Indo-Iran Relations: A Strategic Failure?
Written by: Kabir Taneja
In the middle of the negotiations between the P5+1 group of nations and Iran’s newly elected moderate government on the latter’s alleged nuclear weapons program, French oil major, Total, was pushing Paris to make a favourable deal with Tehran for the company to be able to enter the lucrative Iranian oil and gas industry in the near future. Total’s CEO, Christophe De Margerie, even went to Tehran to hold consultations with the new Iranian establishment.
Following the success of the deal struck between the Western powers and Iran, major energy companies are looking for a further thaw in tensions in order to build a platform to enter the Iranian economy. India, however, was one of the few countries which had this same opportunity even during the height of the standoff few years ago, but New Delhi faltered in taking advantage of this rare geo-political and geo-economic leverage on offer.
During Iran’s isolation from the global arena, particularly over the past decade or so under former President Ahmadinejad’s reign, New Delhi has had to play a delicate balancing act in juggling dynamics between its growing relations with Washington on one hand and its historic and equally important relations with Iran on the other.
Since the sanctions were imposed by the Western powers on Tehran, oil trade between India and Iran dropped significantly. Only a few years ago Iran was India’s second largest source of crude oil next to Saudi Arabia, and now it’s around eighth, losing out to the likes of Iraq and countries in northern Africa and Latin America.
However, during the peak of the crises between Iran and the West, Tehran looked towards New Delhi to significantly boost trade and relations as it looked to keep its economy afloat amidst crushing financial sanctions, specifically on its oil trade activities, a major contributor to its coffers.
Iran, under Ahmadinejad, urged New Delhi to invest in the country, not only in the energy sector, but from everything beginning with agriculture to infrastructure, manufacturing, medicine and so on. Many delegations from Tehran visited New Delhi during this period looking to push India to invest, giving an opportunity on a golden platter to tap into the country’s rich energy sector. However, this was not to be, and the reasons responsible are varied.
India’s growing relations with Washington have made it challenging for South Block to continue or even improve economic relations with Tehran. The tricky balancing act for India between Iran and the US is highlighted by the Farzad B deal. Iran, in an unprecedented move, offered a production sharing contract to India in the Farzad B gas field, estimated to hold reserves of 21 trillion cubic feet of gas. However, India remained non-committal due to Western sanctions and Iran eventually withdrew the offer.T
In August 2012, during a clandestine meeting between Iranian officials and representatives of ONGC Videsh (OVL), the PSU oil giant had agreed to invest $ 1 billion in the Farzad B gas field after Iran pushed for India to begin work on the long delayed project. Iranian officials added that they would consider it as an “unfriendly act” if OVL failed to do so and may hand such projects over to other “friends,” such as China, which is looking to increase its trade with Iran to $70 billion in the next five years. Currently, India and Iran have trade of around $15 billion, a significant amount. However, the trade balance remains heavily in favour of Iran as India imports nearly $12 billion of energy products from the state with the remaining amount going to other goods. During the above mentioned meet, surprisingly, it is known that no representative from the Indian Ministry of External Affairs attended.
Negotiations are still underway, though Iran previously suggested that Indian companies may be barred from the Farzad B processes due to inaction coupled with the new Iranian government’s unwillingness to honour all arrangements signed by the former government. Both countries have exchanged pleasantries and expressed hope on the Farzad B project, however not enough conviction has been shown by New Delhi yet, which stands to gain more than Iran from the deal in the long run.
Another project that is lagging behind is the development of the Chabahar Port, situated in coastal south eastern Iran. This past week, India’s National Security Advisor, Shivshankar Menon, had pulled up the Ministry of External Affairs for not doing enough to fulfil Indian projects in Iran. Now, a team is being sent to Iran to see how to seed up work on berthing facilities and container terminalsto increase capacity. Chabahar Port is seen as vital for India’s larger security strategy as it is India’s only entry point into Afghanistan. Afghanistan is in process of building rail networks which will make trade easier, and has already started exporting goods to India using the port’s facilities.
Majority of the delays over the past five years have been due to New Delhi’s need to please Washington. Since India emphasized to the US that Iran was important for her energy security, India was granted a special arrangement in the sanctions. However, this cannot be a realistic long term solution for either India or Iran.
Currently, Iran has around $5 billion in oil payments stuck in India. About Rs 20,000 crore of these dues are holed up in a UCO Bank branch in Kolkata. Due to the sanctions, financial transactions between India and Iran became a very tricky business. Tehran, which was in bad shape economically by 2012, even suggested that India transfer the much needed money via a ‘third partner system,’ thought to be a route Iran had devised via a bankin a GCC state. For this plan to succeed, India would have had to go against certain international accords, which in turn would have upset the US, the European Union and other signatories.
However, experts believe that many other ways could have been found during that period of time to make payments to Iran, while keeping Indian exports to the country up. Indian businessmen were keen to take up Tehran’s repeated requests to invest, specifically in infrastructure building, however, fear and a lack of vision on part of the Indian government have made India miss out onpreferential access to Iran’s vast economic opportunities.
At a recent event in New Delhi, some prominent Indian oil men and women told India’s Foreign Minister, Mr Salman Khurshid, that it was high time his ministry hired industry and business experts as part of its services, especially in the Energy Security Division, to be able to navigate the technical and political difficulties with ease. Examples of diplomatic structures of states such as the US, Britain and France were given which employ the likes of geo-strategists, economists and even specialised professionals such as oil pipeline engineers in their ranks.
It is not a negative move for Delhi to build closer ties with the United States; in fact it’s largely agreeable. However it needs to be done in a balanced manner and New Delhi does not need to bend over backwards for Washington. India is an important partner for Washington in Asia; however India is still far from being an ‘ally’ of the United States. The difference between ‘partner’ and ‘ally’ is pertinent in this relationship.
An oil man commenting on the India’s lost opportunity in Iran recently said that India was being “more Catholic than the Pope,” in the manner in which it was accommodating American interests these says, specifically in Prime Minister Manmohan Singh’s second term. This, in turn,has cost India a big opportunity in Iran and rare opportunities such as these should not be allowed to easily slip away.
This article has been sourced from The Indian Republic
Did India miss a Historic Opportunity in Iran ?