The international context of Narendra Modi's Iran visit

It is the world's worst kept secret that China's chequebook diplomacy is giving the world a new definition of friends and foes. India has its task cut out

New Delhi has invested heavily in Prime Minister Narendra Modi’s Tehran visit but it is going to be equally closely tracked in three world capitals – Islamabad, Beijing and Riyadh.

What is the context?

Several political pundits in Delhi noted the reception Iranian President Hassan Rouhani got during his two-day visit toPakistan in March this year. It was the first visit by any Iranian head of state to Pakistan in 14 years. Sunni-dominated Pakistan has tended to side with Saudi Arabia rather than majority-Shia Iran in the two states’ long-running competition for regional influence.

Moreover, in the ongoing war in Afghanistan, Iran’s (covert) blessings to a section of Islamic militants in that country has complicated things for Pakistan in the past.

So for Pakistan, Rouhani’s visit was a sign of cautious political normalization. 

Initiatives between Pakistan and Iran are also crucially important in the context of the gradual lifting of US sanctions on Iran. During the Rouhani visit, Prime Minister Nawaz Sharif somewhat optimistically claimed that the two countries would grow annual trade volumes to $5 bn by 2021. Trade between Pakistan and Iran fell to $432 mn in 2010-11 from  $1.32bn in 2008-09, and reached a record low of USD 229mn in 2013-14 mainly because of sanctions. 

During the Rouhani visit, Iran committed to investing in a number of areas to develop Pakistan’s infrastructure including increasing Pakistan’s imports of electricity from Iran from the current 100 megawatts to 1000 megawatts, accelerating the pace of the Iran-Pakistan gas pipeline and importing iron and steel from Iran. 

Where Pakistan is, China is. Eventually, much of the infrastructure will service the $46 bn China-Pakistan Economic Corridor (CPEC). India is opposed to the CPEC because it runs through territory India claims belongs to it. On the other hand, the railroad that China wants to build between Iran and China could be extremely useful for India which could then leverage the creation of that infrastructure without spending a rupee itself.

It is the world’s worst kept secret that China’s chequebook diplomacy is giving the world a new definition of friends and foes. China is spending money it – possibly – does not have, to create infrastructure through the world, creating assets that it will then use diplomacy to protect. India cannot compete – it neither has the power, nor the money. Lofty pronouncements about how India does not believe in transactional relationships are all very well, but New Delhi has to create counterbalances.

Iran is one such counterbalance. In February this year, Iran’s former president Ali Akbar Hashemi Rafsanjani asked Tehran to expand special economic zones on the offshore islands of Kish and Oeshm to attract private investment. There was a time this would not even have been counternanced, let alone been possible. India believes it is best-positioned in the region to take advantage of this economic opportunity and others as Iran integrates more fully with the world, working off previous trade and investment ties – the automotive, pharma and heavy manufacturing sectors are the most obvious.

Prime Minister Modi’s Iran trip comes weeks after his Saudi Arabia visit. Although there is no word from Riyadh on the PM’s Iran tour, former Indian ambassador in Saudi Arabia, Talmiz Ahmad provides a perspective when he writes: “The contentions between Iran and the Arab sheikhdoms pose a far greater challenge, because the continued conflict and proxy war between the Islamic giants could easily deteriorate into an all-out conflict, with horrific consequences for India, the region and the rest of Asia. India should give up its traditional posture of non-involvement in contentions issues outside South Asia and lead a diplomatic effort to address the mutual grievances and loss of trust between Saudi Arabia and the Islamic Republic of Iran”.