27 May 2016

The takeaway from Tehran

May 26, 2016 

The Prime Minister’s visit has given India another chance to craft a strategic relationship with Iran and to enhance its influence in West Asia. But New Delhi has its work cut out for it

Prime Minister Narendra Modi’s recent visit to Iran marks a new beginning in bilateral relations and beyond. The centrepiece of the trip was the basket of agreements on the development of the Chabahar port and onward connectivity with Afghanistan. The government deserves praise for the manner in which various pieces of this were put in place. The ground was prepared by extensive interaction of key Ministries — External Affairs, Transport, Finance and Petroleum — with their Iranian counterparts to overcome persistent hurdles and ensure synergies. In consequence, we have a set of interlinked outcomes: a contract for the development and operation for 10 years of two terminals and five berths; the extension of credit lines of $500 million for the port and of Rs.3,000 crore for importing steel rails and implementation of the port; memorandums of understanding on provision of services by Indian Railways, including financing to the tune of $1.6 billion, for the Chabahar-Zahedan railway line — a line that is also part of the trilateral agreement between India, Iran and Afghanistan on a transit and trade corridor. 

Years in the making 

To be sure, the real challenge for India is in delivery. If MoUs were an index of influence, New Delhi should have had a lot more of it. Still, the level of coordination within the government is noteworthy given that it has taken us nearly 13 years since the idea was first mooted. The proposal was mired in three sets of problems. The Finance Ministry initially applied the brakes on plans for development of the port, insisting that there had to be a certain assured return on investment for the project. The strategic import of the project, especially by way of providing access to Afghanistan, did not figure in their calculations. By the time the Ministry was persuaded of the need to press ahead, other complications had crept into the picture. 

 Srinath Raghavan 

This brings us to the second problem: the United States’s sanctions on Iran. Although the Indian government claimed that it would not adhere to any unilateral sanctions, in practice it took a cautious tack. The danger of exposing Indian banks and companies to indirect American sanctions for dealing with Iranian entities bulked large in the government’s thinking. Interestingly, this view continued to hold sway in some sections of the government even after Iran began accumulating billions of rupees in a UCO Bank account owing to India’s inability to pay for energy imports in U.S. dollars. In fact, this period of Iranian isolation and dependence on India afforded us considerable leverage — both in pushing our exports to Iran and in pressing forward with Chabahar. But this opportunity was frittered away owing to the third, and arguably most important, problem. 

This was the absence of a strategic view of Iran. Barring some exceptions, South Block regarded our ties with Iran as purely transactional, essentially a buyer-seller relationship centred on energy. To be sure, these were the years when President Mahmoud Ahmadinejad seemed determined to ensure that Iran would be unacceptable to much of the world. Then again, there is hardly a government in the region with clean hands. Indeed, there is something to be said for the symmetrical cynicism with which we have condemned terrorism in the joint statements with Saudi Arabia and Iran during Mr. Modi’s recent visits. But the fact remains that New Delhi did not squarely reckon with the upshots of a strategic relationship with Iran. For starters, we could have accessed eyes-and-ears on the Makran coast to monitor not only the Gwadar port being developed by the Chinese, but also Pakistani naval activity under the UN umbrella in the Persian Gulf. 

Iran’s strategic importance 

Notwithstanding Mr. Modi’s references to Chabahar’s strategic location, it is still unclear that we have a sense of Iran’s strategic importance. For this we need to look behind and beyond the last decade. 

The basic point is that Iran has always potentially been the most important power in the region. It has a unique geopolitical location owing to its reach in Central Asia and Caucasus as well as in West Asia and the Persian Gulf. Because of its geography, Iran was historically an important arena of great power jostling for influence. From the last decades of the 19th century to the mid-20th century, the British and Russian empires vied for influence in Iran and eventually settled for a condominium. 

“While the trilateral transit agreement showcases cooperation among India, Iran and Afghanistan, it is unlikely to translate into political cooperation. ” 

During the two world wars, Russia and British India jointly occupied Iran. By this time, Britain was also interested in the oilfields of southern Iran that were under joint Anglo-Iranian management. After the Second World War the U.S. supplanted Britain as Iran’s main external patron, forcing out the Soviets from the country in 1946 and overthrowing an elected nationalist leader, Mohammad Mossadegh, seven years later. Under the reinstated Shah, Mohammad Reza Pahlavi, Iran became the stalwart U.S. ally in West Asia. In the early 1970s, following the British naval withdrawal from east of Suez, the Shah became the main upholder of American interests in the Persian Gulf. 

After the revolution of 1979, of course, Iran became beyond the pale for the U.S. In the 1980s, the Americans and their Arab allies supported the Iraqi aggression on Iran. In the following decades, the U.S. sought to keep Iran out of all regional initiatives, including the Palestinian peace process and the Gulf Cooperation Council (GCC). Yet, paradoxically, America’s own regional policies ensured the resurrection of Iran’s relative power and influence. The wars against Iraq in 1991 and 2003 removed the strongest regional counterweight to Iran. During this period, Iran also began supporting dissident Palestinian groups such as Hamas as well as anti-Israel outfits like Hezbollah. The Israeli mauling of Lebanon in 2006 — with American approval — helped catapult Hezbollah to political dominance and the concomitant extension of Iranian influence in the country. 

A dominant regional player 

It was in this context that the Arab sheikhdoms grew anxious about Iran’s growing regional heft — its alleged quest for nuclear weapons being merely a symptom of this larger problem. Add to this their growing nervousness about the reliability of the U.S. in the wake of Hosni Mubarak’s ouster in Egypt. Instead of seeking a modus vivendi between the GCC countries and Iran, Saudi Arabia (and Qatar) sought to undercut Iran’s regional influence by upending Bashar al-Assad in Syria and more recently by intervening in Yemen. The outcomes of these moves have been nothing short of disastrous for the Arab states. The rise of the Islamic State apart, the disintegration of the region has empowered Iran by driving Iraq, Syria and Russia closer to it. The prognosis seems inevitable: Iranian hegemony in Iraq and what remains of Syria, as well as its political influence in Lebanon, Gaza and Bahrain. If India desires any influence in the region, it must prepare to navigate these tricky geopolitical shoals. Even as India maintains its equities with the Gulf countries and Israel, it will have to forge a more strategic relationship with Iran. 

Mixing optimism with pragmatism 

At the same time, New Delhi must avoid any facile assumption that Mr. Modi’s trip has already positioned us better vis-à-vis Pakistan or Afghanistan. Tehran has also reset its ties with Islamabad following a successful visit by President Hassan Rouhani. Iran will look for opportunities for connectivity and trade opened up by the Chinese ‘One Belt, One Road’ initiative. Chabahar is one of the several such avenues that it is currently exploring. Once the financial sanctions on Iran begin to ease properly, there is bound to be a spurt of European investment in the country. 

As far as Afghanistan is concerned, it is clear that Iran does not share India’s opposition to any attempt at reaching out to the Taliban. With increasing turbulence in Iraq and Syria and the possibility of the Islamic State expanding into Afghanistan, Iran wants to keep its northern frontiers stable. Iran has worked in the past with the Taliban and will have no compunction about doing so now. It is worth noting that the Taliban supremo, Mullah Akhtar Mansour, was felled by a drone strike while travelling from Iran to Pakistan. So, while the trilateral transit agreement showcases cooperation among India, Iran and Afghanistan, it is unlikely to translate into effective political cooperation between them. India’s fundamental problems in Afghanistan persist: lack of strategic presence or leverage, and the absence of any regional partners. Hence, India will remain marginal to the evolving political situation in that country — unless we rethink our approach. 

Mr. Modi’s trip, then, has given us another chance to craft a strategic relationship with Iran and to enhance India’s influence in West Asia. But New Delhi has its work cut out for it. 

Srinath Raghavan is Senior Fellow at the Centre for Policy Research, New Delhi.

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