Why India and Iran Are Destined to Drift Apart

India has tried, for many years, to master the rather delicate art of remaining on excellent terms with all the major players in the Middle East, including Iran, Saudi Arabia, and Israel. It is arguable which of these regional powers is the most vital to Indian interests. Among them, however, Iran has the potential to fulfill India’s geostrategic needs in a way few other nations can. This is primarily because it provides connectivity, around Pakistan, to Afghanistan and Central Asia. Additionally, it is India’s third biggest supplier of oil after Saudi Arabia and Iraq.

Despite this, Indo-Iranian relations are far from reaching their full potential; in fact, if anything, they are likely to have plateaued already. And this is despite a recent visit by Iranian President Hassan Rouhani to India in February 2018 that saw several key agreements concluded, particularly with relation to the Iranian port of Chabahar, which sits on the Arabian Sea coast near Iran’s border with Pakistan and the Pakistani port of Gwadar, which is being developed by China. India has seen its investment in that port as vital toward keeping an eye on China and in furthering its goal of bypassing Pakistan and obtaining a land route to Afghanistan and Central Asia via Iran.

There are many economic and geopolitical reasons for the trend away from greater cooperation between India and Iran, both short-term and long-term. Most immediately, the uncertainty and volatility of Iran’s place in the international economic system makes it difficult for India to fully commit to investing in Iran, a problem also faced by many other countries. U.S. President Donald J. Trump’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and impose sanctions on companies doing business with Tehran puts pressure on India to seek its energy from other countries. India is far too invested in good relations with the United States (and Israel and Saudi Arabia for that matter) to risk defying them in order to increase its oil supply from Iran.

As Tanvi Madan, a fellow at the Brookings Institution, noted recently, “Indian officials will even try to see if this development could represent an opportunity. Iran, for whom India is the second-largest energy export market, might offer New Delhi better terms to try and maintain its market share. Delhi could take this up to an extent if, as it has done in the past, it can pay in rupees. Or it could ask Saudi Arabia or the UAE or Kuwait to make a competing offer.” Moreover, energy is not as important to Indo-Iranian relations as it used to be. According to Sumitha N. Kutty, an expert on Indo-Iranian relations at the S. Rajaratnam School of International Studies (RSIS), “India had hoped to expand its footprint in Iran’s oil and gas sectors starting with the Farzad B gas field, which it had hoped to develop, in a process dating to 2009. Even after sanctions were lifted [in 2015], negotiations broke down repeatedly, with both sides engaging in the blame game. By mid-2017, India began moving away from the project and decreasing its oil imports from Iran to signal its displeasure.”

Adding to this, the intricacies of economics and geopolitics also presage a drift between Iran and India, and not just bilateral disputes over oil. Iran is in a precarious situation now that the United States has withdrawn from the JCPOA. Even though Germany, France, and the United Kingdom, other signatories to the agreement along with China and Russia, have not followed suit, companies from those countries will be hard pressed to do business in Iran if they have assets in the United States. To offset this, Iran has sought investment and closer ties with China, including an indication that it was willing to accept Chinese investment in Chabahar, a port that India sees as its pet project. As Harsh V. Pant points out in an article at The Hindu, “Iran, with its massive infrastructural needs, sees China as its most valued partner.” Furthermore, Iran has much to gain from China’s Belt and Road Initiative a trillion dollar investment in infrastructure to connect Asia and Europe, an initiative that India has so far remained aloof from. “Iran perceives the [Belt and Road] as a project that would make it an indispensable transit hub for countries like China, India and Russia and an effective antidote to the U.S. sanctions.” India can offer Iran nothing comparable.

Iran’s geopolitical interests — to survive new sanctions through greater engagement with China, Russia, Pakistan, and other powers — are at odds with India’s rivalry with Pakistan and China. Iran sees itself as part of an axis with China and Russia that represents a growing alternative to the U.S.-based order, which represents the status quo consensus that Iran, China, and Russia are trying to change. This is an order that India has increasingly cast its lot with, seeking closer relations with countries such as the United States, Japan, and Israel. Thus, as Pant says, “to assume that Iran would help India counter Chinese influence in the region might be wishful thinking.” Iran does not have a deep interest in East Asia’s or South Asia’s power balance and instead focuses much of its foreign policy attention on the Middle East.

India and Iran’s interests have also diverged in Afghanistan. While both countries cooperated against the Taliban and Pakistani influence in that country in the 1990s, circumstances have changed. Iran sees some support for the Taliban as being in its interests, especially as a strengthened Taliban causes more problems for U.S. forces there. India has thus far refused to negotiate with the Taliban at all, a position that may cause it to lose access to Afghanistan if the group does return to power. And beyond Afghanistan, India has clearly indicated a dislike for the creation and use of militant groups as proxies, as Pakistan has tried to do in India. This is the strategy used by Iran to expand its influence across the Middle East.

India, for its part, does not need Afghanistan, Central Asia, or even Iran that much. Civilizational ties, often spoken about at bilateral summits, are at a low. Millions of Indians live in the Arab Gulf states, where Bollywood is very popular, while there is little people-to-people contact between India and Central Asia and Iran. Trade is also minimal and has little potential for growth due to sanctions. India’s trade with Iran is “around $13 billion, while in contrast, that between India and the United Arab Emirates is $60 billion,” according to Kutty. Afghanistan will need decades before it can be a big market for Indian goods and is unlikely to be in a position to counter Pakistan for at least as long, given the weakness of its state.

The market in Central Asia is also small today. Indian access to Central Asia through Iran is at most a temporary and ineffective solution that has nowhere near the potential of a direct route connecting India with Afghanistan and the rest of the region through Pakistan, in terms of the volume of goods that could be transported. There is little India can do to compete with China’s Belt and Road Initiative or even Chinese trucking; China has already built the world’s largest dry port in Khorgos, on its border with Kazakhstan. Ultimately, India does not have the means to project power or influence into Central Asia, even if it wanted to. The region has long been part of Russia’s sphere of influence, politically, and now increasingly is falling into China’s economic sphere of influence.

India’s main comparative advantage in the international system comes from its position in the Indian Ocean, where it can use its central position to its advantage both geopolitically, and economically. And its ties with the United States and other countries matter too much for it to sideline its national interest just to get some more oil from Iran, when it can turn to numerous other countries to make up the difference. None of this inspires much confidence in Iran, which has a different set of priorities. India will hardly be seen as a staunch ally of Tehran if it does not step up to support Iran in hard times, contrary to China and Russia.

India’s relations with Iran have reached a plateau because there is nothing else both countries can do to improve ties with each other without beginning to pursue policies contrary to their own national interests. While ties between the two countries will remain cordial — there are few direct problems between the two — and business relations will remain, India and Iran are on divergent paths in their foreign policies and their perceptions of their roles in the international system. While there are areas, particularly energy and connectivity, where Iran and India can cooperate, the two countries, frankly, do not really need each other all that much.