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A new chapter in India-Iran relations


As India embarks on a new chapter in foreign policy under the government of Prime Minister Narendra Modi, it is becoming increasingly difficult to explain the emerging foreign policy trends in terms of purely bilateral relations. And yet, India’s foreign policy approach does not entirely rely on international organizational forums, like United Nations (UN), WTO, either. What is emerging is a pattern of deeper bilateral relations with all significant countries through which India will subsequently be able to exercise influence in the larger forums of international organizations. India’s pro-active approach towards US, Australia, Germany, France, EU, Pakistan, China and several other countries, regardless of domestic ideological and political opposition, suggests this. Institutions such as UN are no longer treated as sacrosanct in our foreign policy approach, as has been the case during certain Congress and BJP regimes.

Iran’s nuclear deal and the spaces it opens up for India need to be seen in this light. After precarious negotiations for nearly 20 months between the Western powers (P5 + 1) and Iran to facilitate the lifting of economic and trade sanctions on Iran imposed since 2011 in exchange for putting a brake on Iran’s potential nuclear weapons programme, a deal was finally reached on 14th July. It restricts Iran’s uranium enrichment programme and allows for greater intervention by the International Atomic Energy Agency (IAEA) to investigate suspicious sites which are not being used for purely scientific research. Critics of the deal are of course many, the most prominent being America’s Grand Old Party or the Republicans, who holding the ratification powers of the US Congress due to their numbers, decry that the deal does not address any of the key issues such as Iran’s nuclear weapons programme and ballistic missile efforts to deliver weapons the world-over, it merely legitimizes Iran’s nuclear programme under the guise of an agreement.

It may not, however, be as simplistic as the Republican obstructionism indicates. Even though the substance of the deal may not be rigorous enough – it would have been, in any case, difficult to reach a purely pro-West outcome in an age of failing American and European power – the fact that the deal was signed at all, despite Iran’s own political obstructions from the supreme leader Ayatollah Khomeini, is itself a big step. At the very least, it prevents Iran from going the North Korea way and inducts it into the world system again, thereby pinning at least a minimum international responsibility on it. It is also very likely that Iran will be obliged to fulfill its larger international obligations now that it is back in the system, since the Iranian public is in transition to being more liberal under the leadership of its reformist President Hassan Rouhani, who has promised more freedom to the public and is urgently focused on bringing the economy back on track.

Iran was never really out of the system despite the sanctions, with countries like India continuing to maintain a minimum degree of exchange with the country. India relies heavily on Iran for its oil imports. The deal, therefore, has evoked mixed reactions in India.

On the economic side,

  • The deal will make Iran India’s major oil-exporting partner once again, with India no longer having to rely on expensive and inconvenient Latin American oil imports to meet its energy needs.
  • It will also keep India’s oil import bill cheaper for, at least, the next year. While Iran was under sanctions and unable to openly supply oil to the rest of the world, the resulting glut depressed oil prices and reduced India’s import bill. Now, even though the sanctions have been lifted and Iran will start full-fledged supply soon, the process will take until December 2015 to fully take off, thereby benefitting India for the time being1. After that, there are fears that the oil price regime may be back to the previous status, thus, spelling the end of good days for India.

In the meanwhile, speculations were rife immediately after the signing of the deal that Iran may now demand the 41,000 crore rupees that India owes to it under the existing oil bill. However, recent announcements by the Iranian government indicate that there is no ‘emergency’ for India to pay its dues immediately. This has come as a great relief to India2.

  • India also stands to benefit from increasing its investment in Iran. It plans to invest in Iran’s Chabahar port. Besides increasing regional trade, this will be a crucial decision for India on the political front as well, as it will enable India to get direct access to markets in Afghanistan and Central Asia, without being concerned about having to pass through Pakistan.
  • India has been seeking to materialize the Iran-Pakistan-India gas pipeline for several years now. With the lifting of the sanctions, this may soon become a reality. With Iran sitting on the world’s second largest natural gas reserves, the pipeline will benefit all parties, as it will enable Iran to tap into the energy-hungry markets of Pakistan and India. To date, Iran’s natural gas capacity remains underutilized both vis-à-vis South Asia and Central Asia.

These economic benefits have really been made possible through the changing political dynamics between India and Iran. Modi’s active outreach towards Middle-east, without compromising its friendship with Israel, has made the Indian government’s position clear. Unlike the days of the Congress party, it does not have to keep its friendship with Israel an inconvenient secret in order to court the rest of the Middle-east. This strategy is paying off. It makes India a strong player in the region, with clear-cut political positions and preferences. Even though Israel has decried the deal, the complex political positioning in the region will work in India’s favour. Israel has opposed the deal due to Iran’s cordial relations with the terrorist group, Hamas, and its view of Iran as a ‘terrorist state’. Yet even Israel realizes the threat it faces from the rise of militant Sunni Muslims, through the expansion of groups such as ISIS and Al-Qaida. Saudi Arabia is itself a Sunni-majority country. With Iran being Shia-majority, and given the hostile Shia-Sunni relations, Iran will be able to combat the rise of Sunni militancy. Due to the deal, its new-found – albeit unwilling – relationship with the West will bring these two reluctant powers together. And, in the face of constant threats from Sunni-majority Pakistan, the larger outcome will work in India’s favour.


  1. http://articles.economictimes.indiatimes.com/2015-07-20/news/64638662_1_crude-prices-crude-purchases-iran-nuclear-deal
  2. http://indianexpress.com/article/india/india-others/iran-says-no-emergency-in-getting-oil-dues-of-over-rs-41000-crore-from-india/

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