8 billion. However, as the Modi administration moves to give greater impetus to energy partnerships with Iran, a number of challenges remain, as India also competes with other international investors eager to capitalize on the newly-created commercial space in Iran.
The Modi administration tried to revive the Chabahar project, first by committing $85 million in October 2014, and then promising a significant leap in investment during Pradhan’s visit. In April 2016, New Delhi announced its willingness to invest $20 billion to develop the port and set up petrochemical and fertilizer plants in the Chabahar Special Economic Zone (SEZ). However, Iran has, in the past, alleged that India’s role and investment in Chabahar have not been sufficient. In May 2013, the previous Congress-led United Progressive Alliance government pledged $100 million towards the project but did not act on it. It is no coincidence that India’s latest impetus to the project came after Iran invited China to invest in Chabahar and the SEZ, after a Chinese business delegation visited the area in October 2015. Thus, given the centrality of Chabahar to India’s geo-strategic interests, a conclusive deal on the project could be a turning point for ties with Iran.
Similarly, India’s bid to develop the Farzad B gas field also remains in contention after Iran’s initial refusal to give India the project. India’s diplomatic activism revived negotiations thereafter, but Swaraj and Pradhan’s visits did not lead to any conclusion over the issue. New Delhi and Tehran are also locked in efforts to resolve the issue of outstanding oil payments to Iran. India and Iran had developed a rupee-payment system to evade the sanctions regime, but the termination of the system in January 2016 has led to the accumulation of almost $ 6.5 billion in dues to Iran. As New Delhi looks to boost Indian presence in Iran’s hydrocarbon sector, these unresolved issues will also determine the course of negotiations over the India-Iran undersea gas pipeline, and the International North South Transit Corridor (INSTC).
While the challenge for Prime Minister Modi will be to secure India’s place in Iran’s economic and strategic calculus, his visit also signals a more assertive Middle East policy. Even though the Middle East political climate may have eclipsed relations with Iran, Modi’s visit will boost the pursuit of India’s strategic priorities in the region. The simultaneous efforts to strengthen economic and strategic relations with Iran and Saudi Arabia will give greater purpose to India’s profile in the region.
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