India Lost Iran too?

After Nepal, Iran too?

“Enemy’s enemy is a friend”, says an old adage and very well says, especially in the Chinese case.

After subjugating Nepal, China has now struck a $ 400 billion strategic deal (8 times larger than CPEC deal) with an American adversary (or another Indian ally) – ‘Iran’.

Iran has finally given its approbation on the four-years long-pending Chinese proposal for an economic and security deal between the two nations.

This is a twenty-five year strategic accord and an eighteen-page agreement which will enhance the reach of Chinese expansionist motives into Iran’s banking, telecommunication, port, and railway industries along with the contract of dozens of developmental projects in Iran to the Chinese companies.

Apart from all this, Beijing will also get ‘Iranian oil’ at a heavily discounted rate (approximately 13%) for twenty-five straight years. And interestingly, these transactions are not going to materialize in dollars but ‘renminbi (Chinese currency)’.

This makes global oil market more vulnerable. (Global oil demand will pent up further as a large oil consumer will start purchasing from Iran at a highly discounted rate.)

This is worrisome for the USA. Trump’s ‘maximum pressure policy’ against Tehran has clearly failed and China went under the nose of Americans and managed to negotiate a deal with Tehran. A deal that could create more flash-points in West Asia.

But why should India care? 

Donald Trump’s blunder of pulling the USA out of ‘Iran Nuclear Deal’ is now equally intimidating India, especially after this $ 400 billion deal.

The deal has brought serious strategic, cultural, and business ramifications for India. The deal once officially gets signed by the Iranian Parliament, which it will get for sure as per the July 5th statement of the Iranian Foreign Minister Javed Zarif, will fundamentally transform the Sino-Iranian ties and put Tehran into Beijing’s corner.

India is clearly losing its old and strategic ally in West Asia.

India was one of the largest buyers of Iranian oil, though from last year it has stopped buying it due to the American pressure.

But the energy sector is only one equation of the Indo-Iranian ties. There is another serious aspect as well – ‘the Chabahar port’.

India has heavily invested in the Chabahar port which sidesteps Pakistan and counters the Chinese controlled Gwadar port in south-west Pakistan. Also, it provides India a gateway to Afghanistan and Central Asia.

If China starts calling shots in Iran, which it always does after pumping money in this way, then India needs to rethink its strategies and plans.

Chinese money has ruined India’s old ties in the past with many countries (Example: Sri Lanka, Maldives, Nepal, Malaysia).

Is Iran the next casualty? 

A report came that "Iran has dropped India from a rail project linking Chabahar to Zahedan (in Iran). India and Iran agreed in 2016 to jointly construct this railway line but now Tehran has thrown New Delhi out (at least for now/ temporarily*) and decided to start constructing this railway line to Zahedan on its own (as of 17/07/2020). 

Reports claim that Iran has already inaugurated the track lane construction process.

Why is Iran doing so? 

Tehran claimed that New Delhi delayed funding.

Is Iran lying?

Not really.

The project was being stalled because of US sanctions on Iran. Though the USA waived sanctions in 2018 for the Chabahar Port development but finding suppliers and partners from thereon continued to remain a challenge. Banks too were reluctant to provide loans. US sanctions and too much uncertainty associated with US-Iran relations in future depleted investor confidence in the Chabahar railroad project.

India then became inconsistent with its funding to Chabahar. Last year, it allocated 150 Crore in the annual budget for the Chabahar project but later dropped it to 50 Crore (budget constraint or to appease the US?).

This year too, it has allocated 100 Crore in the budget but how much will actually go into Iran is another matter of concern. 

What does all this bring about for the India’s position in Iran and Indo-Iranian ties in the future? 

Indo-Iranian ties are surely on a regressive front. India's deferring attitude towards Iran is going to cost us high. 

Although Iran has proclaimed that “they have not shut the doors for India and it can re-join the project in future if they want”, but this recent development is a clear sign of Iran losing confidence over India and Indian authorities, which is evidently depicted under Ali Chegeni’s (Iran’s envoy to India) statement: “We love the Indian people. But we cannot force somebody to love us. The Government of India has to decide according to its national interest. Just as the Chinese have.”

Also, Iran inexplicably decided to go alone on the development of 'Farzad B Gas Field', a gas field that was discovered by India's ONGC in Iran about 10 years ago and which is said to have gas reserves of 2.7 trillion cubic feet. Iran refused to give exploration rights to ONGC.

And apart from all this, Iran recently became one of those Islamic countries which has started criticizing India over the Kashmir issue. Saudi Arabia, UAE, Bangladesh, and Indonesia, major Islamic countries, remained silent though.

Even if India remains adhere to its commitment of jointly working with Iran, as what Ministry of External Affairs has also indicated about in a recent statement that 'India is committed to Iran's development and it will resume working on railroad project connecting 'Chabahar to Kabul' in future*', but the main constraint here is now Iran bulging towards China. 

It is to note that this development (Iran going alone in railroad construction) comes under the time when Sino-Iran's strategic $ 400 billion accord is under the final stages of its negotiation. Suspicious right?

We have all the reasons to suspect the Chinese involvement in Iran, as its diplomatic prowess is undoubtedly superior. (In fact, it is highly likely that China is funding cash-strapped Iran for this railroad project as of now)

Chinese adroitness in statecraft outplayed Soviets and Americans in the 1970s (as explained in one of the previous articles '1971: Year that Transformed Centuries*'). So, is it India and its allies this time?

Nobody knows the Chinese intents.

But definitely, this diplomatic win of China will provide it with greater leverage over Iran, poisoning one more Indian ally. Although India still has the access of Chabahar Port but China will get to carve its way into trying to influence the affairs in Chabahar and oust India from there, as its dominance near the region will definitely rise (mostly in Chabahar duty-free zone). China won’t easily allow India a free passage in Iran after such a billion dollars investment.

Iran’s verging towards China is going to impede India’s strategic ambitions in Central Asia (i.e. reaching  Central Asian Countries via Chabahar and Kabul) and will also affect its influence in the International North-South Transport Corridor (INSTC: Mumbai to Moscow via Iran), whose future in fact, now comes under scrutiny. 

Last year estimates said that once Chabahar is completely operationalized, India's trade with Eurasia will touch around $ 170 billion and will also reduce shipping cost to 60% and shipment time to 50%.

Chinese investments are now major roadblocks to Indian Investments in Iran.

They pose a major threat to India's national security as well.

How?

China will be able to beset India from all sides: Tibet from the north, Coco Islands Naval base (Myanmar) from the east, Hambantota naval port (Sri Lanka) from the South and Gwadar Port from the west (as Chabahar, a counter to it is now under threat). Both nations will also engage in joint training exercises, joint research and weapons development, and intelligence sharing. 

Indian decision-makers need to deeply contemplate about the severity of this development in Iran. 

What’s ahead? 

First of all, a lesson to be learned: “We cannot take our allies for granted and especially when the expansionist dragon is on the loose and desperate”.

Secondly, India must ponder upon restarting the purchase of Iranian oil (the main reason for deteriorating relations) along with the negotiations with Iranian leaders over the future of Chabahar port and INSTC.

"Do not keep all your eggs in one basket." 

Indo-US relations are quite uncertain after the US presidential elections in November 2020. (to be discussed in later articles)

So, India should not over-depend on the USA and relegate its other allies. Ali Chegeni in one of his official statements also said that "India had fought hard for its independence and should not have given in to unilateral sanctions from the USA". 

We just can’t let our billions of investments in Chabahar go in vain and let Iran become a new Chinese stooge.

Better counteract than regret.

Author: Gautam Sodani 

**MEA proclaimed that Tehran would like to involve India at a later stage. Iran has not permanently dropped India from the project but as of now it is going alone.

*Click here to read about the Chinese diplomacy in 1970s that changed the global dynamics of 21st century- 1971: Year that Transformed Centuries