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Tanvi Madan | February 28, 2014 5:00pm

India's Relationship with Iran: It's

Complicated

More Topics

Middle East and North Africa

India

Iran

Iran's Energy Sector

Iran Foreign Policy

Nuclear Development In Iran

Sanctions against Iran

India

oil

oil and gas

foreign trade
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A colleague once noted that when people ask him what Iran might do under any given
circumstance, he usually has one of two answers to offer: I don't know or It depends.
When it comes to Indias relationship with Iran, perhaps the best answer to most questions
is its complicated. This is not, however, usually the way the relationship is portrayed.
Indian policymakers publicly tend to emphasize the historical and civilizational ties that India
and Iran share. In the U.S., especially outside the executive branch, it is Indias oil imports
from Iran and high-level India-Iran visits that get (mostly negative) attention. This week, one
of those visits is taking place, with Iranian Foreign Minister Javad Zarif traveling to India,
seeking to open a new chapter in the relationship. While viewing his trip, its worth keeping
in mind the complexity of the relationship and the fact that there are not just elements
driving Indias ties with Iran, but some that limit it as well.

There are certain factors that have driven India's desire to maintain a relationship with Iran
and that are likely to persist. The role of the first factor often mentionedhistorical and
civilizational tiesis often overstated. They do provide a link, but these ties neither
prevented a frosty India-Iran relationship through most of the Cold War nor led to a close
one after the 1979 revolution.

India's Energy Needs

India's energy needs are a crucial element. The country today is the fourth largest
consumer of energy in the world, soon likely to become the third. Oil constitutes nearly onefourth of Indian energy consumption. Over three-quarters of that oil comes from abroada
share that is only expected to increase. India has significantly reduced its oil imports from
Iran, mostly as a result of sanctions, but also because of the availability of other import
sources and Indias preference for diversifying its dependence as much as possible.
However, Iran still accounts for 6% of total Indian oil imports.
India is also increasingly looking abroad for natural gas. It does not import any from Iran,
but there have been (unsuccessful) discussions in the past about a long-term supply
contract, as well as an Iran-Pakistan-India pipeline. These kinds of deals could be back on
the agenda, depending on how various bilateral, regional and global factorsincluding the
nuclear negotiationsplay out. Additionally on the energy front, Indian companies,
especially state-owned ones, continue to have investments or interest in investing in the
Iranian energy sector. Till recently, Iran also was a major export destination for Indian
refiners.
The potential development of non-energy bilateral economic ties is another factor. Ironically,
sanctions might have given additional impetus for the exploration of such interaction. With
Indian companies finding themselves having to pay Iran for oil in rupees, which can only be
spent in India, there has been a felt need to find things that Iran can buy in India. While
sanctions relief has meant that companies can potentially pay Iran a certain amount in
dollars, these cannot cover all they owe Iran. Even beyond this, the government and Indian
companies would like to explore economic opportunities with and in Iran.

Attractive Corridor to Central Asia

Potential access to Afghanistan and Central Asia through Iran is another crucial reason for
Indias ties with Iran. Since Pakistan is not currently a feasible transit option to the region,
New Delhi finds the prospect of using an Iranian transit corridor attractive. India's desire to
invest $100 million to upgrade the Iranian port of Chabahar is linked to this need, as well as
to China's investment in the Pakistani port of Gwadar. The impending drawdown, if not
withdrawal, of NATO troops from Afghanistan has made this Iran routeas well as
potentiallybroader India-Iran cooperation in and on Afghanistaneven more crucial for the
Indian government.
A fourth element in play is domestic. India houses 10-15% of the worlds Shia population,
much of which is concentrated in electorally-significant areas. This community and the even

larger Sunni one also make the Indian government sensitive to any Sunni-Shia tension in
the Middle East that could potentially spillover into India.
These factors dont just constitute the backdrop for Zarifs visit, they will be items on the
agenda as well. They are also the reasons that New Delhi would like to cooperate with
Tehran and to see a normalization of Irans relations with and standing in the international
community. However, even if the latter occurs, there are also factors in play that will serve
to limit the relationship from India's perspective.

Regional Complications
First, Indias energy relationship with Iran hasnt been without strain. New Delhi has had
doubts about Tehrans reliability and stability as a supplier. Iran is thought to have reneged
onsome deals, tried to renegotiate others, and given China and its companies better terms
in the Iranian energy sector. While an Iran under the pressure of sanctions has shown
slightly more inclination to offer India and its companies better terms, Indian officials note
that the Iranians remain tough negotiators in this arena. Tehran has also not been above
using Indias oil and gas needs to pressure the Indian government in the foreign policy
realm. This was perhaps most evident when Iranian officials seemed to link energy deals to
Indias votes at the IAEA. This did nothing to increase New Delhis confidence in Iran and
reinforced its general tendency to diversify its dependence partly in order to limit any one
countrys leverage on it.
Second, even as India has ties with Iran, it also has a number of other key relationships in
the region that will keep it from getting too close to Iran. Saudi Arabia and the other Gulf
Cooperation Council states supply a significant amount of the oil India imports. Qatar is also
its largest source of imported natural gas. The large Indian diaspora in these countries,
which is a major source of remittances, and the significant Sunni population in India (over
120 million) also make these relationships crucial. In addition, there are existing and
potential trade and investment ties at stake with these countries. For Delhi, a relationship
with Riyadh is also particularly critical because of the leverage the Saudi government is
thought to have with Islamabad.

There is an overall sense in India that these countries are taking it more seriouslypartly
thanks to Iran, partly in the Saudi case because of American urging, but also because of
Indias potential as a market as other consumers drop off the list. These countries interest
in India has been evident in the fact that in the ten days before Zarifs trip, Delhi saw visits
from the king of King of Bahrain, the Saudi crown prince, the Omani foreign minister and the
chairman of the Kuwaiti national security apparatus.

India's Relationship with the United States and Israel

Beyond these Arab states in the Middle East, Indias relationship with Israel has also
become crucial. That country has become one of India's largest defense defense suppliers,
and is also seen as a major source of agricultural technology and tourism revenue.
Furthermore, Indian companies are keen to invest in Israels technology sector. The two
countries are also negotiating a free trade agreement. Since the Mumbai attacks, shared
concerns about terrorism have created additional space for bilateral cooperation.

Finally, Indias relationship with the United States, and American (especially Congressional)
concerns about Iran have also affected the India-Iran relationship. Indian officials resent
pressure from the U.S. on India-Iran ties to Iranthey especially find public pressure to be
counterproductive, but they realize that these links with Iran do create complications in the
critical India-U.S. relationship. India has not been above using U.S. concerns about Iran as
wellfor example, with officials advocating for U.S. natural gas exports to India suggesting
that itd help ease Indias energy dependence on countries like Iran.

Keeping Each Other at Arms Length

There have been additional causes for strain in the India-Iran relationshipsome that have
played out quite publicly, thus shaping the Indian publics view of Iran. In 2012, a terrorist
attack on an Israeli connected with the embassy in Delhi raised hackles. The Indian foreign
ministry played down the Iran connection publicly. The Indian home ministry and law
enforcement authorities, however, implicitly or explicitly linked the attack to Iran and
complained about the lack of cooperation from Iran in investigating it. Beyond concern
about such acts of terror per se and about the impact on India-Israel relations, if there is
another such attack, it puts the Indian government in a tight spotfinding itself calling on
other countries to criticize Pakistan for allegedly supporting terrorism on Indian soil, while
staying silent on Iran. More recently, Iran found itself in Indias bad books as a result of
its nearly-month-long detention of an Indian ship transporting crude oil from Iraq to India.
Finally, over the last few years, there has been a negative reaction whenever Iranian
officials and commentators criticized India for its relations with third countries. A glimpse of
this was evident in the reaction to an Iranians Iranian's comments to Indian counterparts
during a Track-II dialogue that included the critical assertion your qibla is Washington.
Even as Zarifs visit is an opportunity for India to get an update on Irans perspective on the
P5+1 negotiations and explore avenues of greater cooperation (especially if those
negotiations succeed), the persistence of these concerns will likely limit the extent of that
cooperation. Barring a bilateral shock, India will continue to seek to establish a relationship
with Iran thats not too close, not too far, but just right. This is likely to be the case
regardless of who takes office in India after the national elections thatll be held over April
and Maythough a third front (i.e. non-Congress party-led or non-BJP-led) coalition
government might place somewhat different emphasis especially rhetorically.