INDIA-IRAN BILATERAL RELATIONS

BACKGROUND
 India-Iran relations span centuries marked by meaningful interactions. The two countries shared
a border till 1947 and share several common features in their language, culture and traditions.
Both South Asia and the Persian Gulf have strong commercial, energy, cultural and people-to-
people links.
 The two countries have in place several bilateral consultative mechanisms at various levels which
meet regularly, where views are exchanged on combating global terrorism, energy security, North
South Transport Corridor, developments in Afghanistan and regional security and stability.
 Independent India and Iran established diplomatic links on 15 March 1950. In addition to the
Embassy in Tehran, India currently has two Consulates in Iran - Bandar Abbas and Zahedan.
 The Iranian Revolution in 1979 introduced a new phase of engagement between India and Iran
marked by exchange of high-level visits of Indian Prime Minister Shri Narasimha Rao in September
1993. The trend was consolidated and enhanced at the turn of the millennium with visits by Prime
Minister Shri Atal Behari Vajpayee in 2001 and a return visit by President Mohammad Khatami in
2003, when both sides signed “The New Delhi Declaration” which set forth the vision of strategic
partnership between India and Iran.
 Iran assumed the presidency of NAM in 2012. On the sidelines, Hon’ble Prime Minister Dr
Manmohan Singh met Supreme leader Ayatollah Ali Khamanei and President Dr. Mahmoud
Ahmadinejad. Both sides reviewed the entire gamut of bilateral relations and called for further
strengthening the centuries old relationship between India and Iran.
 Vice President Hamid Ansari graced the swearing-in ceremony of the newly elected Iranian
President Dr. Hassan Rouhani in August 2013.
 After that a lot of high-level visit by the Ministers from both the countries took place before Prime
Minister Shri Narendra Modi paid a bilateral visit to Iran in May 2016. Terming the "dosti"
(friendship) between India and Iran as old as history, PM Modi said "through centuries, our societies
have stayed connected through art and architecture, ideas and traditions, and culture and
commerce." In this regard he quoted a couplet from legendary poet Ghalib, "Once we make up our
mind, the distance between Kaashi and Kaashan is only half a step."
o 12 MoUs/Agreements were signed between India and Iran.
o A Trilateral agreement on Transit and Transport was signed between India, Iran and
Afghanistan in the presence of Prime Minister Modi, President Rouhani and Afghan
President Ashraf Ghani.
o Prime Minister Modi also inaugurated the International Conference titled “India-Iran two
great civilizations” in Vahdat Hall, Tehran and Prime released a Persian Manuscript
“Kalileh Wa Dimneh”.
 Iran President Hassan Rouhani visited India on a three-day visit from 15 February to 18 February
2018. This was Rouhani’s maiden visit to India since coming to power in August 2013. Rouhani’s
visit, exactly a month after Netanyahu’s, is seen as India’s act of balancing the relationship in the
west Asian region. Iran and Israel have a strained relationship, but since India has “strategic
interests” with both countries, New Delhi needs to carefully balance bilateral ties with both.

TRADE AND INVESTMENT COOPERATION

 India-Iran enjoys economic and commercial ties covering many sectors. However, the trade
relations have traditionally been buoyed by Indian import of Iranian crude oil resulting in overall
trade balance in favour of Iran. The India-Iran bilateral trade during the fiscal year 2016-17 was
USD 12.89 billion. India imported USD 10.5 billion worth of goods mainly crude oil and exported
commodities worth USD 2.4 billion.
 The recent economic sanctions imposed on Iran have had an adverse effect on the bilateral
trade as the international banking channels have gradually become non-existent.
 India and Iran hold regular bilateral discussions on economic and trade issues within the framework
of India-Iran Joint Commission Meeting (JCM). The 18th India- Iran Joint Commission was held in
Tehran on 28th Dec’ 2015.
 Few Highlights of Rouhani’s Visit To India in Feb’ 2018
o To deepen trade and investment cooperation, the two leaders recognised the need to put in
place an effective banking channel for business transactions
o It was also agreed to set up a Joint Committee of officials to examine feasible options,
including Rupee-Rial Arrangement, Asian Clearing Union mechanism to establish functional
payment channels
o The two sides agreed to undertake text-based negotiations on Preferential Trade Agreement
as well as conclusion of Bilateral Investment Treaty in a fixed time frame.
o India fully supported the accession of the Islamic Republic of Iran to the World Trade
Organization and the ongoing consensus building efforts among WTO members to
reactivate the accession process, consistent with the objective of making the Organization
universal and inclusive.
o Agreements/MoUs signed-
 Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income
 MoU on Exemption from Visa requirement for holders of Diplomatic Passports
 MoU on the establishment of an Expert Group on Trade Remedy Measures to
promote cooperation in areas of mutual interest

CONNECTIVITY
 The successful inauguration of the Phase-1 of Chabahar Port in early December 2017; the
ratification of the Trilateral Agreement between India, Iran and Afghanistan on Establishment of
International Transport and Transit Corridor by all sides; and the successful shipment of wheat
assistance from India to Afghanistan through Chabahar Port have opened a new gateway to and
from Afghanistan, Central Asia and beyond.
 Both countries have welcomed the lease contract for ShahidBeheshti port of Chabahar during
interim period between Port and Maritime Organization (PMO), Iran and India Ports Global Limited
(IPGL). They further directed that the Coordination Council should meet within the timelines
stipulated in the Trilateral Agreement.
 With this lease agreement, New Delhi got operational control of part of the Iranian east coast port
of Chabahar for 18 months.
 With a view to fully utilize the potential of the Chabahar Port and its connectivity to Afghanistan and
Central Asia, India conveyed its readiness to support the development of Chabahar- Zahedan Rail
 line. IRCON, India and CDTIC, Iran who are engaged in discussions, were tasked to finalise the
technical parameters and financing options for the project in a time bound manner.
 India's accession to TIR Convention and Ashgabat Agreement was welcomed as additional steps
at enhancing regional connectivity and linking regional centers of economic growth.
 Both sides had also stressed the need for inclusion of Chabahar port under the framework of
International North- South Transport Corridor (INSTC).

ENERGY AND INFRASTRUCTURE RELATIONS

 India and Iran have agreed to move beyond traditional buyer-seller relationship and develop it into a
long-term strategic partnership. For this purpose, both sides have agreed to continue and increase
the pace of negotiation for reaching appropriate results on energy cooperation, including Farzad B
gas field.
 The Islamic Republic had become a preferred supplier for India, making it the second largest
Iranian crude oil purchaser of Iranian oil after China due to sweeteners such as 60-day credit,
free insurance and shipping.
 India had imported about 22 million tonnes of crude oil from Iran in 2017-18 and planned to raise
that to about 30 million tonnes in 2018-19.

SECURITY AND DEFENCE COOPERATION

 The two countries recently agreed to enhance regular and institutionalized consultations between
them and others concerned on terrorism, security and related issues such as organised crime,
money-laundering, drug trafficking and cyber crime.
 An Mou was also signed on Instrument of Ratification of Extradition Treaty.
 The Indian side has reaffirmed its support for full and effective implementation of the Joint
Comprehensive Plan of Action (JCPOA), which has been endorsed by the UN Security Council
and is crucial contribution to the non-proliferation framework and international peace, stability and
security.

SOCIAL AND CULTURAL CONTACTS

 In May 2013, External Affairs Minister of India officially inaugurated the India Cultural Center in
Tehran. The Embassy has also been bringing out a bi-monthly magazine named “Ain-e-Hind’
(Mirror of India) taking India to the drawing rooms of the general Iranian public.
 There is an Indian school run by the Kendriya Vidyalaya Sangathan in Tehran and another in
Zahedan.
 There are about 8,000 Iranian students studying in India. India provides 67 scholarships every year
to Iranian students under ITEC, ICCR, Colombo Plan and IOR-ARC schemes.
 India over the years has emerged as one of the favourite tourist destinations for Iranian tourists and
every year around 40,000 Iranians visit India for various purposes.
 Few Highlights of Rouhani’s Visit To India in Feb 2018
o In order to facilitate friendly exchanges between the two countries, it was agreed that India
would grant e-visa facility for the Iranian nationals and Iran would grant e-visa facility to the
Indian nationals.
 o With a view to build on the strong foundations of civilization and cultural connect and
promote better understanding of each other at various levels, it was agreed:
 to hold the Festival of India in Iran in 2018/19;
 to establish a Chair of Indian studies in Tehran University;
 to organise Indology courses for Iranian diplomats by the Foreign Service Institute of
India;
 to support the Persian language courses in India;
 to cooperate further in the areas of archaeology, museums, archives and libraries.
CONCLUSION
India’s relationship withTehran has three primary objectives:
1. first, to diversify (and increase) India’s oil and gas supplies;
2. second, to enhance connectivity and trade with Afghanistan, Central Asia and beyond via Iran;
3. and third—given Iran’s growing regional influence—to hedge its geopolitical bets in the region vis-à-
vis other players, notably Pakistan, Saudi Arabia and the Gulf Cooperation Council members.
A secondary objective is to balance China’s growing influence and also to engage the US in ensuring
that India’s interests are protected in the region. These all require a sharp diplomatic acumen and
active multi-polar engagement to garner the situation in India’s interest.

SOME RECENT ISSUES CONCERNING IRAN

1. CHABAHAR PORT
 India and Iran had in 2003 agreed to develop Chabahar on the Gulf of Oman outside the Strait of
Hormuz, near Iran's border with Pakistan.

 Importance of Chabahar port

o Located in the Sistan-Baluchistan Province on Iran's southern Makran coast, it is of great
strategic utility for India. It lies outside the Persian Gulf and is easily accessed from India's
western coast, bypassing Pakistan. It has the potential of becoming India’s gateway to
Afghanistan, Central Asia and Europe. Also, it is located 76 nautical miles (less than 150km)
west of the Pakistani port of Gwadar, being developed by China; this makes it ideal for
keeping track of Chinese or Pakistani military activity based out of Gwadar.
o Cost Cutter: The port will be used to ship crude oil and urea, greatly reducing India’s
transportation cost. India wanted to build the port as it would significantly reduce transport
costs and freight time to Central Asia and the Persian Gulf.
o Afghan Connect: A railway line will connect chabhar to Zahedan on Afghan border. India
has already constructed a 218 km long road from Delaram in western Afghanistan to Zaranj
in the Iran-Afghan border to link up with Chabahar port.
 o Japan which shares India’s concerns about the growing economic and military strength of
China is likely to partner with India on the development of the Chabahar port in Iran as well
as an adjoining special economic zone. As part of the response to China’s BRI (Belt and
Road initiative) India and Japan are partnering in what they call the Freedom Corridor
which would create new road, rail and shipping routes that would stretch from South East
Asia to Sri Lanka, Iran and Africa.
o Bigger Link: The port will link to INSTC that will connect India to other central Asian
nations.
 Challenges Associated With Chabahar: Despite the strategic import of Chabahar for India, there
has been very little progress on it for several reasons.
o First is Iran’s unenthusiastic support for the project. A key factor behind Iran’s reluctance to
allow an Indian presence at Chabahar was the opposition by the Army of the Guardians of
the Islamic Revolution (the so-called Revolutionary Guards), which reportedly uses the port
to ship arms to Yemen and militant groups in the region.
o Second, its strategic significance notwithstanding the economic viability of the project is
suspect. India, which has had trouble raising funds for the project, has so far been able to
invest only $85 million to build a couple of berths. While India recently indicated that it was
willing to invest up to $20 billion to develop the port, petrochemical and fertilizer plants in the
Chabahar SEZ, it remains to be seen if it can raise the funds.]
o Moreover, given the presence of Gwadar next door, where China has already invested over
$1 billion and committed another $46 billion for the 3,000-km long economic corridor to link
Gwadar to Kashgar in Xinjiang province and its One Belt, One Road project, it is unclear
whether the Chabahar route will generate enough trade and traffic to justify the investment.
o In fact, Tehran, which has been playing hardball with India and demanding greater Indian
investment in Chabahar, itself plans to invest $4 billion to build a refinery in Gwadar to
process 400,000 barrels of oil per day.

2. INTERNATIONAL NORTH-SOUTH TRANSPORTATION CORRIDOR (INSTC)

About INSTC
 Another major project is INSTC which would develop a network of ship, rail and road routes for
moving goods over 7,000 km from India’s western ports up to the Iranian port of Bandar Abbas.
 The INSTC was initiated by Russia, India and Iran in September 2000 to establish
transportation networks among the member states and to enhance connectivity with the land
locked region of Central Asia.
 The INSTC envisages movement of goods from Mumbai (India) to Bandar Abbas (Iran) by sea,
from Bandar Abbas to Bandar-e-Anzali (an Iranian port on the Caspian Sea) by road and then
from Bandar-e-Anzali to Astrakhan (a Caspian port in the Russian Federation) by ship across
the Caspian Sea and thereafter from Astrakhan to other regions of the Russian Federation and
further into Europe by Russian railways.
Potential Of INSTC For India
 Need for a route to Russia, Central Asia and Europe which is shorter, cheaper, safer and well
secured.
 If this corridor were linked with South East Asian Countries, its potential would increase manifold
and will further supplement India’s Act East policy.
 Would help India to bypass Pakistan and yet reach out to Central Asia and Russia.
 Will increase export competitiveness due to lower cost and less delivery time.
 Will provide impetus to regional cooperation and economic integration of the countries in the
Eurasian region with Indian ocean and Pursian Gulf.
 Already existing rail route between Turkey – Iran can help Indian goods to reach Turkey and
beyond.
Challenges
 This project does not have a strong mechanism and institution to address the operational issues on
the ground.
 Absence of harmonization in custom procedures and documentation method is further creating
obstacles.
 Issues related to funding of various infrastructure project under INSTC
 Low level of container trade along this route is creating a fear regarding cost recovery and hence it
has not been able to attract significant private investment.
 Lack of common border crossing rule (the project runs through various countries)
 Security and fear emanating from Afghanistan

3. US SANCTIONS ON IRAN
About The Sanctions
 The US has re-imposed oil-related sanctions on Iran on November 4, 2018 to choke the Islamic
Republic’s biggest source of income and pressure it to renegotiate a new nuclear deal. Any
country or company, trading with Iran without US consent after sanctions kick off risks getting cut off
from the American financial system.
 However, it has agreed to let eight countries including China, Japan, India and South Korea
keep buying Iranian oil till March 2019 from Tehran.
 The US has reinstated two sets of sanctions. The first set of sanction came into effect on August
7, which included restrictions on: Iran’s purchase of U.S. currency, Iran’s trade in gold and other
precious metals, Sale to Iran of auto parts, commercial passenger aircraft, and related parts and
services. The second set of sanctions, which came into force on November 4, restricts sales of oil
and petrochemical products from Iran.
 Activities related to the development of the Chabahar port in Iran and the construction of an
associated railway will also be exempt from U.S. sanctions that kicked on 4 Nov, following the 180
day cool-off period after the U.S. withdrew from the Joint Comprehensive Plan of Action (JCPOA
or the ‘Iran Deal’) in May 2018.
 Rationale For Waiver on Chabahar: The U.S. President Donald Trump’s South Asia strategy is
focussed on economic growth for Afghanistan and a close partnership with India. U.S. seeks to
maintain a close relationship with both countries as they pursue a “policy of maximum pressure”
against Iran. New Delhi also told American officials that India’s goal of helping Afghanistan’s
reconstruction, at the request of the Trump administration, may be affected by any US move to
tighten the screws on Chabahar’s potential use. The need for a waiver became even more
important since Iran was seen to be offering the port to others, including China, which is already
developing the Gwadar Port in Pakistan.
 These sanctions will remain until Iran meets demands such as halting its ballistic missile program;
ending support for terrorist organizations such as Hezbollah and Hamas which are threatening to
 destabilize the Middle East; ending supporting the regime of Syrian President Bashar al-Assad
despite Assad's atrocities against his own people; and end arming Houthi rebels in Yemen.
Impact On India
 Diversification: With India’s domestic production unable to match the country’s ever increasing
domestic demand, the country will continue to depend on imports for foreseeable future. India has
been trying to diversify its supply portfolio, with firms starting to source liquefied natural gas and oil
from the US. The options before it include increasing imports from sources such as the US, Iraq,
Saudi Arabia, Nigeria, Venezuela, and UAE.
 Relief To Oil Companies: State oil firms are yet to decide on how this quantum will be split
between them. A waiver will come as a big relief to Indian Oil and MRPL, the two largest Iranian oil
consumers.
 Tough Road Ahead: India is heavily reliant on oil imports from overseas, including Iran, to fulfill its
consumption needs and 83 % of the oil comes from external sources. Iran provides the cheaper
option and it could have been tough when retail prices of fuel are at an all-time high in the country.
 This waiver will bring some measure of relief to India, which had been discussing a sanctions
exemption for Chabahar, having signed an agreement with Iran and Afghanistan in May 2016 for
the port’s development. India has committed $500 million to the project and $2 billion to build a
railway line from Chabahar to Hajigaj in Afghanistan.
 But despite the waivers from the U.S., India will still face the impact of the U.S. sanctions, on its
investment in Chabahar, as very few international companies may be willing to undertake
contracts.
Way Forward
 The waivers are welcome as they indicate that despite all the harsh rhetoric on choking Iran, the
U.S. may have had a rethink on its sanctions, and the costs incurred in pushing around allies and
partners such as India, Japan and South Korea to zero out oil purchases.
 This conclusion stems from the fact that both India and China, Iran’s two biggest oil importers, have
been extended waivers. This flexibility could be a sign that the U.S. is leaving space for leeway in
resuming talks with Iran in the long term.
 The European Union, Russia and China have also been working on a “special payment
mechanism” to circumvent sanctions. But they have yet to launch it, limiting India’s options.
 Moreover, the fact that the waivers are temporary and contingent on further reductions in oil trade
with Iran, means that for now India will need to continue to find alternatives to its off take from Iran.
The alternative rupee-rial mechanism, which was operationalized in 2012 during the last round of
sanctions, depends on increasing Iranian demand for Indian goods to balance India’s annual
purchases of about $10 billion, which hasn’t fructified yet.
 Above all, by seeking the waivers, instead of sticking to its earlier line that it accepted only UN and
not “unilateral” sanctions, India has lost its moral leverage. Unlike China, it chose to reduce its oil
intake from Iran and entered into negotiations for alternative fuel supplies from Iran’s rivals in the
Gulf. This could, in turn, impact Delhi-Tehran ties in the long run.
 Meanwhile, India will have to keep engaging the U.S. in order to secure further waivers, both in this
case and for CAATSA-related U.S. sanctions on Iran, Russia and North Korea.
Joint Comprehensive Plan of Action (JCPOA)
Background
 The United Nations Security Council imposed sanctions on Iran for its nuclear program
 beginning in 2006, banning the import of nuclear-related materials and freezing the assets of
individuals and companies related to Iranian programs.
 Those sanctions were added to in 2007 and 2008 imposing an arms embargo and travel
restrictions on sanctioned persons.
 UN Security Council Resolution described that Iran could not participate in any activities related
to ballistic missiles; banned all countries from providing military vehicles, aircraft or missiles to
Iran and froze funds to Iran's Islamic Revolutionary Guards Corps.
The Iran Nuclear Deal
 On July 14, 2015 the P5+1 (China, France, Germany, Russia, the United Kingdom and the
United States), the European Union (EU) and Iran reached a Joint Comprehensive Plan of
Action (JCPOA) to ensure that Iran’s nuclear program will be exclusively peaceful.
 After the International Atomic Energy Agency (IAEA) verification that Iran was meeting its
nuclear commitments, the United States and the EU have lifted nuclear-related sanctions on
Iran.
 In the deal, Iran reaffirmed that under no circumstances will Iran ever seek, develop or acquire
any nuclear weapons.
 The JCPOA produced the comprehensive lifting of all UN Security Council sanctions as well as
multilateral and national sanctions related to Iran’s nuclear programme including steps on
access in areas of trade, technology, finance and energy.
 The successful implementation of the JCPOA enabled Iran to fully enjoy its right to nuclear
energy for peaceful purposes under the relevant articles of the nuclear Non-Proliferation Treaty
(NPT) in line with its obligations therein and the Iranian nuclear programme will be treated in the
same manner as that of any other non-nuclear weapon state party to the NPT.
 The International Atomic Energy Agency (IAEA) has been requested to monitor and verify the
voluntary nuclear-related measures and to provide regular updates to the Board of Governors.
 According to the agreement the P5+1 and Iran would meet at the ministerial level every 2 years
or earlier if needed in order to review and assess progress and to adopt appropriate decisions
by consensus.
 The deal ensured that Iran would abide by its voluntary commitments as expressed in its own
long-term enrichment and enrichment R&D plan described in the declaration.
 A dispute resolution mechanism was also established as per the agreement. If Iran believed
that any or all of the P5+1 were not meeting their commitments under the JCPOA, Iran could
refer the issue to the Joint Commission for resolution and vice-versa the P5+1 could do the
same.
 The deal aimed to stop Iran from acquiring a nuclear weapon. In practical terms it puts limits on
many of Iran's nuclear programs. For example: Iran has agreed to turn its Fordow facility into
a research center where Iranian and world scientists will work side by side.
 Under the deal Iran has also agreed to rebuild its Arak heavy-water reactor which is currently
the only site in Iran capable of starting production on weapons-grade plutonium.
 The deal allowed Iran to continue doing Uranium enrichment at its Natanz facility but the
country would only be allowed to enrich uranium to no more than 3.67 percent which is enough
for civilian purposes such as power plants but is much lower than what's needed for a weapon.
 Any violation of the agreement would lead to the re-sanctioning on the Iran and Iran must
have to comply with the provisions of the agreement.
The Fallout
 In May 2018, US President Donald Trump had announced that the United States will
withdraw from the Iran nuclear deal.
 The deal was agreed between Iran and the five permanent members of the UN Security
Council - the US, UK, France, China and Russia - plus Germany.
 The basic gist of the deal was that the sanctions would be lifted in exchange for Iran
agreeing to several serious restrictions on its nuclear development. Among the most
important, the deal called for:
o Reducing Iran’s stockpile of enriched uranium by 97 percent, and banning them from
possessing any uranium potent enough that it could be used to fuel a bomb
o Capping its number of nuclear centrifuges, devices used to enrich uranium, at
roughly 5,000 — and only permitting it to use old, outdated, and slow centrifuges
o Stopping Iran from operating its Arak facility used to make plutonium that could fuel
a bomb
o Permitting wide-ranging and intrusive IAEA inspections designed to verify that Iran
isn’t cheating on any portion of the deal
 These provisions, taken together, make it functionally impossible for Iran to acquire a
nuclear weapon so long as they are in place. And the IAEA has repeatedly confirmed that
Iran is complying with all of its obligations under the deal.
Analysis
 American withdrawal does not mean the deal is immediately dead. Technically, the nuclear deal
is an agreement between Iran and the P5+1 (the US, Britain, France, Russia, China, and
Germany) — which means the US leaving the agreement doesn’t end it. If the rest of the P5+1
keep their sanctions off, Iran may decide to continue to adhere to the deal’s restrictions even
after the US pullout.
 The decision was met with regret and dismay across the world. France, Germany and the UK
have said they "regret" the American decision. EU has announced that it was "determined to
preserve" the deal. Although Israel and Saudi Arabia have supported the supported this move.
 Iranian President Hassan Rouhani reiterated that Tehran would remain committed to its 2015
nuclear deal if its interests can be protected.
 Two more signatories of the JCPOA, Russia and China, have indicated they will honour the
deal despite the US pull-out.
 At a time when leaders all over the world are rooting for diplomacy with North Korea to
succeed, walking away from the JCPOA risks losing a deal with the North Koreans.
Implications For India
 The impact of America’s decision to withdraw from the nuclear deal for India’s oil imports and
business interests remains both imminent and unclear. Uncertainty however, stems from the
question of what the other JCPOA signatories decide to do next.
 In many ways, this hinges on whether or not the European leaders have the political will and
means to uphold the accord. This is also of particular importance to India for it has been paying
its oil dues to Iran in euros and uses European banking channels.
 If the European leaders decide to follow and give in to the US’ directive to comply with their
regime of sanctions, this will have ramifications for maritime trade with Iran. Ship insurance was
a critical hurdle when sanctions were previously imposed on Iran. It will significantly impact the
state-run Shipping Corporation of India, the largest tanker owner in India, which relied on
European insurers.
 With India having committed US$500 million (S$671.4 million) to Iran’s Chabahar port project
as well as stating that it would fund the US$1.6 billion (S$2.15 billion) rail link between
 Chabahar and Zahedan, stretching to Iran’s north-western border, India has major strategic
investments at stake.
 Aimed at enhancing regional connectivity through a trilateral transit arrangement with
Afghanistan, Iran is also crucial to India’s involvement in the International North-South Transit
Corridor which links West Asia to Central Asia and on to Europe.
 Aside from already having investments, India cannot afford to withdraw from its commitments
and risk becoming sidelined in favour of other regional players.
 Furthermore, were the nuclear deal to completely collapse, the sanctions would be American-
led and not the result of a unanimous UNSC resolution, as was the case before. This would
mean a greater moral dilemma for India which would have to decide whether or not to comply
with an American/Western-led initiative.
4. IRAN- SAUDI ARABIA CONFLICT
The struggle between Riyadh and Tehran for political and religious influence is decades old and has
geopolitical implications that extend far beyond the placid waters of the Gulf and encompass nearly
every major conflict zone in the Middle East.
Reasons For Conflict
I. Sectarianism: Saudi Arabia is a Sunni majority country while Iran is a Shia majority country. After
the death of Prophet Mohammad his followers split over who is his rightful heir. This dispute led to
the animosity between Iran and Saudi Arabia.
The Split
o A schism emerged after the death of the Prophet Muhammad in 632. He died without appointing a
successor to lead the Muslim community, and disputes arose over who should shepherd the new
and rapidly growing faith.
o Some believed that a new leader should be chosen by consensus; others thought that only the
prophet’s descendants should become caliph.The title passed to a trusted aide, Abu Bakr, though
some thought it should have gone to Ali, the Prophet’s cousin and son-in-law. Ali eventually did
become caliph after Abu Bakr’s two successors were assassinated.
o After Ali also was assassinated, his martyrdom became a central tenet to those who believed that
Ali should have succeeded the Prophet. (It is mourned every year during the month of Muharram).
The followers became known as Shias, a contraction of the phrase Shiat Ali, or followers of Ali.
o The Sunnis, however, regard the first three caliphs before Ali as rightly guided and themselves as
the true adherents to the Sunnah, or the Prophet’s tradition. Sunni rulers embarked on sweeping
conquests that extended the caliphate into North Africa and Europe. The last caliphate ended with
the fall of the Ottoman Empire after World War-I.
II. Power Struggle in the Middle East Region And Beyond: The countries have been competing to
promote their own version of Islam. Iran is allied with the Hezbollah in Lebanaon, Syria’s Alawite
Shia President Bashar al Assad and Shia militants in Iraq. Saudi supports Wahabism worldwide.
III. 1980’s Tensions: The 1979 Islamic Revolution aggravated the competition for the leadership of the
Muslim world. During the 1980-88 Iran-Iraq war, Saudi Arabia and its allies backed Saddam
Hussein against revolutionary Iran.
Current Scenario
 Iran and Saudi are the two sides of the wars in Syria and Yemen
 Saudi is insecure about Iran’s nuclear deal with the Western countries and its economic expansion.
 World’s dependence on Saudi oil and shale gas production boom in U.S. A. enhances the Saudi’s
insecurity.
 Saudi regimes’ adherence to orthodox Wahabism fuelling global Islamic terrorism.
 Iran’s decision not to send its pilgrims to this year’s Haj marks further straining of relations.
India’s Interests
 India is dependent on both the countries for its economic, energy and strategic interests.
 India has successfully maintained an active Middle East presence. India has also been careful to
hedge its bets. A trip by Indian Foreign Minister Sushma Swaraj to Iran on April 16 could be
interpreted as an effort to both strengthen ties with Iran and balance Modi’s trip to Riyadh.
 There are 7.3 million non-resident Indians in the Middle East, 2.8 million of them working in Saudi
Arabia and remitting over $36 billion to India in 2015. Saudi Arabia is India’s principal oil supplier.
 Saudi-Iran tension and its impact in Yemen have forced India to evacuate thousands of its citizens
from Yemen.
 India’s relations with Iran were on a pause. Since upliftment of economic sanctions on Iran, India
has renewed its engagements vigorously.
 Therefore, it is in India’s interest to maintain an effective balance between the two countries.

5. IRAN-US ANIMOSITY
Why This Bitterness
The Iranian influence in this very arena of enormous geopolitical importance has grown substantially
since the Americans invaded Iraq.
I. The Iranians are influential among the sizeable Hazara and Tajik communities in
Afghanistan. For the landlocked Afghanistan, Iran is vital for its economic sustenance as trade
corridors open across the Iranian mainland towards the warm waters of the Persian Gulf and the
Sea of Oman.
II. Apart from Afghanistan, Iran is arguably the most influential external player in Iraq, Syria and
Lebanon. Iraq, which borders Iran, Jordan, Syria, Turkey, Saudi Arabia and Kuwait, holds the
world’s third largest proven deposits of oil. The danger posed by Israel has powerfully bonded
the Lebanese Hizbollah, the Palestinian Hamas and Syria with Iran.
III. The American influence has been declining in the strategic arc stretching from the Hindukush
mountains in Afghanistan to the Mediterranean Sea in Lebanon. The area is part of the
world’s energy heartland.
IV. A nuclear Iran is feared as:
a) It will become a mighty counterweight to Israel.
b) Once a nuclear power and hence insulated from military attack, it would be unrestrained to
tamper at will with the flow of international energy through “Straits of Hormuz”.
c) It would encourage Iran’s rival like S.Arabia, Egypt etc to acquire the atomic weapons and
thus spur proliferation.
Way Forward
Given its profound vulnerabilities, the U.S. needs Iran badly to stabilise both Iraq and Afghanistan. The
election of Hassan Rouhani — who headed the Islamic Republic’s Supreme National Security Council
for 16 years and was Tehran’s chief nuclear negotiator with the West for much of that period —
presents Washington with an opportunity, for Mr. Rouhani understands the U.S.-Iranian diplomatic
agenda in an existential, granular way. If, though, the Trump administration wants to engage Rouhani
 administration effectively, and to put the U.S.-Iranian relations on a more positive trajectory, it will need
to overhaul U.S. policy in 5 fundamental ways:
I. Washington must accept the Islamic Republic as an enduring political entity representing
legitimate national interests. Virtually since the Islamic Republic’s creation out of the Iranian
Revolution, American elites have declared it is an illegitimate order. In reality, the Islamic Republic
is a legitimate order for most Iranians living in Iran. Despite decades of military, clandestine, and
international economic pressure, it has achieved more progressive developmental outcomes —
e.g., in alleviating poverty, delivering health care, expanding educational access, and (yes)
improving opportunities for women — than the Shah’s regime ever did, and has done better in
these areas than its neighbours (including U.S. allies like Saudi Arabia and Turkey). Among other
things, acceptance would mean calling off the “dirty war” America is conducting against the Islamic
Republic — including economic warfare against civilians, cyber-attacks, and support for groups
doing things inside Iran that Washington elsewhere condemns as “terrorism.
When President Richard Nixon took office in 1969, believing it was strategically vital for
America to realign relations with the China, he ordered the CIA to stand down from covert
operations in Tibet, and ordered the Seventh Fleet to stop aggressive patrolling in the Taiwan Strait.
Nixon did these things so that when he reached out diplomatically to the Chinese leadership, it
would know he was serious. The Iranian leadership needs to see comparable steps from President
Obama, rather than the farce of Mr. Obama’s “dual track” policy.
II. Washington must deal with the Islamic Republic as a system, and stop trying to play Iran’s public
against its government. On a positive note, the White House press statement about the Iranian
presidential election refers to Iran by its official name — “Islamic Republic,” something the Obama
administration has refused to do since 2009. But the statement does not congratulate Mr. Rouhani;
it congratulates the Iranian people “for their participation in the political process, and their courage
in making their voices heard … against the backdrop of a lack of transparency, censorship etc.
III. Washington should stop looking for “Iranian moderates” who, by U.S. definition, are moderate only
because American officials believe they might be willing to subordinate some of Iran’s sovereign
prerogatives for more economic ties to the West. The Clinton administration tried working around
Ayatollah Khamenei and dealing only with reformist President Mohammad Khatami during Mr.
Khatami’s first term. A decade later, the Obama administration tried working around President
Ahmadinejad and dealing directly with Mr. Khamenei. Every time, the tactic has failed. The Islamic
Republic was designed to encompass multiple, competitive power centres — e.g., the Supreme
Leader, the presidency, parliament. As Leader, Mr. Khamenei has allowed three Presidents — Ali
Akbar Hashemi Rafsanjani, Mohammad Khatami, and Ahmadinejad — to pursue very different,
self-defined agendas, but has also restrained them when he judged their agendas might weaken
the Islamic Republic’s identity.
Washington does not help its cause by trying to manipulate one power centre against another.
In Tehran, deciding to realign relations with America will take a consensus — a consensus
encompassing both Leader and President.
IV. Washington must recognise Iran’s legal right, as a sovereign state and as a party to the Nuclear
Non-Proliferation Treaty, to enrich uranium under international safeguards. There is a strong
consensus in Iran — cutting across the factional spectrum, ratified by Ayatollah Khamenei, and
supported by public opinion — that the Islamic Republic should not surrender its nuclear rights.
V. Washington must stop cooperating with Saudi Arabia and others to spread violent, al Qaeda-
like Sunni extremism across the Middle East as part of an ill-conceived strategy for containing Iran.
This strategy is currently on display in Syria, where, from the onset of unrest in 2011, the Obama
administration has sought to use an opposition increasingly manned and supported by foreigners to
overthrow the Assad government and damage Tehran’s position.
“If it wants to negotiate productively with Iran, the U.S. needs to accept the reality that the Islamic
Republic is a political entity that represents legitimate national interests”.