Why India Is Quietly Befriending Iran

India is quietly befriending Iran. This is a significant development in the context of the present state of affairs in the Middle East. The relationship between the two countries has witnessed a recent increase in high-level exchanges, with India looking to ensure its energy security and develop new trade routes. But tensions 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 sub-continent’s energy security.

Diplomatic engagements between Tehran and New Delhi saw a discernible resurgence following the US troop withdrawal from Afghanistan and have increased further in recent months as Iranian proxies target Western maritime traffic in the Red Sea. This suggests that India views Iran as a necessary regional security ally. But tensions 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 trade partners and bilateral trade can be expected to increase following Iran’s inclusion in the Shanghai Cooperation Organization (SCO) and an 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 the 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 benefits 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 optimize trade between India, Russia, and the economies of Eurasia, the INSTC could eventually span some 7,200km and offer an estimated eight-fold increase in trade turnover. The INSTC intends to by-pass 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 in close proximity to 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 are 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 like 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 United States. A good example can be seen in India’s initial reluctance to criticise Israel’s bombing campaign in Gaza, before shifting their 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 the Indian Foreign Minister, Dr Subrahmanyam Jaishankar, has paid state visits to both 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 benefitted China. India was the second-largest consumer of Iranian oil after China in 2018, importing approximately 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 benefitted US energy firms and arms manufacturers.

China and Iran subsequently signed a 25-year pact to deepen their strategic partnership. Under the agreement, China plans to invest USD 400 billion in Iran, receiving Iranian energy exports in return. China intends to develop transport infrastructure between Iran and its neighbours like 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 concerns, New Delhi has stepped up diplomatic efforts to strengthen its own ties with Tehran. Following Iranian air strikes in Pakistan's Balochistan province earlier this year, the Indian Foreign Ministry publicly stated that Iran’s attack was in ‘self-defence’, an open expression of support for Tehran. Additionally, the two states have called for activating a rial-rupee mechanism to by-pass the US dollar in mutual trade. This signals India's willingness to cooperate with Iran in the financial sphere despite the risk of US sanctions.

While tensions between Iran and the US have impacted 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.