Prime Minister Narendra Modi with Iran President Hassan Rouhani.

Prime Minister Narendra Modi with Iran President Hassan Rouhani.

May 22, 2016

When Indian Prime Minister Narendra Modi arrives in Tehran this weekend, he will find out whether it’s the beginning of a new era in bilateral ties – or a missed opportunity.

Delhi’s relations with Tehran are multi-faceted and complex. The two countries share centuries-old cultural and linguistic links. In modern times, the relationship is more economic and strategic.

Tehran was the second biggest supplier of crude oil to India until 2011-12. Iran is also strategically located in the Gulf, and it offers an alternative trade route to Afghanistan and to Central Asia.

India is home to the world’s second highest Shia population, next only to Iran. Iran’s influence over an estimated 45 million Shias in India is regarded as significant. With Iran emerging after international sanctions, it offers great investment opportunities to Indian companies.

But the bilateral ties suffered setbacks following international sanctions on Tehran over its nuclear programme. As successive Indian governments moved closer to the US, their Iran policy took a back seat, much to the displeasure of the Iranians.

Iranians were dismayed when India voted against their country at a vote in the International Atomic Energy Agency in 2009. Then India significantly reduced oil imports from Tehran following US pressure.

“That was a bitter lesson for the Iranians. They understood that India would not take Iran’s side on any dispute and India would not sacrifice its relations with the US and the West for Iran,” says Fatemeh Aman, an Iran-South Asia affairs analyst based in the US.

During his first two years at office, Mr Modi focused more on India’s immediate neighbourhood and Indian Ocean rim countries. Relations with the United States and the west were given a priority.

“There is very clear sense in India that he has to engage more with Muslim countries in the region, in the extended neighbourhood. Mr Modi has already been to Saudi Arabia, the UAE and planning to visit Qatar.

“The visit to Iran comes as part of the strategy,” says Rahul Roy-Chaudhury, Senior Fellow for South Asia at the International Institute of Strategic Studies in London.

When the international sanctions were in place, India could not pay for the oil it had imported from Iran. It still owes $6.5bn in unpaid dues and Delhi is still finding a way to facilitate the payment.

Western banks are still reluctant to do business with Iran when some of the US sanctions are still in place.

India is aware that China is making inroads into Iran to rebuild the economy devastated by the sanctions. The Chinese president, Xi Jinping, visited Iran in January this year to firm up business ties. Beijing is already Iran’s largest trading partner.


About Track Persia

Track Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.