Business and Geopolitics: Iran’s New Asian Course
Eleonora Ardemagni 16 June 2016

The signing of the Iran-India-Afghanistan agreement on May 23rd, as well as a Memorandum of Understanding between Tehran and New Delhi, are signs of Iran’s new (and also old) Asian game. On the other hand, Hassan Rouhani is gambling everything on the revitalisation of the Iranian economy, weakened by years of isolation. It will be essential for the president to attract investments from the East even before those from a West still debilitated by (the consequences of?) a long economic crisis.

For Tehran, strengthening a strategic partnership with New Delhi means both (re)creating a network of alliances in Asia and competing with its Saudi ally. Over the years, partial American disengagement from the Gulf has accelerated the diversification of Saudi Arabia and its allied monarchies’ international alliances. China and India have been the cornerstones of this still ongoing operation, favoured by the Asian giants’ energy needs. And India has also become crucial, because while China’s economic slowdown has to a certain extent reduced Beijing’s hydrocarbon imports, New Delhi’s GDP for 2015 was 7.5%. Until 2012, Iran was India’s second  supplier of oil and now wants to play a significant role on the Indian market, not only as far as oil is concerned, but also in the infrastructure development sector (such as negotiations for the underwater gas pipeline between Iran, Oman and India) as well as trade opportunities.

In relations between Iran and India, Afghanistan plays an increasingly important role in spite of the fact that Kabul is far from peaceful. In perspective, New Delhi will play a leading role in the stabilisation of the country. India has, in fact, invested significantly, in an anti-Pakistan mode, in Afghanistan’s reconstruction (for example, the seat of parliament is a project financed by India), but also in training programmes for local security forces. The tripartite agreement signed in Tehran by Hassan Rouhani (Iran), Narendra Modi (India) and Ashraf Ghani (Afghanistan) offers Kabul a new trade route capable of circumnavigating Pakistan, converging, in both Iran and India’s interest, on the Chabahar Port (in the Sistan Baluchistan region of the Islamic Republic), between the Gulf of Oman and the Arabian Sea. According to this agreement, India will invest $200 million on the development of the port in Chabahar (also open to other investors), that will therefore become an infrastructural hub between the Gulf and Asia. This project also envisages the creation of a trade corridor linking Chabahar to the heart of southern Asia, passing through the western Afghan cities of Zaranj (on the Iranian border) and Delaram, already joined by an Indian-built motorway. Afghanistan is rich in currently still unexplored mineral resources, among them iron and copper deposits.

The development of the port in Chabahar, in the works for decades, is in direct competition with the nearby port of Gwadar, in the Pakistani district of Makran (Baluchistan), a project in which China has invested a great deal, so much so that the China-Pakistan Economic Corridor should go all the way to the Pakistani port. In addition to Gwadar – the most glaring example – the transformation of Chabahar into a hub for maritime trade in the Arabian Sea could also impact the large ports of the Gulf monarchies, such as the UAE’s Jebel Ali (Dubai) and Oman-owned al-Duqm. Considering the volume of commercial traffic in this quadrant of sea between Africa, the Middle East and Asia, various maritime hubs could coexist. Through this project and intensified relations with Iran, India aims to win a place for itself on central Asian markets, currently a prerogative of Turkey and Russia.

There are however some states that observe with displeasure the Iran-India-Afghanistan agreement and there are at least three, Pakistan, China and Saudi Arabia. Islamabad sees itself excluded from a project of regional importance that instead includes Afghanistan, but can only hope for good neighbourly relations with Iran, especially as far as energy infrastructures, water resources and border security are concerned. Not even Rouhani’s visit to Pakistan last March seems to have unblocked the construction of a gas pipeline expected to transport Iranian gas to Pakistan (Islamabad has not yet built its stretch of the pipeline). There is excessive external pressure applied, primarily by Saudi Arabia and China.

Among the BRICS, China and India are powers that are direct rivals. In addition to the potential competition between Chabahar and Gwadar, Beijing is seeing India’s geopolitical manoeuvring. “Connectivity”, hence the creation of infrastructure, links as well as the creation of institutions, is the new Indian mantra. New Delhi is in fact trying to create an interregional trade route as an alternative to the “New Silk Road” (One road, One belt), also in the Middle East, planned by Xi Jingping’s China. In both cases, the Gulf is the pivot of all expansion strategies, be they commercial or influential. Observing the Chinese initiatives, India is, however, beginning to question the growing link between interconnection and geopolitics; this because even a trade development strategy – if outlined unilaterally instead of cooperatively – can result in rivalries and new instability instead of shared prosperity.

And then there is Riyadh and the entire area of the Gulf Cooperation Council, which in recent years has fortified economic relations with India. Narendra Modi has made two important visits, one to the United Arab Emirates (in August 2015) and the other to Saudi Arabia (in April 2016). Saudis and Emiratis are increasing their initially only financial interdependency with New Delhi to less usual sectors such as defence and nuclear energy. India is relying on the diversification of energy supplies; its national energy security depends on hydrocarbon imports. Thus the traditional Indian non-interference policy is nowadays described as cooperative equidistance between the Gulf’s two rival shores.

Cooperation between Iran, India and Afghanistan therefore presents many opportunities and just as many obstacles. Regardless of the fate of Chabahar, the agreement signed is not for the moment destined to change regional power relations (much will depend on Afghanistan’s destiny), but it marks Iran’s public return to the Asian geopolitical game, indicating a trend for the future. In its strategic planning, Tehran will increasingly look to the East as an escape route that is also a financial one, when compared to Middle Eastern instability.

In spite of the many unresolved issues and chronic territorial instability, trade and energy remain the best vectors of alliances between states and therefore of politics itself.

Tranlsated by Francesca Simmons