A Persian Gulf: The China Factor And Why Relationship Between India And Iran Is In Choppy Waters

Over the past decade, India’s ties with Iran, actuated by strategic and economic reasons, have been impeded by a nearly insurmountable odd—the unremittingly hostile relations between Washington and Tehran. Indeed, the two countries are drifting apart, despite proclaiming their civilisational and historical links from time to time. At the moment, New Delhi and Tehran find themselves on opposite sides of the international power equation. China and Iran’s comprehensive trade and military partnership, said to be in its final stages of approval, deepens the divide.

Faced with a belligerent China, India’s increasing strategic reliance on the US has convinced Iran that New Delhi is moving towards the American sphere of influence. Iran’s foreign minister Mohammad Javad Zarif did not mince his words while expressing his disappointment at India’s refusal to buy Iranian crude since May 2019, after the expiration of US waivers to eight buyers. “Expected a big country like India to be more resilient to US pressure,’’ Zarif had said during a meeting in Tehran last October, referring to US sanctions on Iran over its nuclear programme. He said the global community was making a “strategic mistake” in complying with US diktats. Decades of crippling US sanctions was further exacerbated by President Donald Trump since he walked out of the hard-fought Obama era nuclear deal with Iran in 2018.

Now, countries targeted by US sanctions, like Iran, China, Russia and Venezuela, are uniting to face up to “US hegemony”. When questioned, Zarif, however, made it clear that it was not a defence alliance, but a loose group of like-minded nations against the US.

“India’s emphasis on an international rules-based order on the Indo-Pacific, making Japan a permanent invitee for India-US Malabar exercises and enthusiasm for the Quad are all signs of getting into the US camp,” says former Indian ambassador to Saudi Arabia, Oman and UAE, Talmiz Ahmad, a keen observer of Iran. The Quad—short for the Quadrilateral Security Dialogue—is a US-Australia-Japan-India initiative to contain China’s aggressive manoeuvres in the Pacific and Indian oceans.

Ahmad says that while it is all very well to be a player on the Indo-Pacific, “India is in danger of taking its eyes off the land border, which is where we are having problems. The Chinese intrusions in Ladakh are a direct result of Delhi playing footsie with the US. South Block mandarins have forgotten that India’s problems are on our land border and not in the Indo-Pacific.” Last August, when India scrapped Kashmir’s special status and divided the state into two Union territories, it afforded China a toehold in the Kashmir issue via Ladakh—now a separate UT. Through its actions on behalf of Pakistan in the UN Security Council, Beijing had always batted for its ‘all-weather ally’ on Kashmir; it now sees India’s decision on Ladakh as impinging on China’s national interests.

India stopped buying Iranian oil for fear of its companies being barred from the lucrative US market. Since US financial institutions are also closed to entities doing business with Iran, New Delhi thought better than to jeopardise ties with the world’s only superpower.  

India has long tried to balance its ties with the US and Iran. But that has reached a critical point as a realignment of forces is taking shape, with China, Russia, and Iran coming together. Pakistan is also in the line-up, considering its strategic location and the China-Pakistan Economic Corridor, a vital link of the Belt and Road Initiative (BRI)—the heart of China’s power projection under President Xi Jinping. Like Pakistan, Russia and Iran have welcomed the BRI. As the Trump White House aggressively takes on China and trains its guns on Iran and Russia, the contours of a new alliance are likely to emerge in a post-Covid world.

India has realised that there are no free lunches in international relations, especially with the Trump White House clearly favouring a transactional politics. When India was negotiating the civil nuclear deal with the US during the Manmohan Singh years, Delhi voted with the US in the International Atomic Energy Agency to take Iran to the UNSC for perceived nuclear violations. This was not what India wanted, but it was forced to do so to get the backing of the US Congress for the nuclear deal. It was the first time India voted against Iran in the UN.

Shifting geopolitics, American sanctions and India’s wariness have also affected the much-touted Chabahar port project, signed in 2003, and heralded as a major strategic investment to bypass Pakistan and open a direct route to Afghanistan and the Central Asian markets, as well as a counter to Pakistan’s China-developed Gwadar port. Though Washington exempted India from sanctions on Chabahar, refusal of several international firms to get involved in Iranian projects made the going painfully slow. But in 2016, when PM Narendra Modi visited Iran, the port was formally operational. The first shipment of wheat for Afghanistan through Chabahar was flagged off by the late Sushma Swaraj. Since 2018, when an Indian company took charge of the port operations, traffic has been scaled up. The port has handled 12 lakh tonnes of bulk cargo and 8,200 containers till now.

However, New Delhi has been lax over the railway track it was to construct between Chabahar and Zahedan in Afghanistan. The line is crucial for realising the full potential of Chabahar and helping India’s trade with Central Asia. During President Hassan Rouhani’s visit to New Delhi in September 2018, IRCON, India’s engineering and construction PSU, and its Iranian counterpart, CDTIC, were told to finalise technical parameters and finance options for the project. After nearly two years’ delay, Iran has decided to finance the railway project without waiting for India to provide the promised funds.

As reports fly thick and fast of India being thrown out of the Chabahar-Zahedan project, China is expected to land it, considering its expertise in such areas. The presumption is that China is elbowing India out from a strategic project in its extended neighbourhood as it finalises the $400 billion strategic investment agreement with Iran, initiated during President Xi Jinping’s 2016 visit to Tehran.

Tehran, however, has denied the report about the project—India’s ambassador to Iran, Gaddam Dharmendra, said that Saeed Rasouli, Iran’s deputy minister for railways, had assured him that vested interests were behind the story. In short, India was still in the race. Both sides may deny the news, but India’s tilt towards the US has upset Iran’s strategic calculations. China, as the main challenger to the US, is moving into this vaccum.

However, former Indian diplomat Zikr-ur-Rahman believes that this is a temporary phase in India-Iran ties and the deep historical connect between the two will force a rethink. “Iran may link up with China, Russia and Pakistan for strategic reasons now but that will not last forever. Iran is a tricky country to do business with, and US sanctions made it more so. It has been difficult for India. But neither country would like to call it quits. There is a natural affinity betw­een them.’’ India, no doubt, is also under pressure from the Trump administration to exclude Iran from its ambit, but “both countries are waiting and watching” and keeping ties on hold. Yet, a win by Trump’s Democratic challenger Joe Biden in the November elections might revive the nuclear deal signed by Iran, US, Russia, China, France, UK and Germany. That will transform the political dynamics of the region. India-Iran ties will be a direct beneficiary.