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India is quietly befriending Iran. This is a significant development in the context of the state of affairs in the Middle East today.

High-level exchanges between the two countries increased recently, with India looking to ensure its energy security and develop new trade routes. But tension between Washington and Tehran, along with China’s growing ties with the Islamic republic, could complicate India’s recent endeavours.

It is said that to know a nation’s geography is to know its foreign policy, which explains India’s eagerness to co-operate with Iran. Positioned between India and the Persian Gulf, Iran is a crucial partner to India due to its regional influence, abundant resources and strategic location. Iran gives India overland access to the resources of Central Asia and is critical in ensuring the subcontinent’s energy security.

There was a discernible resurgence in diplomatic engagements between Tehran and New Delhi after US troops withdrew from Afghanistan, and these  increased further in recent months with Iranian proxies targeting Western maritime traffic in the Red Sea. This suggests that India views Iran as a necessary regional security ally. But tension between Iran and the US add a layer of complexity to India’s carefully calculated foreign policy.

Nevertheless, despite external pressures India remains one of Iran’s top five trading partners. Bilateral trade can be expected to increase with Iran’s inclusion in the Shanghai Co-operation Organisation (SCO) and the expanded Brics bloc. These platforms open up new avenues for collaboration between India and Iran, particularly in the development of new transport corridors.

New trade routes

In New Delhi's strategic efforts to establish trade connections with Russia (the top supplier of crude oil to India), Iran plays a pivotal role, chiefly via the development of Chabahar port. Complimenting the revitalisation of the Chennai-Vladivostok maritime route, the trade route originating in Chabahar envisions a modern railway line in Iran connecting the port to the Afghan border. This transport corridor is expected to increase India’s access to the natural resources of Central Asia, while Iran will benefit from improved transport infrastructure and increased economic development.

India sees Chabahar as a key node in the International North-South Transit Corridor (INSTC).  Designed to optimise trade between India, Russia and the economies of Eurasia, the INSTC could eventually span 7,200km and offer an estimated eightfold increase in trade turnover. The INSTC intends to bypass the Suez Canal and connect India with the Northern Sea Route, linking the resource-rich Russian Arctic to the Indian Ocean.

Notably, the Chabahar port is near the Chinese developed port of Gwadar in Pakistan, a significant project with strategic implications for China and Pakistan and naturally of interest to India. Beijing’s plans to connect Xinjiang in western China to the Indian Ocean via Gwadar underscores India's interest in developing alternative trade routes with Iran as a means of advancing its own strategic interests in the region.

Energy security

An estimated 40% of the world’s crude oil supplies is transported via the Persian Gulf, with 20% of global supply passing directly through the Strait of Hormuz, located between Oman and Iran. As a major oil importer, maintaining good relations with countries in the region is critical to India's domestic energy security. Iran is no exception. Given the Islamic republic’s substantial political and military influence in the Gulf, both directly and through proxies such as Yemen's Houthis, this incentivises New Delhi to maintain strong diplomatic ties with Tehran.

But India faces a complex challenge in maintaining good relations with its Middle Eastern neighbours while simultaneously appeasing the US. A good example can be seen in India’s initial reluctance to criticise Israel’s bombing campaign in Gaza, before shifting its position and eventually voting in favour of a UN resolution calling for a ceasefire. Similarly, India has deployed several warships to the Red Sea while declining to join a US-led security mission to counteract Houthi attacks on ships bound for Israel.

As the world's third-largest energy consumer and the fastest growing major economy in the world, India can be expected to remain pragmatic in this regard. Russia’s crude exports to India have been spared from Houthi attacks due to India’s nuanced approach, and the country’s development goals would be unattainable without this oil. As such, it should come as no surprise that Indian foreign minister Subrahmanyam Jaishankar has paid state visits to Russia and Iran in recent months.

China and Iran

There was a time when India was more susceptible to pressure from Washington, but this simply benefited China. India was the second-largest consumer of Iranian oil after China in 2018, importing about 480,000 barrels per day, before halting Iranian oil imports in 2019 to oblige the Trump administration. But China continued importing oil from Iran, which strengthened ties between Beijing and Tehran. Meanwhile, Trump’s deals with New Delhi mostly benefited US energy firms and arms manufacturers.

China and Iran later signed a 25-year pact to deepen their strategic partnership. Under the agreement China plans to invest $400bn in Iran, receiving Iranian energy exports in return. China intends to develop transport infrastructure between Iran and its neighbours such as Pakistan, with major roles expected for Chinese companies. This growing Iran-China relationship poses considerable challenges for India, undermining its interests and operating space in its own neighbourhood.

To address these issues of concern New Delhi stepped up diplomatic efforts to strengthen its own ties with Tehran. After Iranian air strikes in Pakistan’s Balochistan province this year the Indian foreign ministry said publicly that Iran’s attack was in “self-defence”, an open expression of support for Tehran. The two states called for the activation of a rial-rupee mechanism to bypass the dollar in mutual trade. This signals India’s willingness to co-operate with Iran in the financial sphere despite the risk of US sanctions.

While tension between Iran and the US affected India in the past, New Delhi is re-evaluating its priorities. India’s desire to develop new trade routes, enhance its energy security and develop new local currency payment systems has led to a marked increase in diplomatic overtures between New Delhi and Tehran. This increase in high level exchanges highlights Iran’s enduring strategic significance to India, with the two countries working to deepen bilateral ties despite a challenging geopolitical environment.

• Shubitz is an independent Brics analyst.

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