Iranian President Hassan Rouhani is currently on a three day visit to India. His primary goal in the region would be to encourage Indian businesses to invest billions of dollars in the region. Chief among his goals is the construction of a strategic port being developed by India.
However, will the looming threat of re-sanctions on the nuclear deal prevent the President from his agenda?
In 1950, India and Iran established diplomatic relations. However, during the Cold War, the two nations kept a studied distance. This was largely due to India being one of the leaders of the Non-Alignment Movement and Iran was close to the US. After the 1979 Iranian revolution, Iran’s relationship with the US suffered, and ties between India and Iran strengthened momentarily. However, Iran's continued support for Pakistan and India's close relations with Iraq during the Iran–Iraq War impeded further development of Indo–Iranian ties. Iran is home to 7 million expatriate Indians presently.
Despite differences in foreign policy, Iran remains one of the largest suppliers of oil to India. In 2011, the US$12 billion annual oil trade between India and Iran was halted due to extensive economic sanctions against Iran, forcing the Indian oil ministry to pay off the debt through a banking system through Turkey. The sanctions were a result of Iran’s nuclear programme, which has been a source of concern for the international community.
Despite this fact, the nation ratified the Non-Proliferation Treaty in 1970, an investigation by the IAEA revealed that Iran had not declared a number of its nuclear activities to the group. The sanctions cost the nation billions of dollars (estimated at $100 billion in oil revenues alone till 2015). It has also lost out on foreign direct investment. In 2015, the nation agreed to significantly scale back its nuclear program in a deal with P5+1 at the UN. In turn, the UN nations agreed to lift many of the harsh sanctions on the region.
The US has remained highly critical of the region and of the treaty – especially US President Donald Trump. In 2017, he indicated that he would not be ratifying the agreement. In January 2018, Trump announced that he will be temporarily extending the waiver of sanctions on Iran, until Europe and the US could fix the nuclear deal.
India’s Middle East agenda
One of the priorities of the Indian government is to increase the nation’s influence in the Middle East. In February 2018, Indian Prime Minister Narendra Modi embarked on a historic visit to the region. He was the first Indian Prime Minister to visit Palestine on an official capacity and he also visited the UAE and Oman. This was his fifth visit to the west Asian region since 2015.
Just days after Prime Minister Modi returned from West Asia and the Gulf region, Iranian President Hassan Rouhani has made his first ever official visit to India after becoming President.
“President Rouhani will be accorded a ceremonial reception on 17 February,” an Indian foreign ministry statement said on Wednesday. “During the forthcoming visit of the President of Iran, both sides will review the progress achieved in bilateral relations and also exchange views on regional and international issues of mutual interest,” it said. “Besides his official engagements in Delhi, President Rouhani will also visit Hyderabad,” it added.
According to diplomats briefed on the subject, President Rouhani will be in the region seeking billions of dollars of Indian investment. This comes during a period when the US has increased its pressure to review a 2015 international nuclear deal and re-impose sanctions on Iran. Chief among the goals of the visit would be the construction of the port of Chabahar on Iran's east coast. It is a project being developed by India, which has been stalled. This is due to fears that if sanctions are re-imposed on Iran, then it would ultimately become a fruitless exercise. The port is of significant strategic value to India. When completed, it would provide access to markets of central Asia as well as Afghanistan while circumventing Pakistan. Rouhani is also expected to convince businesses to invest in Iran despite fears of sanctions.
The Iranian President is also hoping to reach an agreement with India on developing Iran’s Farzad-B gas field. Rouhani’s visit also comes during a period when India has solidified ties with Israel and regions like Saudi Arabia and UAE.
Our assessment is that President Rouhani’s visit indicates that the geopolitical fault-lines in the Middle East are being redrawn at the moment. As the threat of sanctions looms over Iran, it will be Rouhani’s top agenda to solidify India’s commitment to its investment projects in the region – especially the Port of Chabbar.