|Up-to-the-minute perspectives on defence, security and peace
issues from and for policy makers and opinion leaders.
Iran's historic relations with India undoubtedly will grow as it shall seek improved economic, commercial and military ties with a country it believes has done well and has much to offer it, writes Professor Sohail Mahmood..
As is widely discussed, India isgrowing fast and has become the fourth largest economy in the world in terms of purchasing power parity. So it badly needs oil and gas from abroad and Iran is one such source. Iran's estimated oil reserves are 136.2 billion barrels and natural gas reserves are 948 trillion cubic feet (tcf). Given the new situation after the international nuclear deal between Iran and the P5+1, an estimated $56 billion of frozen assets will be released eventually. Iran has been closed to Western oil markets for years due to the sanctions, but those restrictions would be lifted soon. It was reported in the CNN on September 1, 2015, that Iran was "wasting no time in planning its comeback, and is aiming to ramp up production faster than many expect despite a supply glut that is killing prices". It was also reported by CNN that Iran had the fourth biggest oil reserves in the world and was pumping about 2.8 million barrels a day, according to experts.
Some of the money is now likely be put into Iran-India energy and infrastructure projects. Given India's hopes to redouble its economy soon by a sustained annual growth of about 8%, Iranian oil and gas, plentiful and close by, would be advantageous. Meanwhile, Iran seeks markets in India and assistance to develop its infrastructure and military. The two nations have kept up a cozy relationship notwithstanding the US pressures.
With the Iran-Pakistan-India (IPI) pipeline still stuck and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipelines yet to take off, India is focusing on Iran to meet its energy needs. India and Iran are developing a new undersea gas pipeline in the Arabian Sea that will connect the two countries, bypassing Pakistan altogether. The gas pipeline project by South Asia Gas Enterprises Pvt Ltd (SAGE), when implemented, could see over 31 million cubic metres of gas per day delivered to India. The pipeline project, also known as Middle East to India Deepwater Pipeline (MEIDP), was formulated a decade ago, but could not take off due to the Western sanctions and US opposition as well as technological issues.
The SAGE project holds promise of seeing gas delivered to energy-starved India in about five years. The 1,200-1,300 km pipeline, set to cost around $4.5 billion, was a good energy option for India. The pipeline would start from Chabahar on the southern coast of Iran and Ras Al-Jafan on the Oman coast. The pipeline, after traversing deep in the Arabian Sea, would bring gas to Porbandar in south Gujarat. The maximum depth of the pipeline is set to be 3,450 meters, and construction could take two years to complete. The pipeline route can also bring Turkmenistan gas to India through a swap arrangement with Iranian gas from the South Pars gas field in the Arabian Sea. Turkmenistan and Iran are building gas pipelines to Chabahar port. From here the Turkmen gas could be transported through the SAGE pipeline. Turkmenistan, in the past, was agreeable to such options for supply of additional gas too. Prime Minister Narendra Modi and Iranian President Hassan Rouhani, who met in Ufa, in Russia, on the sidelines of the Shanghai Cooperation Organization (SCO) summit earlier this month, discussed increasing Iranian oil imports, the development of Chabahar port and the fast-pacing of connectivity projects. Iran is central to India's access to Central Asia and the Chabahar port and road connectivity is a priority area for India. Ravi Agrawal and Sugam Pokharel reported on CNN Money on July 16, 2015 that:
As a major net importer of oil, India has already benefited from the U.S.-led nuclear deal with Tehran. Oil prices have declined in recent days, driven largely by expectations of more Iranian crude hitting the market. According to India's Finance Ministry, power-hungry India saves nearly $1 billion in import costs for every dollar drop in global crude prices. India is particularly well positioned to benefit because many of its refineries are designed to receive Iranian-grade crude, analysts said.
Since India refused to fully take part in the U.S. and EU-led sanctions on Tehran, Indian businesses have made substantial inroads in Iran, and it is now India's third-largest trading partner. Exports to Iran nearly doubled to $3.3 billion between 2009 and 2013, according to India's Ministry of Commerce. Now, Indian businesses will begin to face stiff global competition. While Tehran has benefited from trade with Indian businesses, some worry that Iran will now be in a position to pick and choose profitable trades on the global market. "Iran will show significant diplomatic strength in getting the best deal from India in terms of its business interest," said M. P. Ram Mohan, an Associate Professor at India's TERI University. We can expect a tough customer in Iran, but a customer we will be far more comfortable to deal with."
Meanwhile, India was offered a greater role in the development of the Port of Chabahar in return for $8 billion in investment in infrastructure projects. President Rouhani had recommended the bigger role to India amid a meeting with Prime Minister Narendra Modi on the sidelines of a very recent summit in Russia.
Earlier, India and Iran had concurred in 2003 to create Chabahar on the Gulf of Oman, close to Iran's border with Pakistan, yet the endeavor had moved gradually as a result of the Iranian nuclear issue.
The Chahbahar port project had already received an $85 million commitment from India for help construct second and third terminals at the port, and in addition a railroad link. Chahbahar was seen as a rival to Pakistan- China's CPEC Gwadar port project. India was eager to expand its presence at Chahbahar because it would provide it with a sea-land access route into Afghanistan through Iranian territory. Chahbahar port is located in the Sistan-Baluchistan Province on Iran's south-eastern coast and could prove to be of strategic importance to India as it was very eager to open up trade routes to Afghanistan. Now hopefully the port could be developed quickly. Meanwhile, India had committed $22.9 million per year for ongoing port operations under a proposal that will see the port operated via an Indian JV company, composed of Jawaharlal Nehru Port Trust (JNPT) and the Kandla Port Trust (KPT), which would sign a 10 year leasing agreement.
Details of the project are being considered. Road links from the port connect Chahbahar to Zaranj some 883 km and from there Afghanistan's garland highway would permit access to for goods to the country's four major cities; Herat, Kandahar, Kabul and Mazar-e-Sharif. Iran's port sector had seen a sharp rise in investor interest In June 2015, Iranian authorities announced plans for €700 million multi-purpose port on the island of Qeshm in the Strait of Hormuz, the world's most significant oil sea route, a channel to over 33% of all seaborne traded oil. The slim band of water connects significant oil producers such as Saudi Arabia to the Arabian Sea and the Gulf of Oman. Every day more than 17 million barrels of oil and oil products are shipped through the passage.
Iran is now occupied with negotiations with India over the project which was described as an aggressive undertaking set to transform the port into a key centre point for economic development of the region. In august 2015 the Times of India had reported that Iran had offered a proposed rate of $2.95 for every million British thermal unit (mbtu) of LNG that it wants to offer to India later on. Iran's past proposed rate was $0.82 per mbtu that had been raised in the course of recent years.
Perhaps Iran was developing the seaport to balance US presence across the Gulf. As PLAN Chinese navy sets up in Gadara seaport in Pakistan, India would be keener to enter the Gulf through Chabahar seaport in Iran. In all likelihood more developments will happen regarding the expansion of the Chabahar seaport in near future.
Iran will also seek great cooperation with India to counter Taliban influence in Afghanistan. Iran already supports the Shia Hazaras in south and southwestern Afghanistan. However, Iran would be definitely anticipating a peaceful and secure Afghanistan and a final ending of the long war there. The US and Iran have a convergence of national interests in Afghanistan now. The Chabahar project will soon connect with Afghanistan in north through a road link. Thus, infrastructure developments will commence beneficial to the South West Asia region. Iran seeks better relations with neighboring Pakistan also. Any naval engagement with India will exacerbate past tensions with Pakistan and prove an obstacle on desirable future cordial relations with Pakistan. Therefore Iran may be circumspect on advancing the Indian Navy any such concessions or engagements any time soon. Naval engagements between Iran and India may yet happen later but not any time in the near future. However, Iran may give some docking facilities to the Indian navy in Chabahar.
In sum, Iranian relations with India which were already warm are poised to become warmer very soon. This would be taken as a challenge by Pakistan, however.
Sources for this article include :
Vrushal T Ghoble, "The Economics of natural Gas Its Geopolitical Implications", World Affairs, Summer 2013 (April-June) vol.17 No. 2,109
Saudi king meets Obama amid concerns over Iran deal, BBC News, http://www.bbc.com/news/world-us-canada-34153624, September 5, 2015, accessed September 6, 2015
John Defterios and Mark Thompson , Exclusive: Sanctions deal will unleash Iran's oil production, officials say, CNN Money, September 1, 2015, http://money.cnn.com/2015/09/01/news/economy/iran-oil-production-zangeneh/ accessed September 6, 2015
With Iran nuclear deal, an undersea gas pipeline to India holds promise, Zee news, http://zeenews.india.com/news/world/with-iran-nuclear-deal-an-undersea-gas-pipeline-to-india-holds-promise_1633175.html, accessed August 24, 2015
Ravi Agrawal and Sugam Pokharel, Iran awaits windfall from Iranian nuclear deal, CNN money, http://money.cnn.com/2015/07/16/news/economy/iran-india-nuclear-oil/index.html?iid=EL, accessed September 6, 2015
See REUTERS, -Iran offers India a bigger role in Chabahar port: Report, July 18, 2015
http://indianexpress.com/article/india/india-others/iran-offers-india-bigger-role-in-chabahar-port-reports/, accessed August 29, 2015. Also India offered expanded role in Iran's Chabahar port project, PORT FINANCE INTERNATIONAL, 20 JULY 2015
HTTP://WWW.PORTFINANCEINTERNATIONAL.COM/FEATURES/ITEM/2232-INDIA-OFFERED-EXPANDED-ROLE-IN-IRAN-S-CHABAHAR-PORT-PROJECT, ACCESSED SEPTEMBER 6, 2015
The Iran Project, "India eyes LNG imports from Iran's Chabahar Port", http://theiranproject.com/blog/2015/08/22/india-eyes-lng-imports-from-irans-chabahar-port/, accessed August 29, 2015
Dr Sohail Mahmood is a Professor of Political Science and is widely published on the politics and governance issues of South Asia and the Middle East.