Iranian President Hassan Rouhani on December 3, 2017, after inaugurating the first phase of the Chabahar Port. India has since been dropped from the rail link project. Photo: AFP

After a decade of negotiations, India has lost the ONGC Videsh–discovered Farzad-B gas field in the Persian Gulf after Iran awarded a contract for its development to a local company. The National Iranian Oil Company signed a US$1.7 billion deal to bring Farzad-B to production with its subsidiary Petropars.

This is the second major Indian project in Iran that has been shelved. Last year, Iran dropped India from the Chabahar railway link project, which Tehran decided to develop on its own.

The commercial relations between India and Iran have been on a downward trend since the imposition of heavy sanctions by former US president Donald Trump. Beyond simply affecting the bilateral relationship, the dynamics of India-US-Iran relations will have critical implications for Afghanistan after the US troop withdrawal President Joe Biden has announced for September 11 this year.

Even though the US State Department was convinced that the Joint Comprehensive Plan of Action (JCPOA) was effective in limiting Iran’s nuclear program, Trump unilaterally revoked the deal, reinstating harsh sanctions. Subsequently, India was made to choose between continuing business with Iran and enhancing strategic relations with the US.

This led New Delhi to re-examine its relationship with its West Asian neighbor. India then decided it had no choice but to stop importing oil from Iran in mid-2019.

Another issue that came up was India’s interest in developing the strategic Chabahar Port. Despite obtaining a waiver from the US on the project, India has not been able to make much progress.

While the Indian government has been enthusiastic about pushing the project through, the private sector has been unwilling to take the risk of investing in the infrastructure development there because of uncertainty over US sanctions. 

These factors have led to the degradation of India-Iran relations, which has facilitated the grand entry of China.

During the confirmation hearing of now US Secretary of State Antony Blinken, he was reported to have said that the new administration would engage with Israel and the Arab states before reviving the JCPOA. Biden has also indicated willingness to revive the deal if Tehran agrees to comply with certain provisions.

This is welcome news for India, as it is now gearing toward the possibility of resuming its oil imports from Iran and fast-tracking the long-delayed Chabahar Port project.

Impact on wider region

The way the US will deal with Iran has major implications not only for India, but also for the peace of the South Asian region. In particular, the decision of the US to pull out from Afghanistan in September may create a vacuum for more instability in the country given the constant clashes between the Taliban and the civilian government.

Though India has been given a voice in the peace talks, the question lies on its ability to shape the political landscape between the parties involved. There is a lack of constructive and official engagement between New Delhi and the Taliban compared with those by China and Pakistan. This will inevitably lead to India being sidelined in Afghanistan affairs.

Iran, however, has managed to cultivate relatively good relations with both the civilian government of Afghanistan and the Taliban. Though Iran’s engagement with the Taliban was not always cordial, recent shifts have indicated a more accommodating position.

In late January, a Taliban delegation paid a visit to Tehran and was received by senior Iranian officials. They reportedly discussed the need to ensure stability in Afghanistan and the entire region.

However, it is important to note that the Iranian Foreign Ministry stated that the government of Afghanistan was notified in advance of the trip. It was confirmed by Kabul that Iran sought the Afghan government’s views in advance.

It is also significant to point out that India and Iran converge in their views regarding Afghanistan after a US withdrawal. India and Iran have jointly opposed the potential return of the Islamic Emirate in Afghanistan, which refers to the totalitarian regime established by the Taliban in 1996. This indicates that both countries seek to keep the Taliban in check.

In addition, expediting the development of the Chabahar Port will enhance Afghanistan’s economy, which is a major prerequisite for its stability.  

As a result, it is important for India and Iran to deepen their strategic engagement not only to enhance bilateral ties but to secure the stability and peace of Afghanistan and the region.

The US must realize that regional cooperation may be the only way to achieve peace in Afghanistan. Moreover, India and Iran can both play important roles. Therefore, it will be crucial to develop a more conducive environment for cooperation between those two countries.

Don McLain Gill

Don McLain Gill is a resident fellow at the Manila-based International Development and Security Cooperation (IDSC) and the director for South Asia and Southeast Asia at the Philippine-Middle East Studies Association (PMESA). He is also a geopolitical analyst and an author.