Economy, Domestic Economy

Will India Be Able to Outwit China in Iran?

Will India Be Able to Outwit China in Iran?Will India Be Able to Outwit China in Iran?

With the Islamic Republic of Iran coming out of longstanding sanctions following the July 2015 nuclear deal and its implementation in mid-January, there is a sort of gold rush to exploit a range of opportunities that this resurgent oil-rich country presents.

Apparently, the lifting of sanctions makes for the removal of restrictions on its oil, petrochemicals, banking, natural gas and port sectors that are critical to the economy of this strategically-located West Asian country, reads an article recently published in The Northlines, an English-language daily published from Jammu, in the state of Jammu and Kashmir in northern India.

By all means, Tehran continues to hold immense strategic significance for India since Iran fits in well into the geopolitical and economic equation of India. And on a more practical plane, Iran could also be a trusted ally in India's strategy to influence the course of events in the war-ravaged Afghanistan where Taliban continue to pose a challenge to the ruling dispensation in Kabul.

The perception in New Delhi is that an economically-revitalized Iran could be a major factor in facilitating Indian energy security by serving as a stable and long-term source of fossil fuel supply. Whether Iran, which boasts the fourth biggest proven reserve of crude oil and the largest natural gas reserve in the world, would be able to supply crude to India at a price that could prove advantageous to the country, it is difficult to conclude at this point of time.

However, the biggest attraction for India is that Iran's economy is far more diverse than many of its oil-rich neighbors.

But then for India, the most pressing concern is how to counter China, a long-time buyer of Iranian oil and a major player in the Iranian development saga, in the race for Iranian "business opportunities".

China has already made Iran a part of the "One Belt One Road" strategy by flagging off of a cargo train from the industrial hub of Yiwu to Tehran. This new connectivity holds the key to Chinese vision of expanding the scope of trade, business and manufacturing across Europe and Asia.

As it is, China has already signed a strategic partnership pact with the sanction-free Iran to take care of military and security cooperation as well as intelligence sharing.

For Iran, the biggest positive point of doing business with China is that the country is the largest importer of oil in the world. For China, the strategic location of Iran holds the key for consolidating its geopolitical influence in West Asia.

But as European companies tussle to do business with a sanction-free Iran, China will have difficult times expanding its business avenues in Iran. At about the same time, what could tilt the Iranian scales in favor of China is that during the period of sanctions, Chinese enterprises had invested heavily on building steel mills, highways, dams, shopping malls and rapid transportation systems as well as mining complexes in the country. The fact is that China is today Iran's biggest trade partner.

By all means, India would need to reshape and recalibrate its Iranian strategy in the context of the rapidly shifting geopolitical dynamics. Chabahar Port project, in the race for which India has pipped China at the winning post, seems to be the brightest spot in Indo-Iranian trade relations. It is in the fitness of things that the Indian government has cleared a proposal of the Shipping Ministry to raise a credit of $150 million for the development of Chabahar Port.

In this context, a statement from the Indian government says, "India is negotiating this project to facilitate the growing trade and investment with Iran and other countries in the region, notably Afghanistan; and also to provide opportunities to Indian companies to penetrate and enhance their footprint in the region."

As it is, last year, the Indian government took a decision to sanction $85.21 million for developing this Iranian port.

In fact, both countries are working toward preparing the ground for the Indian participation in the development of the strategically-located Chabahar Port and the adjoining Free Trade Zone.

During his late December 2015 visit to New Delhi, Minister for Economic Affairs and Finance of Iran Ali Tayyebnia informed Indian Foreign Minister Sushma Swaraj that India is free to rope in both private and public sector companies for the development of Chabahar Port and Chabahar FTZ.

Evidently, the connectivity afforded by Indian participation in the development of Chabahar Port would facilitate linking Afghanistan and Central Asia with India.

Chabahar, which is located not far from Bandar Abbas Port in the Strait of Hormuz, provides an alternate access to Afghanistan by bypassing Pakistan. This unique deep seaport, located at the crossroads of global trade, commerce and energy routes, could also be India's gateway to energy-rich countries of Central Asia and further into Europe. India can make use of its role in the development of Chabahar for shipping crude and urea, and in the process reduce the transportation cost of these two vital commodities to a substantial extent.

By all means, the Indian participation in Chabahar project cannot but be a win-win development for Afghanistan that can forge ahead with its maritime trade by bypassing Karachi Port in Pakistan. Chabahar Port could play a crucial role in the economic reconstruction and development of the landlocked Afghanistan.

 In this context, India has finalized a plan to put in place a 900-km long railroad from Bamiyan Province of Afghanistan to Chabahar. This railroad could also support Indian companies involved in minerals extraction in Bamiyan.

Perhaps India can use Chabahar as a springboard to nullify the advantages that China could derive from the management control of Gwadar Port in the neighboring Pakistan. Of course, China can use the deep sea Gwadar to support its naval forces in the Indian Ocean in addition to fast tracking the movement of its naval personnel to Indian Ocean in the event of an emergency.

China has both financed and constructed the Gwadar as it opens up a route for transportation of oil imported from West Asia by a 3,000-km-long land route from Gwadar to Kashgar in northwestern part of China.

On another front, India's association with Chabahar project would imply greater maritime relations between the two countries. For instance, India can bypass Dubai to reach Iran directly from Kandla Port in Gujarat to Chabahar. Currently, Chabahar is handling 2 million tons of cargo annually. After the port is upgraded through a phased expansion plan, it would be possible to handle more than 80 million tons by 2020.

India's involvement in the expansion plan of Chabahar being developed to meet the modern shipping standards while radically transforming the geostrategic position of Iran will help boost trade and business between Europe and Asia through overland route.

Unlike Bandar Abbas, which is located in the congested waters of the Strait of Hormuz, Chabahar is located further to the east and is the only Iranian port with direct access to the Indian Ocean. Chabahar will enable India to effectively compete with China for trading opportunities across Central Asia, Russia and Europe.

India has also expressed its keenness to participate in the oil and gas exploration activities in Iran. This has been made amply clear by India's External Affairs Ministry. But then the possibility of Iran linking up with Chinese or western energy enterprise is very much on the cards. To what extent India will be able to counter growing Chinese influence over Iran will depend on the diplomatic strategy and business blueprint it puts in place to engage Iran.

But then, China, which did business with Iran during the time it was under sanctions, could emerge an Iranian favorite much to the disadvantage of India.

For instance, Chinese footfalls can be seen everywhere in the capital city of Tehran. Hundreds of thousands of inexpensive cars, a well-equipped metro system and huge shopping complexes built with Chinese money and expertise during the sanctions regime provide a telltale evidence to Chinese influence in Tehran.

Against such a backdrop, India would need to work overtime to regain the Iranian confidence.