External Affairs

Modi flies to Iran to Wrap up Pacts on Connectivity and Energy

The Prime Minister will have to make a finely-balanced foray into a sharply polarized region

Prime Minister Narendra Modi with Iranian President Hassan Rouhani during their meeting in Ufa. Credit: PTI

Prime Minister Narendra Modi with Iranian President Hassan Rouhani during their meeting in Ufa. Credit: PTI

New Delhi: On Monday, the leadership of India, Iran and Afghanistan will get together to finally operationalise the much-anticipated Chabahar agreement. Beyond the geo-strategic agenda, Prime Minister Narendra Modi’s two-day visit will also bring back Iran as an important actor in India’s energy security, finding solutions to clogged banking channels and untapping the Farzad-B gas field.

Modi’s visit to Iran on May 22-23 comes as part of a visible push by the Indian government to expand its presence in volatile West Asia. It began with a trip to Saudi Arabia in April and will continue with a Qatari sojourn on June 4-5.

Modi will have to make a finely-balanced foray into a sharply polarized region, but extremely vital for India’s security and energy interests.

The last visit by an Indian Prime Minister to Iran was by Manmohan Singh in 2012 to attend the Non-Aligned Movement summit.

Modi and Rouhan met for the first time on the sidelines of Shanghai Cooperation Organisation summit in Ufa on July 9 last year, which provided the “broad roadmap” for taking forward relations. Since then, there have been half-a-dozen ministerial visits from both sides to keep up the momentum.

After arrival in Iran on Sunday, the substantive day for the visit will be May 23 – when Modi will call on Supreme Leader Grand Ayatollah Sayyid Ali Hosseini Khamenei and hold formal discussions with President Hassan Rouhani, who will host a lunch in his honour.

“Prime Minister’s visit to Iran will impart a timely impetus to the ongoing efforts of the two countries and their business entities to expand bilateral cooperation and mutually benefit from new opportunities in the wake of lifting of secondary sanctions against Iran earlier this year,” said MEA’s joint secretary (Pakistan-Afghanistan-Iran), Gopal Baglay, briefing reporters on Friday.

He added that deliberations between Modi and Rouhani will “guide preparation of a roadmap” to “cement our close civilisational ties in the contemporary context, on the basis of shared interests”.

While the bilateral agreements will be inked after the talks, a separate function will be organized for the signing of the Chabahar trilateral agreement. The final draft was only finalized a month ago at a meeting in Delhi.

Transit trade

Afghan President Ashraf Ghani will be flying down from Kabul to specially witness the ceremony, which has immense significance for the war-torn country – which has so far been dependent on Pakistan for most of its transit trade.

“The trilateral Agreement using Chabahar-Zahedan-Zaranj as a corridor will be a game-changer for regional connectivity, especially for Afghanistan to find an assured and reliable alternative access to India via sea. The route will also significantly enhance prospects for India’s connectivity with Afghanistan, Central Asia and beyond through synergies with other initiatives such as North South Transport Corridor,” he added.

Minister of Road, Transport and Highways Nitin Gadkari, who has been to Iran earlier to fine-tune Chabahar pacts last year, will be accompanying Modi to sign the agreements.

The commercial contract between Indian Ports Global private limited and Iran’s Arya Banader will be signed to develop two terminals and five berths in the first phase of Chabahar port. India plans an investment of $200 million, out of which $150 million will be funded through a line of credit of Exim Bank, Baglay informed. The loan agreement by EXIM bank is among the slew of pacts to be signed after Modi-Rouhani talks.

The senior Indian diplomat noted that there was “interest in Indian public and private sector to invest in Chabahar Free Trade Zone, as also in railway projects in Iran”.

Asked about whether India will work with Japan who have expressed interest in developing Chabahar, Baglay said that it will depend on the “comfort level” of all partners, especially Iran as the host country.

Energy partnership

The energy partnership is expected to get a fillip, with India in a long time having the advantage in a low-price oil market against tough Iranian negotiators. From 17 percent in 2007-8, Iranian oil’s share in the Indian crude basket had come down to 6 percent last year.

In April, oil imports from Iran to India increased by over 48 percent year-to-year, reported Reuters. This was mainly due to Reliance restarting its crude purchase from Iran after a gap of six years.

Of course, both countries will also have to resolve the payment issue, with Indian refiners owing $6.5 billion to Iran. In February, a delegation from the Iran’s central bank met with their counterparts in Reserve Bank of India.

Baglay said that while there was understanding on terms of repayment, “the only question was to find effective banking channel”. Despite the JCPOA being in force, Iran is finding that the doors of the world’s financial institutions are still rather firmly shut.

“We are hopeful that in the very near future, we will be able to effective banking procedure,” said the Indian official, adding that this will be part of the bilateral talks.

On the development of Farzad B gas field discovered by ONGC in 2008, “discussions have moved towards commercial conclusion and financial closure”, he added. Iran had agreed not to put Farzad-B on the auction block. “Progress on Farzad B will elevate further India’s energy partnership with Iran beyond a buyer-seller relationship,” said Baglay.The overseas wing of India’s state oil producer had submitted a development plan of $3 billion for Farzad-B, which apparently as 12.5 trillion cubic feet of gas.

With Afghanistan’s security situation continuing to deteriorate and West Asian disputes from Israel-Palestine to Syria/ISIS still festering, both leaders will have plenty of subjects to exchange notes. One item, they may however skip is the case of the Indian national Kulbushan Yadav, who, Islamabad alleges, used a small business at Chabahar port as a cover for spying activities in Pakistan.

Besides, sidelights of Modi’s visit will be a visit to Gurdwara in Tehran and inaugurating an international conference on Iran-India historical ties. At the conference, he will release a rare manuscript of the Persian translation of Panchatantra which led to the spread of the ancient Indian animal tales to west, where they gained currency as Aesop’s Fables.

  • Sedi

    MoU between IRCON and Construction, Development of Transport and Infrastructure Company (CDTIC) of Iran.

    It was a very good move by our PM Modi and our govt. But it seems that this project has also been delayed due to our slow bureaucracy. As this MOU was signed by IRCON in presence of PM Modi, it was assumed that it would be taken up on priority basis. This MOU was very important for India due to its strategic impacts. This rail project would give India presence in the border area’s of Afghanistan and Pakistan. This rail line would also provide India transit corridor to Afghanistan and Central Asia. But sadly the 4 months period is soon going to finish and India has not yet started its work on this project. After September (4 months period), Iranian govt was free to cancel the MOU signed, if any progress was not done by Indian govt. If anything is not done soon to start the project, Iran would be free to give this rail project to other interested countries.
    I request Mr Modi and his govt to look into this matter and start the bureaucratic process on urgent basis in order to avoid losing this project.

  • Sedi

    MoU between IRCON and Construction, Development of Transport and Infrastructure Company (CDTIC) of Iran.

    It was a very good move by our PM Modi and our govt. But it seems that this project has also been delayed due to our slow bureaucracy. As this MOU was signed by IRCON in presence of PM Modi, it was assumed that it would be taken up on priority basis. This MOU was very important for India due to its strategic impacts. This rail project would give India presence in the border area’s of Afghanistan and Pakistan. This rail line would also provide India transit corridor to Afghanistan and Central Asia. But sadly the 4 months period is soon going to finish and India has not yet started its work on this project. After September (4 months period), Iranian govt was free to cancel the MOU signed, if any progress was not done by Indian govt. If anything is not done soon to start the project, Iran would be free to give this rail project to other interested countries.
    I request Mr Modi and his govt to look into this matter and start the bureaucratic process on urgent basis in order to avoid losing this project.