Importance of Modi’s Iran Visit

Modi’s Iran Visit

Modi’s Iran Visit

PM Modi will conclude his Iran visit today, his most important and strategic tour till date. The impact of this tour will be felt in coming years as India grows economically stronger and begins to increase its economic and strategic footprint in Central Asia and the Middle East.

Warmly received by Iranian President Hassan Rouhani, the hectic two-day tour had PM Modi oversee India sign 10 agreements with Iran, which included the signing of the contract for building the strategic port of Chabahar, located on the southeastern coast of Iran.

The tour is path-breaking not just for India but for Iran and Afghanistan as well. Such was the importance that Afghan President Ashraf Ghani, too, was present in Iran to sign the important Trilateral Agreement between India, Iran and Afghanistan, which will see infrastructure development and trade facilitation between the three countries through sea, rail and land movement.

Strategic Advantage for India

China has been leveraging its growing economic power to push its economic agenda through capital diplomacy. It has already announced its goals to connect China through rail and land to Russia, Central Asia and onwards to Europe.

As part of this grand plan, it wants to ensure quicker access to the Middle East and has committed itself to a $46-billion investment for building the China-Pakistan economic corridor that will connect the Gwadar port in Baluchistan province of Pakistan to China, through sea-road link.

This also forms part of China’s unstated plan to undermine and contain India’s growing strategic influence in Afghanistan and Central Asia.

What makes Chabahar Port strategically important for India is that it is located just 100 km from Gwadar port. Given that the Chinese presence in Gwadar will be keeping a military eye on maritime movement in the Gulf of Oman region and on India, the Chabahar port will serve as an inevitable outpost for India to keep an eye on Chinese-Pakistani maritime movement and counter China’s influence in the region.

Between Gwadar and Chabahar, the latter is of greater strategic importance, since it is located at the entry to the Gulf of Oman and the Strait of Hormuz, where Iran exerts its naval influence.

Chabahar is better positioned to offer access to Central Asia than Gwadar, since the terrain through Afghanistan and onto Central Asia is topographically challenging, besides political instability through the Af-Pak region.

How does India stand to benefit in the long run?

Therefore, with India developing Chabahar, the country gets to build greater economic and strategic relations not just with Iran and Afghanistan but several Central Asian countries as well. This fits in very well with India’s long-term strategic objective to get easier access to Afghanistan and Central Asia, thus bypassing Pakistan, since the country has been traditionally hostile to India and has been opposing India’s growing influence in Afghanistan.

The US will be pleased with this development, as this access will mean greater Indian involvement and movement of goods to Afghanistan, thus opening up another alternate route bypassing Pakistan. Needless to say, this development will not please anyone in Beijing, Islamabad, and as many put it, Riyadh.

Given that the initial agreement for developing the Chabahar Port was signed in 2003, it was smart on India’s part to move quickly in signing the fresh agreement since the sanctions were lifted in January this year.

The importance India attaches to Iran can be gauged by the fact that almost every senior minister in the Modi government has been to Iran this year, in the run up to this historic visit.

Economic advantage

India has been looking to secure its energy future and access to abundant and stable supply of crude oil and natural gas, and Iran has huge quantities of both.

India and Iran have historically had very good trade and cultural relations and until it faced US-led trade sanctions, Iran was India’s second largest crude oil supplier. The fact that the distance between Kandla Port in Gujarat and Chabahar Port is less than the distance between Delhi and Mumbai highlights the cost and logistic advantage that India will enjoy in its trade with Iran, Afghanistan and other Central Asian countries.

India owes around $6.5 billion to Iran on account of earlier oil purchases prior to the sanctions. India has now expedited the prepayment of the pending amount and should clear all dues in the near future, as fresh agreements are signed.

Easy physical access to Afghanistan has been an impediment to India’s efforts in increasing trade and development with that country. With the Trilateral Agreement being signed between India, Iran and Afghanistan, India can now use the existing road network in Iran to reach Zaranj province in Afghanistan.

Located around 883 km from Chabahar, movement through Zaranj will now connect to the Zaranj-Delaram highway that India built in 2009. From here, India will be able to reach four important cities of Afghanistan – Herat, Mazar-e-Sharif, Kabul and Kandahar.

For development of the Chahabar Port, India has agreed to open a $500-million line of credit with Indian Ports Global Private Limited taking the lead in construction of the port. The company is a joint venture between JNPT, which owns 60%, and Kandla Port, which owns the remaining 40% stake.

IRCON is likely to take up the construction of the Chabahar-Zahedan railway link.

Others Agreements Between India, Iran

After years of economic sanctions, Iran is welcoming investment to develop almost all its sectors. With India’s large pool of technical and engineering talent across science and technology, space, pharmaceutical research, IT, Telecom, healthcare and education, Iran is looking towards India for investment and knowledge transfer in these sectors.

Government-owned NALCO is planning to develop a 0.5 million tonnes aluminium extraction plant at Chabahar, while Tata Motors has already announced plans to set up a car assembly unit in Iran.

Several other Indian companies are in the process of signing agreements. Iran also wants to collaborate with India on joint research projects.

India-Iran relations as a stabilising factor

The Middle East is in turmoil with religious fundamentalism and terror spreading across the region. On one hand, there is Sunni-dominated Saudi Arabia trying to consolidate its hold over the region, while on the other hand, Shia-dominated Iran is trying to exert its own influence to counter Saudi Arabia.

India has traditionally been close to Iran, and with this visit, bilateral relations have just become stronger. Close relations with a stable Iran can help India exert greater influence in the Middle East than it has been able to do thus far, and in time to come, this visit will stand out as a turning point in Middle Eastern and Central Asian diplomacy for India.

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