In a recent statement, Arvind Mehta, Joint Secretary, Indian Commerce Ministry, said that India and Iran have

plans to increase the bilateral trade to $25 billion by 2015. The trade ties between India and Iran date back to the Neolithic period. Of course the political demarcation was not as strong as it is today so free trade was practiced between the two nations. The two nations even shared a boundary until 1947. In 2008-09, Iran accounted for nearly 16.5% of crude oil imports to India, and about 40% refined oil consumption of Iran is imported from India. We clearly see that the two nations are important trade partners. This paper attempts to analyse the India-Iran trade relationship and pattern through time and how it is today. On 15th March 1950 independent India established first diplomatic links with Iran. The Shah of Iran visited India in February/ March 1956 and the then Prime Minister Jawaharlal Nehru visited Iran in September 1959. And since then, the two nations have entered into numerous bilateral trade agreements. With the Iranian Revolution in 1979 a new phase of relationship between India and Iran came into being. India followed the policy of Non-alignment during the Cold War period at the same time maintaining close ties with USSR. Considering global political conditions of that time India chose not to support the revolution that was backed by US. The two nations were also strategic partners. In 1990s Iran and India supported the Northern Alliance in Afghanistan against the Taliban regime.

Ever since the discovery of natural gas in 1988, in the South Pars feilds of Iran, the government of Iran is promoting gas exports mainly to Asian countries which are low in reserves but high in demand. In 1995 a preliminary trade agreement was signed between Iran and Pakistan proposing a gas pipeline between the two countries. Later it was proposed that the gas pipeline be extended till India via Pakistan. In 1999 India and Iran signed a preliminary agreement for the same but

when the military took control in Pakistan the project was put off. In 2004, the project was revived under the name Peace and Prosperity pipeline. However Indias growing strategic-economic relations with US and Israel made the pipeline proposal seem impossible. In 2009, India withdrew from the agreement over security and price issues. This came as no shock as the previous year India had signed a civilian nuclear deal with US. Since then the project is pursued bilaterally between Iran and Pakistan. Indias current mission is to carefully balance out its relations with Iran wihout straining its relationship with US and Israel. Irans nuclear ambitions have proven to be a credible threat to the issue of national security as per the US and EU. Even its neighbour Israel (a major US ally) is opposing Irans pursuit of becoming a nuclear power. As a result of this threat the US and its allies passed sanctons againts Iran, forcing it to re-consider its nuclear programme.A Bloomberg report published on 13th February 2012 mentions that U.S. and EU leaders are trying to tighten restrictions on business with Iran, which produced 3.55 million barrels of crude a day in January, 11 percent of OPEC's total, according to data compiled by Bloomberg. Oil sales earned Iran $73 billion in 2010, accounting for about 50 percent of government revenue and 80 percent of exports, the U.S. Energy Department estimates. Because of this the oil based exports of Iran are showing a declining trend:

2006-07

2007-08

2008-09

2009-10

2010-11( first 3 quarters)

84.9%

86.5%

85.5%

79.8%

78.9%

Countries have imposed travel bans on personnel involved in the nuclear programme, harsh restrictions on exports and imports of oil and related products such as refinery equipment and any other products that help finance this sector. India itself has restricted the export of goods, equipment and knowledge which would help Iran to develop into a nuclear power. In the IAEA (International Atomic Energy Agency) Vote , India walked parallel with US and voted against Iran1 . This astounded Iran , because of rich Cultural & Economic ties between the two nations. This has been a reason for much distress in the Indo-Iranian relation. Iran is willing to reassess its ties with the nations that voted against it. There is much within India too regarding this decision. The opposition left block thinks of this as a gimmick by the centre to please US and strenghten new tiew while forgetting old ones. As a result of this distraught India has sent a delegation to Iran in March 2012 to revive the trade opportunities between the two countries. The companies involved think that this move will help boost Indias balance of trade with Iran. Because of the sanctions put on Iran by the western powers the payment for oil in dollars became a problem. Consequently , now India would pay upto 45% in Rupees that will stay in the country and be used by Iran to buy Indian goods. Iran is Indias second largest supplier of crude oil and hence it becomes essential to maintain and balance its ties with the country. It also focuses on the trade of agricultural commodities,textiles, pharmaceuticals, factory machinery etc.IndiaIran trade in 2009-10 was US$ 13.4 billion (Indian exports US$ 1.9 billion and imports US$ 11.5 billion). Currently Indias exports to Iran include petroleum

1. 22 countries voted against Iran which include countries like Israel, EU, Canada etc.

products, rice, machinery & instruments, manufactures of metals, primary and semi finished iron & steel, drugs/pharmaceuticals & fine chemicals,processed minerals, manmade yarn & fabrics, tea,organic/inorganic/agro chemicals, rubber manufactured products, etc. Even though India took a stand against Irans nuclear programmes, there is much evidence to believe that the rich civilisational ties between the two nations will grow stronger after the recent trade negotiations. Irans chief nuclear negotiator Ali Larijani said Iran was willing to continue its friendly relationship with India. "We should not lose a friend because of one incident," said Larijani . "We will have talks with India over Irans nuclear ambitions in the future."

TRENDS IN INDO-IRAN BILATERAL TRADE

Source: Ministry of Commerce and Industry, Government of India. Note: All figures are in million $US