Economy, Domestic Economy

India Rebooting Ties, Expediting Connectivity Plans With Iran

India Rebooting Ties, Expediting Connectivity Plans With IranIndia Rebooting Ties, Expediting Connectivity Plans With Iran

In his upcoming visit to Iran this week, Indian Prime Minister Narendra Modi is hoping to take New Delhi’s Ties with Tehran to a higher level.

Three senior ministers of the Modi government, including External Affairs Minister Sushma Swaraj, have travelled to Tehran in the past few months to step up engagement, revive some stalled joint projects and set the stage for the prime ministerial visit.

Modi’s trip on May 22-23 is expected to bridge the trust deficit in bilateral cooperation and boost energy and trade ties while expediting India’s connectivity plans. Strong ties with Iran are vital for India. The key factor is energy, wrote the Indian newspaper The Hindu.

Until sanctions were imposed on Iran, the country was India’s second largest source of crude oil after Saudi Arabia. Once Chabahar Port in Iran is developed, it will offer India alternative access to landlocked Afghanistan, bypassing Pakistan.

 Both Iran and India share the goal of a stable government in Kabul free of the Taliban’s influence. Globally, New Delhi and Tehran are on the same page in their opposition toward terrorist groups like Al-Qaeda and the self-styled Islamic State.

Despite these shared interests, bilateral ties took a beating during the sanctions years. India had voted against Iran at the International Atomic Energy Agency over its nuclear program and, under pressure from the US, slashed oil imports from the country by up to 40% during the period.

New Delhi had also backed off from a pipeline project that aimed to bring natural gas from Iran to India through Pakistan. But with sanctions removed and foreign countries and companies rushing back to Tehran to seize business and economic deals, it is important for India to reboot relations.

  Chabahar Pact to Be Signed

India, Iran and Afghanistan are set to sign an agreement on developing Chabahar Port and establishing a transit-transport corridor during Modi’s visit, a deal that will make it easier for New Delhi to access markets as far afield as the Central Asian republics.

The agreement, to be signed in the presence of Modi, Iranian President Hassan Rouhani and Afghan President Ashraf Ghani on May 23, is expected to be the centerpiece of the Indian Prime Minister’s two-day visit, Hindustan Times wrote.

The establishment of a transit-transport corridor with Chabahar Port in Iran’s Sistan-Baluchestan Province at its heart will allow Afghanistan to bypass Pakistan for trade with India. It will also allow India and Afghanistan to access new markets in the Central Asian republics.

The three countries have engaged in protracted negotiations on the Chabahar Agreement since 2003 but the venture was boosted by recent developments, including the lifting of nuclear-related sanctions on Tehran in January and New Delhi’s renewed focus on the port in southeast Iran.

Shaida Mohammad Abdali, Afghanistan’s ambassador to India, had recently described the agreement as a “done deal”. India’s External Affairs Ministry said in a statement that the agreement “will be a strategic bulwark for greater flow of people and goods among the three countries as well as in the region”.

During a meeting in New Delhi last month, representatives of Afghanistan, India and Iran finalized and initialed the text of the agreement. They also agreed to set up a subcommittee to frame transit, port, customs and consular protocols within six months.

  Overdue Crude Bill

India is also rushing to pay nearly $6.5 billion it owes to Tehran for crude oil imports.

Turkey’s Halkbank has been identified to facilitate the payment.

“The money will be paid in euros,” NDTV quoted India’s ambassador to Iran, Saurabh Kumar, as saying.

India is one of the biggest customers of Iranian crude and is set to import at least 400,000 barrels per day from Iran in the year from April 1, but it has built up a backlog of payments for three years when Iran was under sanctions.

Indian Oil Minister Dharmendra Pradhan travelled to Iran last month to push for development rights to the vast Farzad B gas field in Iran.

India’s state-run Oil and Natural Gas Corporation discovered the offshore block in 2008, but was unable to get permission to develop it because of the anti-Iran sanctions.  Pradhan also discussed India’s interest in developing Chabahar Port in Tehran and building industrial complexes there.

India was one of a few countries that never halted oil imports from Iran during sanctions. India is Iran’s second-biggest oil client after China.

As Iran’s banking and financial systems will take some time to integrate with global processes following the removal of sanctions, India has limited options for how to route its payments. Although most restrictions on Iran have been lifted, the United States maintains some sanctions and a trade embargo. This means banks cannot use the dollar for any deals with Iran, while US banks are barred from doing business outright.

“While the payment of dues issue is in the throes of being resolved with the help of the External Affairs Ministry, the other matter to be sorted is regarding the shipment of crude oil from Iran,” said an Indian Oil Ministry official.

Iran was using its own shipping lines to deliver the crude because major shipping entities could not be involved due to sanctions. Now, Tehran wants India to make its own arrangements.