Iran, the heart of the storied Persian empire of antiquity, has long played an important role in the region as an imperial power and later—because of its strategic position and abundant natural resources, especially petroleum—as a factor in colonial and superpower rivalries.
Situated at the crossroads of Central Asia, South Asia, and the Arab states of the Middle East, its strategic position—and its access to the Persian Gulf in the South— have made Iran an important country throughout its history.
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India, which shared its border with Iran till the partition of the British India in 1947, enjoys deep-rooted historical relations with Iran. Iran is one of the richest countries in hydrocarbon and India is a rapidly growing economy with a deep thirst for energy. These are the hallmarks of the India-Iran relationship.
Iran’s strategic significance to India is crucial, resulting in close bilateral ties in the face of insurmountable difficulties.
Iran’s geographical position is paramount to India’s geopolitical outreach, especially to Central Asia, a rich reservoir of natural resources. Similarly, Iran is vital for India’s access to Afghanistan in which India has immense strategic and security interests. India’s choice of Iran as a gateway to Central Asia and Afghanistan also has positive repercussions on Iran’s aspirations of becoming a regional hub for trade and transit.
India and Iran have friendly relations in many areas, despite India not welcoming the 1979 Revolution.
There are significant trade ties, particularly in crude oil imports into India and diesel exports to Iran. Iran frequently objected to Pakistan’s attempts to draft anti-India resolutions at international organisations such as the OIC and the Human Rights Commission. India welcomed Iran’s inclusion as an observer state in the SAARC regional organisation.
Such an understanding of reciprocally advantageous consequences motivated India and Iran to formally sign two consecutive comprehensive joint documents reflecting their vision of strategic partnership. The first is the ‘Tehran Declaration’ signed in April 2001, and the second is the ‘New Delhi Declaration’ signed in January 2003.
The India-Iran relations have arguably been on the backburner due to intense hostility of Tehran towards Washington, despite regular high-level exchanges between the two states, largely due to US sanctions against Tehran upending oil trade. The interpretation of Iranian strategic and foreign policy choices from an Indian perspective should come from recognising Iran for what it is, a survivalist state, transactional in nature, and more than challenging to deal with, sanctions or no sanctions.
While India-Iran bilateral has been challenging from a regional perspective, the recent US-UAE-India-Israel ‘quad’ meet during Foreign Minister S Jaishankar’s visit to Israel also adds a new layer of concern for Tehran.
The Israel–Iran regional tensions have found their way to India as well, with attacks against Israeli mission in 2012 and in 2021 being blamed on Iran. Overall, a fast-paced economic and security relationship with UAE, Saudi Arabia, and the Gulf Cooperation Council (GCC) will be seen by Tehran as trends that New Delhi should balance out with Iran as well.
While Iran and India may see eye-to-eye on many developing issues in Afghanistan, including the overreaching influence of Pakistan, the variables for any extended collaboration with India is unlikely to be seen from an exclusive lens of Afghanistan.
Iranians are experts in trade-offs, being a survivalist political order that has, whether the West likes it or not, endured and arguably thrived, in some areas, despite both international exclusion, significant domestic challenges, and an expansive area of foreign policy operations.
The good news for India is that these complexities are not new, and New Delhi is well-equipped with experience to play out these intricacies keeping its own strategic goals at the forefront.
Iran is currently pumping about 24 lakh barrels per day of crude in April as against 38 lakh bpd before sanctions were re-imposed in 2018. This suggests there is ample spare capacity to pump out more Iranian crude, which competes with similar heavy sour grades from Gulf Cooperation Countries, Russia, Venezuela and Mexico.
The other area of cooperation is the Chabahar port where the effort of both Iran and India is to involve more countries. Having formed a trilateral with Uzbekistan for utilising the port, the two countries are now looking at involving Kazakhstan.
Hopes revive for rupee-rial trade
External Affairs Minister S Jaishankar last week spoke to his Iranian counterpart Hossein Amir-Abdollahian to develop and promote cooperation and relations in various fields. The conversation comes in the wake of Iranian media reports that India is preparing its refineries for Iranian imports. Iran has offered to help India meet its energy needs by reviving rupee-rial trade for export of oil and gas.
India’s energy and transit ties with Iran have been subject to vicissitudes due to its troubled ties with the US, whose sanctions have repeatedly determined the quantity of India’s oil imports from Iran. Iran’s share of India’s total oil imports reached a peak of 16.60 per cent in 2007.
Till 2010, Iran was India’s secondlargest supplier of oil (behind only Saudi Arabia), accounting for 14 per cent of total oil imports After an escalation in US sanctions against Iran in 2010, and more stringent application of secondary sanctions, the West Asian country’s share in India’s oil imports fell to an average of only 7 per cent between 2011 and 2019.
Sanction waivers from the US always decided how much oil would flow from Iran to India. One example of the impact of US sanctions on India’s oil imports from Iran is the experience of India’s largest private oil company, Reliance Industries Limited (RIL), which has deep commercial linkages with the US.
RIL stopped buying Iranian oil in April 2010, resuming imports only in April 2016 for a brief period, before halting it again in October 2018. Due to the threat of US secondary sanctions after the it stopped granting waivers, India’s oil imports from Iran dropped considerably in 2019, before coming to a complete standstill by 2021.
Following the Ukraine war, experts expect a shift in the US policy of sanction waivers for Iranian oils. India’s private and public sector oil companies, along with India’s diplomatic support have stepped up lobbying for specific waivers from Washington.
In this backdrop, India and Iran have begun talks on resumption of bilateral trade in items such as crude oil and fertilisers that have faced US sanctions since 2019.
