Originally Published 2012-06-02 00:00:00 Published on Jun 02, 2012
Though India has decided to cut down oil from Iran and thereby, for the time being, might have placated the US, it, however, cannot afford to ignore Iran either - for a myriad of reasons.
Why New Delhi should not ignore Tehran
Past few days and weeks, there have been significant developments which clearly reiterate the point that the US-Iran acrimony is having a pronounced impact on the geo-politics and economics of the Middle East and South Asia. In the Middle East, new alignments which aim to reduce Iran’s clout in the Middle East are on the anvil. On 14 May 2012, in Riyadh, Arab heads of state, met to discuss the idea for a ’union’ among six-member Gulf Cooperation Council (GCC), consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE with the primary intention of checking Iran’s growing influence in the Middle East. To move forward on this proposal, members have planned to meet by the year end.

If one were to look at the impact of the US-Iranian hostility on South Asia, there is no better illustration than the forward movement on Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and India’s enthusiasm with regard to the project. On 23 May 2012, in the presence of petroleum minister S Jaipal Reddy, the Gas Sales and Purchase Agreement (gspa) relating to the pipeline was signed by Chief Managing Director of gail, BC Tripathi and Chairperson of TurkmenGaz, Baymrat Hojamuhamedov. The proposed tapi Gas Pipeline project (worth $7.6 billion) is likely to be 1,680 km, with a distance of approx 145 km in Turkmenistan, 735 km in Afghanistan and 800 km in Pakistan, before connecting it in India at Fazilka, carrying 38 mmscmd of gas to Indian borders.

It is widely believed that the urgency being shown with regard to this project is a consequence of direct pressure from the US and a way of putting the Iran-Pakistan-India (IPI) pipeline on the backburner. The Indian government, though, has ve-hemently denied this. Interestingly, Iran has already constructed 900 km of the 1,100-km pipeline and Pakistan has already completed Interim Front End Engineering Design (feed) of the proposed ip project.

Second, India which was the second largest oil importer of Iran (13 percent) only after China (22 percent) has decided to reduce oil imports by 11 percent to 15.5 million tonnes this year from 17.44 million tonnes in 2010-11. India imports 80 percent of its crude oil requirements of which Iran supplies as much as 12 percent. Other major importers of Iranian oil before the sanctions were European Union, Japan and South Korea.

It must be mentioned here, however, that while for the time being India might have placated the US, it cannot afford to ignore Iran either - for a myriad of reasons.

First, civilisational linkages between India and Iran - regularly cited by India’s leadership, strategic community and academia - date back to centuries. The close interactions between the Indus Valley civilisation and the Persian civilisation are well known to all.

In the recent past too, cultural exchanges have been crucial components of the bilateral relationship between both countries. In 2008, a MoU was signed between Indian Council for Cultural Relations, New Delhi and the Iranian Cultural Heritage, Handicrafts and Tourism Organisation on holding of ’Days of Culture’ in these countries.

Geo-political relevance

Cultural exchanges have been crucial components of the bilateral relationship between Mumbai and Tehran. Further, India has plans to set up a Cultural Centre in Tehran. It might also be mentioned here that over the years, India has emerged as an attractive destination not only for Iranian tourists, but students as well.

Apart from close civilisational ties, linkages can be traced in the realm of bilateral trade and commerce. According to The Ministry of Commerce & Industry, Government of India, in 2006-07, the total growth rate of Indo-Iran bilateral trade stood at 55.20 percent on year to year (y-o-y) basis i.e. 2005-06, before coming down to 2.07 percent in 2010-11, on y-o-y i.e. 2009-10.

A few weeks back businesspersons from India and Iran held talks to boost trade between the two nations when a sizeable delegation of Iranian businessmen visited India, interestingly the visit coincided with that of US Secretary of State Hillary Clinton.

The trade delegation sealed a deal with India to buy shipments of sugar, rice and soybeans, as a part of plan for Tehran to use such pacts to circumvent US financial sanctions for oil shipments. Iran is planning to increase the annual trade figure from current $14 billion to $24 billion.

Iran’s geopolitical and strategic location as India’s potential gateway to Central Asia, also make it indispensable. India is in fact helping in the construction of Chabahar Port, to get access to the Central Asian region. Constructed by India in 2008, the road passes from Chabahar Port on the Arabian Sea through Iran’s Sistan-Baluchistan and Khorasan provinces, and onward to the town of Milak on the Afghan border. New Delhi, Tehran, and Kabul have also planned a 900-km railway line along the entire route to facilitate trade to and from Central Asia. This project is looked at as India’s answer to Gwadar Port being developed in Pakistan.

It would also be worthwhile to mention here that India, Iran and Russia also have a plan to connect Mumbai with St Petersburg, providing Europe and Central Asian access to Asia and vice-versa, by building a multi-modal transport link, known as International North South Corridor.

This corridor is likely to boost trade between Europe and South East Asia, beside helping India, Myanmar and Thailand. Trade at this route will easily reduce the distance by 20-30 days in what currently taken through Suez Canal.

Most importantly, the US pressure to reduce oil imports from Iran has had a negative impact on India’s other energy interests in the Persian Gulf, such as its hunt for gas in Iran’s Farsi block. New Delhi’s plans to go ahead with a $5 billion (`27,000 crore) investment in this block for developing Farzad-B gas field, in which ongc and ioc hold 40 percent and 20 percent stake respectively may also have to be put on the backburner. Seeing all the above factors, it is unequivocally clear that while New Delhi may not want to annoy Washington, the geo-political relevance of Iran makes it impossible for New Delhi to ignore Tehran.

(Tridivesh Singh Maini is an Associate Fellow and Manish Vaid a Research Assistant at Observer Research Foundation)

Courtesy: The Financial World

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