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Video Summary

The Big Picture – PM Modi in Iran: Where are the ties heading?

From the inception of relations between the two countries, there has always been a lack of content in the relation.
By IT's Video Summary Board
May 31, 2016

 

Video

Introduction

  • During Prime Minister Narendra Modi’s recent two-day visit to Iran, India and Iran inked twelve agreements. The most important among them is the agreement to build the strategic Chabahar Port for which India will extend $500 million.
  • The agreements and MoUs signed will further deepen the bilateral ties in diverse fields.
  • The development project of Chabahar port has been drawing on the board for several years.
  • The Chabahar port will give access to India to Afghanistan and other Central Asian countries without having to cross Pakistan.

Apart from the bilateral agreement between India and Iran, a trilateral transit and trade corridor deal was also signed by India, Iran and Afghanistan which would ensure easy movement of goods between the three countries, bypassing Pakistan.

The whole visit is significant, but why Chabahar Port has been focused?

Chabahar Port

  • Strategic importance of Chabahar Port is its location. Chabahar Port is roughly 70 kilometres west of Pakistan’s Gwadar port.
  • The Chabahar Port provides a connectivity by road from Iranian port city of Chabahar to a point at Iran’s Northern border with Afghanistan, from where Delaram–Zaranj Highway starts.

About Delaram–Zaranj Highway project

The Delaram-Zaranj Highway also known as Route 606 or A71 is a 218 km roadway in the Nimruz Province of Afghanistan connecting the Delaram District in Afghanistan to the northern border of Iran. The opposite way goes towards the south near Zaranj, Afghanistan.

Delaram-Zaranj Highway

  • From Zaranj, the highway connects to Zabol across the border in Iran. Zabol is well-connected by road to the Port of Chabahar.
  • Totally financed by India, the highway project was completed in 2009 with a cost of $152 million USD.
  • It is one of the busiest roads in Afghanistan and provides an important trade route between Iran and the rest of Asia.
  • The highway thus provides land-locked Afghanistan an alternative way to access the Arabian Sea and the Persian Gulf, instead of relying solely on the unstable Pakistani routes.

How important the port is for India?

  • India believes the Chabahar port is critical to its interests and wants to develop it as a counter to Pakistan’s Gwadar port which was built with Chinese assistance.
  • The port will allow India to bypass Pakistan to transport goods to Afghanistan and Central Asia using a sea-land route.
  • Chabahar Port lies outside the Persian Gulf in Iran and will help India in expanding its maritime commerce in the region.
  • It also provides opportunities to Indian companies to penetrate and enhance their footprint in the region.
  • At present, majority of Iran’s seaborne trade is handled by the Bandar Abbas port. Chahbahar has much higher trading and shipping capacity than Bandar Abbas. The decision of the Indian government to invest in the Chahbahar port marks high trade prospects for both the countries.
  • The Chabahar port was partially developed by India in the 1990s. Since the partition of the country in 1947, India’s trade access to Afghanistan has been thwarted by Pakistan. While no Indian goods can move to Afghanistan through Pakistan, only a trickle of goods from Afghanistan can reach India. Trade interests in Afghanistan and in Central Asia, made it imperative for India to look for an alternative route, which was provided by Chabahar.

India-Iran relations- Background

  • Relations between India and Iran took off in the 1990s, when the two countries came together to support the Northern alliance in Afghanistan against the Taliban.
  • Since then, there have been persistent, but slow efforts at boosting economic ties between the two countries.
  • One of the largest suppliers of oil to India, Iran has always been of huge strategic importance to the country despite international pressures to halt friendly relations between the two sides.
  • Apart from the largest suppliers of oil to India, Iran provides a big market for Indian industries. Iran has a good scientific base and agriculture.

Issue of due payments

  • India is one of the biggest buyers of Iranian crude, and is set to import at least 400,000 barrels per day (bpd) from Iran in the year from April 1. But it built up a backlog of payments when Iran was under sanctions.
  • Recently just ahead of PM Modi’s visit to Iran, Indian refiners have made first euro payments in four years to clear a part of the $6.4 billion in past oil dues.
  • This the first payment by Indian refiners in a foreign currency since lifting of Western sanctions against Iran in January this year.

    India’s ability to finance large projects abroad has always been a challenging task.

Concerns of Pakistan and China

  • Pakistan look at the development project very negatively in a sense that India will undercut their Gwadar port development. Pakistan views that if Chabahar develops, the Gwadar as port may no longer be competitive.
  • According to some experts, China is not so much concerned with the development of Chabahar port as China has its port development projects in both Iran and Afghanistan. Even China has been tendering for Chabahar port itself with a rates Iran may considers favourable.

Role of U.S. in India-Iran relation

  • After India’s commitment in the 7th BRICS summit held in the Russian city of Ufa in mid-2015 last year to pay a part of its oil dues worth $6.4 billion to Iran, no banks came forward to take responsibility of transactions. Then after on U.S. secretary of State John Kerry’s recent urge to bankers, many banks came forward. On this basis, some experts view that U.S. is keen to strengthen India-Iran relations.
  • Also, U.S. looks India as a moderating influence on Iran and India-Iran relations as balance with the growing influences of China and Russia in the region.

Conclusion

From the inception of relations between the two countries, there has always been a lack of content in the relation. The said visit will give boost the bilateral relations. India should focus on making this kind of projects functional. India’s interest in the development project should be seen as a bilateral relation devoid of any apprehensive tags like anti-Pakistan and anti-Taliban.

 

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  • junaid

    Nothing is missed in the topic.
    short and sweet.

  • shantanu

    nice summary.

    • yugveer

      waiting for another one

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      • sneha

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      • arpita

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