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Is India Making a Good Bet on Iran?

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Is India Making a Good Bet on Iran?

The recurrent nature of tensions between Washington and Tehran will continue to test India’s balancing act. 

Is India Making a Good Bet on Iran?
Credit: Depositphotos

The quest for strategic autonomy remains the lodestar of India’s foreign policy, whether through Cold War era non-alignment or the new age of multi-alignment. India’s growing strategic embrace of the United States contrasts with New Delhi’s penchant for independent agency in foreign policy decision-making. Particularly in dealing with U.S. adversaries, New Delhi has had to walk a tightrope, and as such, managing the curious case of India-Iran-U.S. dynamics will remain a challenge for India’s foreign policy planners. 

On May 13, 2024, India and Iran made headlines by signing a landmark agreement to develop and manage the strategic Chabahar Port, and drew diplomatic ire from Washington. The deal was inked between India Port Global Limited (IPGL) and Iran’s Ports and Maritime Organization (PMO). Coincidentally, the agreement was sealed just before the sudden demise of Iranian President Ebrahim Raisi in a helicopter crash. At a time of increasing India-U.S. partnership in the Indo-Pacific region, and of heightened Washington-Tehran tensions in West Asia, can New Delhi sustain the momentum of its engagement with Tehran? In short, is India making a good bet on Iran? 

Collaboration on the development of the Chabahar Port has remained a point of convergence and joint strategic vision, supported through successive political leaderships on both sides. The recent deal is a culmination of many milestones over the years. In a landmark 2003 visit by then-President Mohammad Khatami of Iran to India, the two nations signed “The New Delhi Declaration,” solidifying their strategic partnership. The centerpiece of the declaration was collaboration on the development of Chabahar Port, through which India and Iran aimed to unlock new trade routes and connect the region to Central Asia and Europe. The agreement holds immense significance for India as it provides an alternative trade route to landlocked Afghanistan, bypassing Pakistan. 

Chabahar Port, located in southeastern Iran, offers a direct sea-link to the Indian Ocean, providing a much-needed gateway for India to access Central Asian markets. This not only boosts India’s trade prospects but also enhances its strategic presence in the region. Chabahar’s location on the Arabian Sea further enhances its appeal to avoid potential disruptions in the Strait of Hormuz. 

Iran has also remained one of India’s most important partners in energy security, despite Western sanctions affecting the volume of transactions. India’s burgeoning economy will continue to necessitate a secure and reliable source of energy to fuel its growth. Exacerbating tensions between Iran and European countries have further incentivized Iran to view India as a vital and reliable destination for its energy exports. 

On the other hand, China’s growing influence in the region crisscrossing South, Central, and West Asia lends geostrategic significance to the Chabahar Port. China’s gargantuan Belt and Road Initiative (BRI) – particularly the China-Pakistan Economic Corridor (CPEC) – and Beijing’s comprehensive engagement with Tehran, primarily through a 25 year, $400 billion deal settled in 2021, provide China significant access to the Gulf of Oman and the Arabian Sea.

The partnership between India and Iran suffered a major setback in 2020 with Iran’s unilateral decision to shelve the Chabahar-Zahedan railway project, citing delays in Indian financing. Despite Iranian assurances about completing the project with domestic resources, the move signaled a potential shift in priorities and a potential opening for China to participate in this crucial infrastructure initiative. The potential inclusion of the Chabahar-Zahedan railway project under the BRI umbrella, the project’s proximity to CPEC, and China’s growing footprint in Afghanistan raise concerns about India’s security objectives and its energy import routes. 

The growth in the China-Iran strategic partnership coincided with a deterioration in their respective relationships with the United States. In 2018, the U.S. withdrawal from the Iran nuclear deal and subsequent re-imposition of sanctions added significant further strain to Iran-U.S. relations. China, defying these sanctions, continued to import energy from Iran, further solidifying its partnership with Tehran. The targeted assassination of Iranian General Qassem Soleimani by the U.S. in 2020 further exacerbated tensions. Similarly, escalating trade disputes and disagreements over human rights and regional security issues have strained China-U.S. relations. This shared perception of U.S. pressure served as a catalyst for the 2021 China-Iran deal.  

Despite U.S. sanctions against Iran discouraging India from participating in the Chabahar-Zahedan Railway project, the Indian government has demonstrably maintained a long-term vision for Chabahar port. Since 2015, there has been a renewed focus on project completion, irrespective of the Taliban’s return to power in Afghanistan, and the port deal solidifies this commitment on the ground to operate the Shahid Behesti terminal at Chabahar. A key obstacle to fully realizing Chabahar’s potential is the looming threat of U.S. sanctions targeting any entity engaging in business with Iran. While the recent U.S. sanctions announcement following the Chabahar deal did not explicitly target India, it reflects a hardening U.S. stance toward Iran, particularly in light of growing clash over regional security in West Asia. 

New Delhi’s response, emphasizing Chabahar’s importance for regional connectivity and urging U.S. appreciation of the port’s broader significance, underscores India’s desire to maintain its Iranian engagement. India should also be prepared to push back in order to protect and promote its strategic interest against excessive U.S. pressure. Chabahar offers significant strategic benefits for India, including access to Afghanistan and Central Asia, and pursuing these benefits strengthens India’s position as a major stakeholder in the evolving regional security environment. The U.S. failure to understand India’s strategic vulnerabilities and opportunities will end up reducing the advantages that a more proactive New Delhi can offer to counteract China’s growing presence in the region. A more nuanced U.S. approach, acknowledging India’s legitimate interests while addressing Washington’s concerns, would be crucial in fostering a stable and cooperative regional order.

Any uptick in tension between the United States and Iran leads to Washington expecting other countries to toe its line of thinking and action, which in turn constrains countries like India that desire a stronger partnership with the United States, without jeopardizing important ties with Iran. The recurrent nature of tensions between Washington and Tehran will continue to test India’s balancing act. In the midst of such complex geopolitical dynamics, New Delhi must effectively communicate the strategic importance of Chabahar for regional connectivity while potentially pushing back against undue American pressure. 

Despite the challenges, the long-term vision for Chabahar remains strong. The recent agreement signifies renewed momentum for the project and broader India-Iran cooperation. Washington should acknowledge the strategic value of a robust Indian presence in Iran and across the geostrategic expanse of the region to counter China’s influence and foster a stable regional order.

However, questions linger. How well can India navigate Iran-U.S. tensions? How effectively can India manage China’s growing footprints In Iran and the region, to protect and promote its own interest? The answers to these questions will determine whether the Chabahar deal becomes a wellspring of opportunities or a missed opportunity.