Modi’s visit to Tehran culminated with the signing of a major trade deal on May 23, one that will significantly increase flows of investment and goods between Iran, India and Afghanistan. The deal follows closely on the heels of talks with Kabul to increase investment in Iran’s Chabahar. However trade was not the only issue in the agenda. Indian and Iran signed additional Memorandums of Agreement (MoUs) that covered a wide range of cultural, intellectual and technological exchanges.
Marking this occasion, Modi said, "India and Iran have always been partners and friends. Our historical ties may have seen their share of ups and downs. But, throughout our partnership has remained a source of boundless strength for both of us" For India, Iran has historically been an important energy supplier, however deepening engagement between the two powers following the signing of the JCPOA signals India’s intent to increase its footprint in the region.
The Chabahar port gives India much-needed access to Afghanistan’s Ring Road. As Nitin Gadkari, Minister of Transport explained “The distance between Kandla and the Chabahar port is less than the distance between New Delhi and Mumbai, and so what this agreement does is to enable us quick movement of goods first to Iran and then onwards to Afghanistan and Russia through a new rail and road link” The proposed port development projects will add additional terminals and berths with cargo-handling capacity, as well as credit of $155 billion. With greater access and greater capacity, India will likely become an increasingly important economic influence in the region, especially with the relatively untapped markets of Central Asia.
China and Pakistan
India’s engagement with this region will likely not be met with much enthusiasm from Beijing or Islamabad. For the latter, India’s growing friendliness with Pakistan’s neighbors will be perceived as a direct security threat, especially since the move closely follows a pro-India tilt in Saudi Arabian foreign policy. China (whose Gwahar port is not very far from Chabahar), on the other hand, will now be facing greater economic competition from India in Asia. Strategically, India’s economic power will also give it greater leverage on security issues, should it choose to do so, an eventuality that both Beijing and Islamabad are not keen on.
India is currently the world's fourth-largest oil consumer after the United States, China and Japan, and set to overtake Japan within the next year. Growing energy demand is one of the biggest challenges India faces as its population and economy outpace what its existing energy reserves can sustain. The IEA predicts that by 2040, India will account for a quarter of the increase in global energy demand. India has keenly pursued multiple gas pipeline projects, such as TAPI and IPI, which feel through due to its unstable relations with Pakistan. Improving infrastructure and investment ties between itself, Iran and Afghanistan may culminate in the building of a pipeline that bypasses Pakistan entirely. An undersea pipeline along these lines is currently under discussion between India and Iran.
Persistent, deep engagement between India, Iran and Afghanistan will reap dividends beyond trilateral relations between these powers. It has repercussions for India’s relations with its extended neighborhood, and may well help secure India’s greater strategic interests in building and maintaining influence in the region.
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