INDIA-IRAN RELATIONS: CHALLENGES AND WAY FORWARD

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Picture Courtesy:  THE HINDU

Context

Britain, France, and Germany's reimposition of UN sanctions on Iran due to its nuclear program could negatively impact India-Iran relations.

Evolution of INDIA-IRAN Relations

Foundation and Early Years: Diplomatic relations established in 1950. During the Cold War, relations were strained by differences in political alignments.

• India followed non-alignment with strong Soviet ties, while the Shah's Iran was firmly in the Western bloc and supported Pakistan in its conflicts with India.

Post-Revolution Shift: Following the 1979 Islamic Revolution, relations improved.

• Signing of the "Tehran Declaration" during Prime Minister Atal Bihari Vajpayee's visit in 2001 and the "New Delhi Declaration" in 2003, laid a strategic framework for cooperation.

Strategic Convergence (1990s-2000s): In the 1990s, both nations found common ground in supporting the Northern Alliance against the Taliban in Afghanistan.

• Deepening of energy ties, with Iran become India's second-largest oil supplier.

Sanctions and Balancing Act: Relationship faced stress due to international sanctions against Iran's nuclear program.

• India, navigating pressure from the U.S., has reduced its engagement.
• India voted against Iran at the International Atomic Energy Agency (IAEA) in 2005 and 2009.
• Despite this, leaders from both countries maintained high-level exchanges.

Renewed Momentum (2016-Present): Indian Prime Minister Iran visit in 2016, resulted in the signing of the trilateral agreement on the Chabahar Port with Afghanistan.

• U.S. withdrawal from the Iran nuclear deal in 2018, led to India suspending oil imports from Iran in 2019.  
• Chabahar Port Contract (2024): India signed a 10-year contract to operate the Shahid Beheshti terminal at Chabahar Port.
• Bilateral Trade: Despite sanctions, bilateral trade stood at $2.33 billion in FY 2022-23. India's major exports include rice, tea, and pharmaceuticals.

Why IRAN is important to India?

Strategic Connectivity: Gateway to Afghanistan and the landlocked Central Asian republics, bypassing Pakistan.

Chabahar Port: Centerpiece of India's "Look West Policy" and connectivity initiatives.

• It acts as a strategic alternative to Pakistan's Gwadar Port (developed by China) and is a key node for the International North-South Transport Corridor (INSTC), a 7,200-km multi-modal transport project to move freight between India, Iran, Afghanistan, Armenia, Russia, Central Asia, and Europe.

Energy Security: Iran has the world's third-largest oil reserves and second-largest natural gas reserves.

• Before U.S. sanctions in 2019, Iran was India's top-three oil supplier, accounting over 10% of total Import.
• Re-engaging with Iran offers India an opportunity to diversify its energy sources and enhance its energy security.

Economic Partnership Beyond Energy: Iran is a export market for India, importing commodities such as rice, tea, pharmaceuticals, and other goods, opportunities for diversifying trade basket and facilitating greater economic engagement.

Regional Balance of Power: A stable and friendly Iran is important for India's interests in West Asia.

• Tehran acts as a geopolitical counterweight to Pakistan's influence in the region.
• Historically, Iran has resisted Pakistan's attempts to pass anti-India resolutions at the Organisation of Islamic Cooperation (OIC).
• Counterbalance other major powers in the region, particularly China, which is expanding its influence through initiatives like the Belt and Road Initiative (BRI).

Afghan Stability: Both India and Iran share common interest in a peaceful and stable Afghanistan, free from extremist influence, historically collaborated against the Taliban and can play a significant role in the country's future.

Diplomatic Engagement and Multilateralism: India engage with Iran on multilateral platforms such as the Shanghai Cooperation Organization (SCO) and BRICS, where both are members, to promote common interests and contribute to a more equitable and multipolar world order.

Why India is important to Iran?  

Economic Partnership: India, as the fifth-largest economy and a major energy consumer, a huge and reliable market for Iranian oil and gas.

• India is a source of technology, investment, and essential goods like pharmaceuticals and food products.

Countering International Isolation: Facing Western sanctions, a strong relationship with a major, strategically autonomous power like India provides Iran diplomatic and economic space.

• India's continued engagement on projects like Chabahar, despite U.S. pressure, stresses value as a resilient partner.

'Look East' and 'Neighbourly' Policy: India is a part of Iran's foreign policy towards Asia to find partners beyond its immediate, hostile, neighborhood.

• A strong partnership with New Delhi helps Tehran balance its ties with other powers, including Israel and China.

Geopolitical Alignment: Iran views India as a key player in a multipolar world order that can help challenge U.S. dominance. 

Strategic Location and Regional Connectivity: India's strategic location in the Indian Ocean and efforts in developing connectivity projects such as the INSTC and Chabahar Port, offer Iran potential trade routes to Central Asia and a means to enhance regional integration.

India's Policy Towards IRAN

Strategic Autonomy: India follows its national interests without being bound to any single power bloc's agenda.

• This allows New Delhi to engage with Iran despite strong opposition from the U.S. and simultaneously build deep ties with Iran's rivals like Israel and Saudi Arabia.

De-hyphenated Foreign Policy: India categorises relationships, maintaining robust defense and technology cooperation with Israel while pursuing energy and connectivity projects with Iran. This de-hyphenated approach allows India to maximize its gains from all sides.

Pragmatic Realism: Engagement is not driven by ideology but by a realist calculation of core interests: energy security, connectivity, and regional balance.  

Adherence to Multilateralism: While India has resisted unilateral sanctions imposed by the U.S., it has followed UN-mandated restrictions.

• India uses multilateral forums like BRICS and the SCO, of which Iran is now a member, as platforms for continued dialogue and engagement.

Calculated Neutrality: During the recent Iran-Israel conflict in June 2025, India urged both sides to de-escalate and chose not to join an SCO statement condemning Israel, demonstrating its careful, non-aligned position.

What are the Challenges and obstacles in INDIA-IRAN Relations?  

Sanctions: U.S. sanctions regime, particularly the Countering America's Adversaries Through Sanctions Act (CAATSA), forced India to reduce its oil imports from Iran to nearly zero after 2019, impacting economic ties.

• It also slow down progress on projects like Chabahar due to difficulties in securing equipment and financing.

Geopolitical Tightrope: Pressure to balance growing strategic partnership with the United States and strong ties with Israel and Gulf Arab nations against relationship with Iran.

• The direct Iran-Israel conflict has intensified this dilemma, with India advocating for restraint from both sides while trying to protect its interests.

Iran's Deepening Ties with China: Iran and China signed a 25-year strategic cooperation agreement in 2021. While Iran pursues its own interests, China's expanding economic and strategic footprint in Iran under Belt and Road initiative (BRI) is a concern for India.

Delays in Key Projects: India's participation in the Farzad-B gas field project was terminated, and the construction of the Chabahar-Zahedan railway line has faced delay.

Regional Instability and Terrorism: Iran's support for groups like Hamas, Hezbollah, and Houthis in Yemen create challenges for India, which aims to maintains neutrality and has strong partnerships with countries like Saudi Arabia and the UAE.      

• Iran's involvement in regional conflicts, like the Gaza crisis and strained relations with Gulf states, creates an uncertain environment, which affect the security of trade routes and impacting India's overall strategy in the region.       

Rhetoric on Kashmir: Occasional statements by Iranian religious leaders on sensitive internal issues for India, such as the situation in Kashmir or the state of Indian Muslims, strain bilateral relations.

Way Forward for Strengthening INDIA-IRAN Relations

Prioritizing Chabahar Port & Connectivity: Focus on the timely completion of the Chabahar Port development and associated connectivity infrastructure like the railway line to Zahedan and its integration into the INSTC.

Strategic Engagement on Energy: Explore possibilities of resuming or diversifying energy cooperation, restarting oil imports from Iran, considering India's growing energy needs and Iran's reserves.

• Consider investments in Iran's energy sector and examine the feasibility of projects like the Iran-Oman-India pipeline.

Boosting Trade and Investment: Expand the trade basket beyond traditional goods like oil to include areas like pharmaceuticals, agricultural products, engineering goods, and services.

• Work towards a preferential trade agreement and explore alternative payment mechanisms, including rupee-rial trade, to bypass the restrictions imposed by sanctions and facilitate trade in essential goods and services.

Deepening Counter-Terrorism and Security Collaboration: Address shared security concerns and the threat of terrorism by strengthening counter-terrorism cooperation, including intelligence sharing and joint exercises.

Strategic Autonomy and Balanced Engagement: India should continue to pursue its foreign policy of strategic autonomy, maintaining robust ties with Iran while also managing relations with other regional and global powers.

Addressing US Sanctions: Engage with the US to explore opportunities to mitigate the impact of sanctions on essential connectivity projects for regional stability and development like Chabahar port.

Leveraging Multilateral Forums: Utilize platforms like the Shanghai Cooperation Organization (SCO) and BRICS to discuss important regional issues, to promote common interests, and advocate for a more multi-polar world order.

Conclusion

India-Iran relations are crucial for India's energy security and regional connectivity via Chabahar Port. Navigating US sanctions while balancing geopolitical interests presents challenges. However, mutual interests in stability and economic cooperation offer pathways for a stronger future partnership.  

Source: THE HINDU