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Why is India hesitant in its policy towards Iran?

 The slow progress on Iran policy can have long term strategic implications for India

With sweeping changes occurring in West Asia after the lifting of sanctions against Iran by the US on 16th January, Iran is all set to play a major role in the geopolitics of this region. But India’s Iran policy seems to stuck in stasis. In May 2015, the long standing Chabahar port deal was finalised with Iran. The port is slated to be operational by the end of 2016. This will link India with Afghanistan and Central Asia. Calling off the sanctions is a welcome opportunity to be seized.  All indications towards the end of 2015 pointed towards this development and India should have been ready. It seems the government did not think that sanctions would be lifted so soon.

In a speech delivered at the India International Centre, Delhi on 18th January, Mr Gholamreza Ansari, Iran’s ambassador to India said, “In the changed circumstances in West Asian region, India cannot follow a policy of patient waiting any more. I have often been advised to be patient on big India-Iran projects. Does India want to wait for centuries before capturing the right opportunities?” Iran had asked India to conclude the bilateral agreement quickly at the Joint Commission Meeting(JCM) on 28th December 2015.  The main hitch was amendment to ‘withholding tax’ with which India exempted crude payments to Iran, if it was done in Rupees. There was a sense of urgency for this to be done before lifting of the sanctions. With sanctions gone, the need no longer exists as payments will have to be done in dollars. During the sanctions regime, Iran could not trade in dollars. It is free to do so now. There are no barriers to trade. The Indian products like Basmati rice, soyameal, sugar, and pharmaceuticals will have to compete with other countries.

Lack of coordination between ministries is also affecting the important Chabahar project. Iran wanted a loan for developing the rail network from port. In spite of the ministry of external affairs stressing the urgency, the department of financial services and ministry of railways did not move with the desired speed for reasons unknown. As per the deal in May 2015, the contract was supposed to be signed by November last year. If the government does not have the money, could it not invite the private sector? If sufficient guarantees of security is given, then private players will be willing to get involved. After all, there are other projects in Iraq and Syria worth thousands of crores that would interest them. The government only needs to give a push to get this going. After all, Modi is known for his clinical efficiency to get things done.


Guru Aiyar is a Research Scholar at Takshashila Institution and tweets @guruaiyar

Featured image: Holy shrine of Abdulazim in Tehran by David Stanley, licensed by creativecommons.org

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