Here's What Narendra Modi's Trip to Tehran Means for India, Iran and Afghanistan
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Here's What Narendra Modi's Trip to Tehran Means for India, Iran and Afghanistan
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President of Afghanistan Ashraf Ghani (R), Prime Minister of India Narendra Modi (L) and President of Iran Hassan Rouhani (C) shake hands after they signed Chabahar transit agreement in Tehran, Iran on May 23, 2016. (Photo by Pool / Iran Presidency/Anadolu Agency/Getty Images)
This has been the week of Asian pivots, where world leaders bury old animosities with state visits—and get to sign big business deals while they are doing so.
No, we are not talking about President Obama’s historic visit to Hanoi, where he announced the U.S. is ending the 41-year U.S. arms embargo against Vietnam, and also oversaw new business deals worth about $16 billion.
Instead, in a more fraught part of the continent, three leaders—Iran’s President Hassan Rouhani, Indian Prime Minister Narendra Modi, and Afghan President Ashraf Ghani—signed a flurry of deals in Tehran on Monday, aimed at reworking political obstacles that have hobbled the region’s economies through years of war and economic boycotts.
In the most important deal by far,
Modi announced in Tehran on Monday that India would invest about $500 million building two terminals and five cargo berths at the Iranian seaport of Chabahar.
To Iran, the facility has long been an underused, underfunded resource that has languished through years of U.N. and Western sanctions. To India, it is a lot more: A precious sea outlet that bypasses its arch rival, Pakistan.
On Monday Rouhani said India’s relationship with Iran “starts with Chabahar today, but its end will be an all-out comprehensive development, and economic, cultural cooperation.”
This might sound disconnected from the nuclear deal the U.S. and Europe signed with Iran last July, after years of negotiations. But it is hardly unrelated.
Under the deal Iran is now free to export its most precious resource—its mammoth oil and gas reserves. And since most Western sanctions against Iran ended in January, Rouhani’s government has raced to boost its oil production, frantically trying to turn around its sanctions-hit economy. On Tuesday the International Energy Agency said Iran had pumped 3.6 million barrels of oil a day in April—a level it had last hit in 2011, before U.N. sanctions banned much of its output from world markets. Iran has vowed to defy production cuts proposed by OPEC members, arguing that after years of embargoes, it should be exempt from any such agreements.
That is good news to India—Iran’s biggest customer for its energy exports, after China—which needs a reliable flow of oil.
To Iranians, India appears to be as ideal a partner as they can hope for at the moment.
“It is one of the fastest growing countries and economies in the world at the moment, and we have no political problems, no dispute with them at all,” Saeed Laylaz, an Iranian political analyst and auto-industry executive, tells Fortune. “That situation is very rare at the moment in the world.”
U.S. sanctions remain in place, on the grounds that Iran violates human rights and supports terrorism. Hence, no Western banks have dared open for business in Iran, for fear of running foul of U.S. regulations. That has hampered big Western projects, and financial transactions with Iran remain hugely complicated.
India faces few such limitations, however. On Monday Indian officials said the country would pay back its $6.5 billion it owed to Iran, for oil imports, by using Turkey’s Halkbank—which now operates in Iran.
That, says Laylaz, is just the start of far bigger deals:
12 business agreements were signed during Modi’s visit to Tehran. “India is increasing its consumption of energy, and we can import a lot of goods and services, including high tech, from India,” he says. “Everyone in Tehran is counting on this relationship, and this visit.”
That relationship could be sealed in the port of Chabahar. Perched on the Gulf of Oman, the port provides a strategic outlet to the Persian Gulf and the Indian Ocean.
Just 43 miles east of Chabahar sits Pakistan’s port of Gwadar, which China has invested millions in developing. Brookings Institution fellow Tanvi Madan told CNBC on Monday that by investing in Chabahar’s port, India had “an eye on China as well, what China is doing not just in Pakistan… but also with countries in the Middle East.”
Chabahar is just one piece of India’s strategy in Iran, however.
Modi also agreed to spend about $1.6 billion building a rail link from Chabahar to Iran’s inland city of Zabehan. That will form part of a new transportation network that links not only Iran and India, but also Afghanistan—a country that’s also emerging from years of war and sanctions, and whose huge mineral resources are in need of investment and customers.
All that has brought a flush of optimism to Iranians, many of whom have been deeply disappointed by how few major Western investments have begun since sanctions ended four months ago.
For Rouhani, new business and an improved economy are crucial in showing Iranians that their concessions to the West under the nuclear deal was worth it. Rouhani faces a reelection vote next Spring, and hardliners who opposed nuclear deal are maneuvering to unseat him.
Without new investments, “The conservatives will go back and tell people, ‘you promised change, and we see nothing coming in,’” French-Iranian lawyer Adarvan Amir-Aslani told Fortune last month.
Although French President François Hollande and Italian Prime Minister Matteo Renzi have visited Tehran since, Iranians are not expecting a visit from their country’s old enemy, the U.S., any time soon.
“We have to solve a lot of mutual problems between Tehran and Washington, and after that maybe we can expect such a treat,” Laylaz says. “Obama is visiting Vietnam 40 years after the war. And we are only in the first year after the ‘war’ between Iran and the U.S. We need a lot more time.”
http://fortune.com/2016/05/24/narendra-modis-trip-to-tehran-means-for-india-iran-and-afghanistan/
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Iran surely needs all the investments it can get to justify nuke deal. It's a start and I think after oil prices recover a bit, they should be able get more money and it will also help justifying the nuke deal.
. The balance of payments was because Iran's bank accounts were frozen due to sanction, had nothing to do with India's willingness or ability to pay. But sure, continue living in delusion. And yeah, Definitely, let's see where things are at in 5 months. India wanted to build the Delaram Zaranj highway - its done. Afghan Parliament building? done. Just wait and watch. Biggest thing in favor of Chabahar is that it is in Afghanistan and Iran's self interest to see that project succeed. Its not dependent on Khairat from Uncle Cheen. You don't seem to understand how country-to-country projects progress at their own pace. But that's fine, haathi chale bazaar, kutte bhowke hazaar
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