India-lran Relations | UPSC Notes

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India-lran Relations | UPSC Notes

• India and Iran have had close cultural ties for a long time. Their past and present lives are all connected.

• India and Iran have been friends since the time when people lived in the Indus valley and Mesopotamia. Through the Persian Gulf and the Arabian Sea, there was trade between the coast of southern Iran and India. In Iran, some Indus seals have been found in Kish, Susa, and Ur.People think that the Harappans got silver, copper, turquoise, and lapis lazuli from Afghanistan and Persia. Ancient India got things from Iran like silver, gold, lead, zinc, and jade. India was a source of ivory.

• Since India got its freedom, most of the time things have been calm, friendly, and clear.

The two countries were next to each other until 1947, and their languages, cultures, and customs have a lot in common. On March 15, 1950, formal ties were made between India and Iran.

• In 1953, Shah Mohammad Reza Pahlavi was in charge of Iran. During much of the Cold War, India and Iran had trouble getting along because they had different political goals. This was mostly because India did not side with the US, which had close links with Iran. Also, India was leaning more towards the USSR, especially after the Treaty of Peace and Friendship was signed in 1971. Relations between India and Iran have gotten better since the Iranian Revolution of 1979, the war in Afghanistan in 1979, and the worsening of ties between Iran and Pakistan. In the 1990s, Iran and India worked together to help the Northern Alliance in Afghanistan fight the Taliban.

• India’s trade with Central Asia and Russia is now most likely to go through Iran. In 2000, India, Russia, and Iran made a deal to send goods from India to Russia through Iran along a “North-South Corridor.”

• The “Tehran Declaration,” which was signed during the visit of former Indian Prime Minister Atal Bihari Vajpayee to Iran, said that both countries wanted a “international order that is fair, pluralistic, and based on cooperation.” It acknowledged that Mohammad Khatami, who was president of Iran at the time, had a vision of a “dialogue among civilisations” as a model for international relations built on tolerance, pluralism, and respect for differences.

• But in 2006, India voted against Iran at the International Atomic Energy Agency because of its secret nuclear project. Due to pressure from the US, India cut the amount of oil it imported by 40% and stopped a pipeline project that would have brought gas through Pakistan. This was a big blow to the relationship between India and Iran. But when Iranian President Mahmoud Ahmadinejad went to India in 2008, things got back on track. India promised to have its own policy towards Iran and not give in to pressure from the US.

• India has worked hard to keep its ties with Iran strong, even when there were sanctions against Iran from all over the world. Banking and insurance restrictions hurt trade with Iran on both sides.

• In 2015, India changed its visa policy for Iran and took it off the list of countries that need to be referred to India first. Iran can be India’s most important ally as terror groups like the Islamic State gain more power. • Prime Minister Modi’s historic visit to Iran in 2016 led to a stronger focus on improving trade, business, and energy partnerships. India, Afghanistan, and Iran signed a trade agreement to help grow the port project and other projects as well.

• The Indian Minister of State for Petroleum and Natural Gas went to Iran in April 2016. India and Iran signed an agreement to build the Farzad B gas project in the Persian Gulf.

Indian researchers found the Farzad-B field in the year 2012.

• India has planned to spend USD 20 billion in oil and gas, petrochemical, and fertiliser projects in Iran. In May 2016, PM Modi went to Iran, where the historic Chabahar port deal was signed. This is a contract to build and run the port’s two terminals and five berths for 10 years. There was a Memorandum of Understanding (MoU) that said Indian Railways would help build the Chabahar-Zahedan railway line and pay $1.6 billion for it.

• India will put money into building factories in Chabahar. These factories will make things like aluminium and urea.

Political Areas of Cooperation

• There have been important interactions between India and Iran for thousands of years. On March 15, 1950, India and Iran became two separate countries.

• In 1993, Prime Minister Narasimha Rao went to Iran, and in 1995, President Rafsanjani went to India. This was after the Iranian Revolution.

• At the turn of the millennium, the trend got stronger when Prime Minister Shri Atal Bihari Vajpayee went to Tehran in April 2001. During his trip, the two countries signed the “Tehran Declaration,” which laid out places where they could work together.

• The New Delhi Declaration described how India and Iran could work together in a smart way. Dr. Manmohan Singh, India’s prime minister, went to Iran to take part in the 16th “Non-Aligned Movement” (NAM) Summit, which was held in Tehran from August 28 to 31.

• In 2016, Narendra Modi, the Indian prime minister, went to Iran. Both countries put out a statement together called “Civilizational ties, modern context.” Also, a deal was made for Chabahar.

• Iranian President Dr. Hassan Rouhani’s Visit to India (2018)

The Chabahar port in Iran was at the centre of nine deals that were signed.

The agreements were about avoiding double taxation, making it easier to get a visa, ratifying an arrest treaty, working together on traditional systems of medicine, and signing a lease contract for Chabahar’s Shahid Beheshti Port, Phase 1.

“Towards prosperity through greater connectivity” was the title of a joint statement.

• Iran’s Foreign Minister went to India for the first time since a new government was put in place in 2021. The visit was in line with the new Iranian government’s “Asia-oriented” foreign policy.

Trade Relations:

India and Iran have always had strong business links, with India buying most of Iran’s crude oil.

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• From April to June 2018, India was the second largest buyer of crude oil from Iran, after China. Iran was the second biggest supplier of crude oil to India.

• The trade between India and Iran was worth USD 12.89 billion in the fiscal year 2016-17.

• India brought in goods worth USD 10.5 billion, mostly crude oil, and sent out goods worth USD 2.4 billion.

• India sends a lot of things to Iran, like rice, tea, iron and steel, organic chemicals, metals, electrical equipment, drugs, and other things.

• India buys a lot of oil and oil goods, semiprecious stones, and other things from Iran.

• India brought in $12.11 billion worth of crude oil in 2018-2019. This is because the ‘Significant Reductions Exceptions’ waiver from the US has ended. Under “Significant Reductions Exceptions,” the United States let India and a few other countries keep getting crude oil from Iran without being punished.

• Despite all of these sanctions, the Reserve Bank of India and the Iranian Central Bank signed a “Currency Swap Agreement” to get around the US sanctions. This agreement lets India use the Indian Rupee (INR) to pay for oil it buys from Iran. This would keep India’s valuable foreign exchange savings from being used up.

Energy Security:

• India’s most important energy partner is Iran. India is also trying to work out a deal for the Farzad B gas field. On December 5 and 6, 2016, a group from OVL (ONGC Videsh Ltd) went to Iran to talk about the Farzad B gas field deal. But the talks have taken a long time.

Indian companies are ready to spend up to $20 billion in Iran’s energy sector and build petrochemical and fertiliser plants in the Chabahar Special Economic Zone. Iran has the second-largest natural gas reserves in the world, but it is not a major exporter.

The planned underwater gas pipeline between Iran, Oman, and India can help India move towards clean energy.

Cultural Relations and Diaspora

• There is currently an Indian Cultural Centre in the Embassy, and Iran also has Cultural Centres in Delhi, Hyderabad, and Mumbai.

In 2016, MoUs were signed for the India-Iran Cultural Exchange Programme, ICCR and ICRO of Iran, the National Archives of India and the National Library and Archives Organisation of Iran, and the establishment of a chair for Hindi language at Tehran University and the India-Iran Eminent Persons Group. There used to be a large Indian community in Iran during the Shah’s time, but since the Revolution, it has shrunk to only 80-100 families.


• Infrastructure projects like Chahbahar Port and the International North-South Transport Corridor will help India avoid going through Pakistan by road and improve trade with West and Central Asia.

Chabahar Port:

• The port of Chabahar is in southeastern Iran in the Gulf of Oman. • It is the only Iranian port with direct access to the ocean. • It is in the Sistan-Balochistan province on the energy-rich southern coast of Iran. • The Chabahar port is seen as a way for India, Iran, and Afghanistan to trade with countries in central Asia.

• Significance: India is more involved and excited about Chabahar than any other foreign port.

It will let India use a sea-to-land path to get goods to Afghanistan without going through Pakistan.

o Right now, Pakistan does not let India send land from India to Afghanistan.

Between Gujarat’s Kandla Port and Iran’s Chabahar Port, there is less space than between Delhi and Mumbai. This shows how India will save money and have an easier time getting things done when it trades with Iran, Afghanistan, and other Central Asian countries.

The Chabahar port will help India fight against China’s position in the Arabian Sea and keep an eye on what China is doing in the area. China is building up the Gwadar port in Pakistan, where Chinese subs have also stopped. By sea, Chabahar is less than 100 km from Gwadar port.

The expansion of the port will bring more trade and development to Sistan-Balochistan, an important province for Iran because it borders Pakistan and Afghanistan and has been troubled. In the past few years, terrorist strikes by groups based in Pakistan have also increased in the area.

Bandar Abbas port is very busy and handles 85% of Iran’s trade by sea. Bandar Abbas can’t handle cargo ships that are bigger than 100,000 tonnes, but Chabahar can.

It would give the International North-South Transport Corridor a boost. Both countries, along with Russia, were among the first to sign up for this project.

Iran is the most important entry point to this project.

It would go against China’s presence in the Arabian Peninsula.

International North-South Transport Corridor (INSTC)

• India, Iran, and Russia came up with the idea for the International North-South Transport Corridor (INSTC) project in 2000 in St. Petersburg. Ten other central Asian and west Asian countries later joined the project:

 Azerbaijan Armenia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkey, Ukraine, Belarus, Oman, Syria, and Bulgaria are witnesses.

Pakistan, Turkmenistan, and Afghanistan are not part of the INSTC agreement, but they want to use the transport route.

• It calls for a network of ship, train, and road routes for shipping goods that is 7,200 km long. The goal is to cut the cost of shipping between India and Russia by about 30% and cut the transit time from 40 days to less than 20 days.

Most of the freight on this road comes from India, Iran, Azerbaijan, and Russia.

• Goal: The goal of the corridor is to make it easier for big towns like Mumbai, Moscow, Tehran, Baku, Astrakhan, etc. to trade with each other.

• Significance: It would be a good option to China’s Belt and Road Initiative (BRI) that would be more fair.

Also, it will make it easier for people to travel between regions.

Terrorism and Security: Terrorist groups like Al-Qaeda and Islamic State pose a threat to both India and Iran.So, the fight against terrorism


How important Iran is to India

Iran is likely to become not only a major source of energy but also a major player in Central Asia and the Middle East.

Connections: • Iran is at a very important spot where South Asia and the Middle East meet. It also connects the Caucasus area and the Central Asian Republics to the Arabian Sea. India has been very interested in connecting to the Central Asian area through Iran.

• Chabahar Port: India and Iran have also made a deal to improve the Chabahar port in southern Iran. India needs a road and rail network through Chabahar port because there is no land path through Pakistan to Central Asia. It will make a trade line to Afghanistan and Central Asia possible. India didn’t have access like this before. India built the Zaranj-Delaram road in 2009, which connects to Afghanistan’s Garland Highway. This gives road access to four major cities in Afghanistan: Herat, Kandahar, Kabul, and Mazar-e Sharif.

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Joining the Ashgabat Agreement by India

• If India joined the Ashgabat Agreement, it could use the current transport and transit corridor to make business and trade with the Eurasian region easier.

The Ashgabat deal is a Multimodal transport agreement between Oman, Iran, Turkmenistan, Uzbekistan, Kazakhstan, and Pakistan to create an international transport and transit corridor to make it easier to move goods between Central Asia and the Persian Gulf.

International North-South Transport Corridor (INSTC): This ship, train, and road route connects the Indian Ocean and Persian Gulf to the Caspian Sea through the Islamic Republic of Iran. From there, it goes to St. Petersburg and North Europe through the Russian Federation.

• The agreement for the INSTC project was made by Russia, Iran, and India in 2002.

Iran is the project’s most important entry point. The goal of the corridor is to make it easier for big towns like Mumbai, Moscow, Tehran, Baku, etc. to trade with each other. When combined with the Chabahar Port, INSTC could be the most important part of the relationship between India and Iran. The present members are India, Iran, Russia, Azerbaijan, Kazakhstan, Armenia, Belarus, Tajikistan, Kyrgyzstan, Oman, Syria, Turkey, Ukraine, and Bulgaria (observer).

If the passage is used well, the time and cost of shipping containers can be cut by 30–40%, and India and Russia can be linked in 16–21 days.

Turkey has offered to give the information that is needed to link the Black Sea Economic Cooperation (BSEC) with INSTC.

INSTC could be a geopolitical counterweight to China’s One Belt, One-Road Initiative. It could also help India connect with Eurasian markets and become a strong player in oil and gas production in Central Asia.

Kashmir Issue

• India will be connected to many Islamic countries through Iran’s position in the Organisation of Islamic Conference (OIC). The Kashmir problem has been brought up many times by the OIC contact group on Jammu and Kashmir. India has said that the OIC has no right to interfere with India’s internal matters, and Iran thinks that Kashmir is a problem between India and Pakistan.

• Ayatollah Khamenei, the supreme leader of Iran, is said to have talked about Kashmir lately. He compared the situation in the Indian state of Jammu and Kashmir to that of Yemen and Bahrain, saying that “all Muslim nations” need to help.

Afghanistan: The presence of the Taliban and al-Qaeda fighters in Afghanistan has put the security of the Indian subcontinent at risk. So, in order to solve the problem, Iran’s help is needed.


• India is Iran’s biggest supplier of rice, and it can also start to sell other agriculture goods. India can also make money from exports in the pharmaceutical field.

Energy Security in India

• In October 2016, Iran was India’s biggest source of crude oil. Its exports to India were more than 10% higher than Saudi Arabia’s exports of 697,000 barrels per day (bpd), which were the biggest exports of any country.

• India uses oil from Iran to build up its Strategic Petroleum Reserves (SPR) in order to have enough oil for 90 days in case of an emergency.

• Farzad-B Gas Field Contract: India is interested in Iran’s Farzad-B gas field, where Indian companies explored and found oil and gas in 2008. People say that Farzad-B has almost three times as many gas stocks as India’s biggest gas field.

• South Asia Gas Enterprise Pvt. Ltd. (SAGE): Talks are going on to build a $4.5 billion gas pipeline under the sea from Iran to the west coast of India. This is because India turned down a plan to build a pipeline on land that would go through Pakistan. The planned pipeline will take 31.5 million standard cubic metres of gas per day from the coast of Iran through the Oman Sea and the Indian Ocean to Gujarat.


How important India is to Iran

• India’s power in international forums is rising, and Iran needs India’s help for its cause in different forums. India said that it would follow any UN penalties against Iran that were put in place by the Security Council, but it also said that it preferred to work with Iran. Despite the sanctions, India kept doing small amounts of business with Iran and bought less oil because it was hard to make payments.

• India’s position is important because it is the second most populous country and has a large economy and a large population. This helps Iran sell its oil to a large market that is close to its location, which lowers the price of its oil.

• Strengthen Trade Ties: It gives Iran access to the world’s fifth biggest economy, where it can invest and strengthen trade ties.

It will also give a boost to Iran’s weak economy. • India and Iran both want Afghanistan to be stable.

Challenges in Relations

US Withdrawal from Iran Nuclear Deal

• In May 2018, the United States pulled out of the Iran Nuclear Deal. This could hurt the relationship between India and Iran.

• Oil imports from Iran will stop in May 2019 because of U.S. sanctions (CAATA), which were put in place after the Iran nuclear deal was cancelled. This will affect India’s energy security.

Oil Payment Row

• The problem started when the Reserve Bank of India chose in December 2010 to stop using a clearing system to pay Iran for its crude oil.

• The Asian Clearing Union (ACU) currency swap system was no longer used to pay Iran. This was because the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said the system was too hard to understand. Because of this, it was hard to tell if the money going into Iran’s bank accounts wasn’t being used to strengthen the country’s nuclear project.

Faced with these complaints, India started to pay its bills through the German bank EIH. But in May 2011, after the European Union put sanctions on Iran, this route stopped working. Because it was hard for Indian companies to make payments, they racked up nearly $5 billion in debt.

Since the payment dispute was getting worse, Iran chose to stop sending goods to Indian companies. But as the date for the payments got closer, both sides worked hard to find a solution. Later, it was said that the problem with the payment had been solved. Part of the bill would be paid “quickly,” and the rest would be paid off “gradually.”

• During Iran’s President’s visit in February 2018, both countries agreed to set up a committee of officials to look at possible ways to set up payment channels, such as the Rupee-Rial Arrangement and the Asian Clearing Union system.

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Iran-Pakistan-India Pipeline

• The Iran-Pakistan-India (IPI) pipeline was planned to bring natural gas from Iran’s South Pars gas field to Pakistan and India. It would be able to take 60 million standard cubic metres per day, which would be split evenly between India and Pakistan. Even though talks have been going on since 1995, the on-land IPI pipeline has not been built. India left the project in 2009 because of concerns about security, gas prices, and gas quantities. But penalties that have been put on Iran are also given as a reason. But India and Iran are talking about building an underwater gas route (SAGE) that would go around Pakistan.

Saudi Arabia-lran-lndia

• India is in a tough spot because it has deep interests on both sides of the conflict between Iran and the Saudi-aligned Gulf states. The first of these is trade. If Iran and Saudi Arabia got into a direct fight, it could break these ties, in part by cutting off the shipping paths that make regional trade possible. If India helped either side, it would lose.

• The huge number of Indians who live in the Gulf and send money back to India is another reason why India can’t afford a war in the Middle East. Oil, along with gas, is a key part of India’s plans to modernise its forces and make more money.

• The Houthis in Yemen, who are backed by Iran, are using drones to attack Saudi Arabia and the UAE, which are both close allies of India.

Chhabahar Railway Project:

• India’s withdrawal from the Chhabahar Railway Project. Iran has chosen to build the Chabahar rail line on its own because it is taking India too long to start the project and pay for it.

Farzad-B Gas Field:

• In 2008, Farzad B gas fields in Iran were found to have a lot of promise thanks to the work of ONGC Videsh Limited of India.Iran has not given ONGC Videsh Limited the rights to develop the gas field, even though it was found 10 years ago. Instead, it has made a first deal with Russia’s Gazprom to do this.


• The Iran nuclear deal was criticised by Israel, which called it a “historic mistake.” India is interested in both Iran and Israel, and the task is to keep a balance in its relationships with both.

• The close links between India and Israel and between Iran and China, which include a 25-year strategic partnership agreement.

How Close Iran Is to China

• Iran is a part of the Belt and Road project, which is a big plan by China. This could go against India’s goals in Iran, since India has been very vocal about its opposition to China’s Belt and Road Initiative.

Kashmir Issue:

Iran has been a strong supporter of Pakistan’s position on the Kashmir problem.

• The Indian government’s decision to get rid of Article 370 of the Indian Constitution made Kashmir a special place in Iran’s eyes.

• On a couple of times, Iran’s previous government said things that made Muslims in Kashmir want to rebel against the government. India punished Iran harshly for this.


Places where people agree

• Afghanistan: Since the Taliban took over Kabul in August 2021, they have been mostly on their own. Iran was one of the few countries that didn’t move its embassy out of Kabul, and it has kept its lines of contact with the Taliban open.

Now, India wants to reopen its office in Kabul, and talks with the Taliban have just begun.

India and Iran might be able to work together to make a good policy for dealing with Afghanistan in the future.

• West Asia: The area of West Asia is in the process of rebalancing. This could help India and Iran get closer to each other.

For a long time, India’s growing links with the Gulf countries, especially Saudi Arabia and the UAE, were seen as a “zero-sum game” against their rivalry with Iran.

Recently, the UAE and Qatar had productive talks with Iran. This year, the Iranian president has already been to Qatar and Oman.

Syria and Iraq are slowly coming together, and they have good feelings towards Iran.

The Abraham Accords that Israel signed give hope that the other countries in the area will see Israel as a possible partner and not always as an enemy.

All of these changes are good for India because it has good relationships with the Gulf countries, Iran, and Israel.

This gives India a great chance to grow and expand its relationship with Iran without worrying about losing other friends in the area.

In fact, at some point in the future, India may be the best person to talk to in the area because everyone trusts and respects it.

The Next Steps

• Both countries need to look towards areas where their values overlap and work together to reach those goals.

• This means that India and Iran can do a lot when they work together. India’s strong diplomacy, which focuses on sticking by its neighbours and friends and achieving only its own national interests, is a welcome change.

If India can bring the same vision to its relationship with Iran, it could create a huge opportunity for cooperation between these two great countries and civilizations. So, it’s time for a fresh start.

• Develop an alternative way to pay Iran and encourage flexibility in investment mode. • Have high-level talks with the US about India’s security and strategic worries about China.

• Near-term changes in its neighbourhood are a top priority for Tehran, even though India is trying to find a balance between his stated preference for closer ties with both the U.S. and Israel and his desire for closer ties with the U.S. and Israel.

• India and Iran want to sign a preferential trade deal and a bilateral business treaty as soon as possible.

• Iran’s new plan to make it easier for people to get visas and India’s plan to let Indian businesses invest in Iran in rupees are all steps in the right direction. Still, they might not be enough to keep trade going if US bans come back.

• India should do everything it can to make sure that the JCPOA works well. Only if the JCPOA is put into practise well over time will there be political room for more talks. • Both countries can use their shared history and civilizations to steer their relationships. The meeting was a much-needed wake-up call for the relationship between India and Iran.