Iranian President Hassan Rouhani's Visit to India

The centuries-old relations between India and Iran have witnessed several ups and downs throughout history due to domestic, regional and international factors.

The centuries-old relations between India and Iran have witnessed several ups and downs throughout history due to domestic, regional and international factors. The Iranian President’s visit to India between 17 and 20 February 2018 is considered an important development for both countries particularly at a time when both are facing internal and external challenges. In the case of Iran, the world witnessed the recent phase of protests against the government mainly out of economic concerns which lead to several casualties. Furthermore, with the signing of the nuclear deal in 2015, and the subsequent suspension of the international economic sanctions, Iranian people expected a better life both economically and politically. No doubt after the suspension of the economic sanctions Iran made efforts to make its presence in the global oil market. In 2017 Iran became the fifth largest oil producing country with over 2 million barrels of oil export per day. It raised its GDP to 1.631 trillion dollars (based on purchasing power parity) which means a total increase of 12.5 percent after the nuclear deal.[1] However, the rising inflation, corruption, unemployment, lack of investments in the industry and energy sector on the one hand and the yet-to-be-fulfilled promises made by Hassan Rouhani during his election campaign are still among the distressing economic problems in Iran. To these we should add the financial and military support Iran provided to other countries and groups for increasing its influence. All that ultimately resulted in the outbreak of a new phase of protests and discontent against the Iranian government. Also, Iran has been facing challenges in its foreign relations posed not only by the ongoing turmoil in Iraq, Syria, and Yemen or by the deteriorating relations with Saudi Arabia but also Donald Trump’s warning of withdrawal from the nuclear deal and imposition of a new phase of sanctions on Iran. India has maintained a conscious approach in its relations Iran particularly after the suspension of international sanctions mainly because of the looming threat of the US sanctions and India’s unwillingness to dissatisfy the US at the time when their relations are touching new heights.

Meanwhile, India is considered an energy deficient country and has continuously been facing the problem of rising energy demands. BP Energy Outlook 2017 has estimated that India’s energy consumption increases by 4.2 percent per year; faster than all major global economies. The report predicts India’s energy consumption to be the fastest growth among all economies by 2035 and India is expected to overtake China as the largest energy market by 2030. The growth of India’s energy demand is estimated to be more than double (+129%) when compared with non-OECD countries (52%) and overtakes the BRICS countries as well in 2035. India’s share of global demand increases to 9 percent by 2035. The demand of gas is estimated to grow by 162 percent, the demand of oil is to grow by +120 percent, the coal demand will expand up to +105 percent, renewable energy up to 699 percent, nuclear energy by 317 percent and hydro energy by 97 percent. On the other side, the production of energy in India is estimated to share only 5 percent of global energy production in 2035.[2] The majority of the energy requirements of India are fulfilled by the import of oil and gas from volatile Middle East and Persian Gulf regions. Furthermore, due to India’s heavy dependence on energy import, the instability in the Middle East has pushed India to diversify and search for more stable and secure energy sources.

With respect to the external challenges that India is facing with the rising Chinese economy and its influence in the region, particularly after the Chinese roll out of the Belt and Road initiative, the threat of Pakistani interference in the state of Jammu and Kashmir, the challenge of maintaining the balance between the fast growing India-US strategic cooperation and safeguarding the centuries old relationship with Iran, the changing regional situation has further increased the strategic significance of India-Iran mutual cooperation. India’s main interests in Iran are Iranian energy sources, access to Iranian and other markets, access to Afghanistan and Central Asia, isolating Pakistan as well as overcoming the encirclement of India by China through the Chababhar Port and North-South Transport Corridor. While on the part of Iran, India provides a vast market for energy consumption, dry fruits but also can act as a source of investment in such fields as gas and oil exploration, infrastructure development, IT, medicine and education. India considers that strengthening relations with Iran would play an important role particularly with respect to energy, China, and Pakistan.

On the part of their bilateral relations, there are many areas where both India and Iran have signed several agreements particularly in the energy sector, investment in infrastructural development, and most importantly India’s access to Afghanistan, Central Asia and other regional countries through the North-South Transport Corridor. Last year the two countries operationalized the first phase of the Chabahar Port which was built by India. Furthermore, during the Indian Prime Minister’s last visit to Iran, almost sixteen agreements were signed with Iran in different sectors, including the Trilateral Transit Agreement signed between India, Iran, and Afghanistan. In light of these events, the two countries try to advance their mutual cooperation. In his visit, President Hassan Rouhani tried to persuade his Indian counterpart to complete the construction of the Chababhar Port as quickly as possible and invited India for investment in Iran. The Indian Prime Minister, on the other hand, pressed the Iranian President for a resolution to the issues related to the Farzad gas field, oil prices and the issue of Pakistani interference. However, how India will manage to maintain a balance between its relations with Iran and the US remains to be seen. India finds itself trying “not to do anything which will make the US unhappy” and by at the same time dealing with the risks of the US sanctions on Iran. Moreover, it is due to this fear that India failed to develop its cooperation to the extent it was expected, particularly after the suspension of the international sanctions. Ultimately, the visit of the Iranian President to India is considered a positive move as a is a win-win situation for both countries in the short and the long terms.

1. Kimberly Amadeo. Iran’s Economy and the Impact of the Nuclear Deal and Sanctions.

https://www.thebalance.com/iran-s-economy-impact-of-nuclear-deal-and-sanctions-3306349

2. B. P. Energy Outlook Country and Regional Insight-India. (2017).

Retrieved from http://www.bp.com/content/dam/bp/pdf/energy-economics/energy-outlook-2017/bp-energyoutlook-2017-country-insight-india.pdf

The views expressed in this article are the authors’ own and do not necessarily reflect IRAM’s editorial policy.

India-Iran-Turkey Strategic Cooperation

Mukhtar Ahmad Bhat

Trilateral cooperation with Iran and India offers economic integration for Turkey and helps facilitate it to become one of the world’s top ten economies.

Indian Response to the Re-Imposition of Sanctions on Iran

Mukhtar Ahmad Bhat

Indian interests at stake in Iran and the US are much higher now compared to previous times