Amid Russian oil sanctions, India wants Iranian crude and cooperation on Chabahar port to continue

Iran was India's third-largest crude oil supplier in 2018-19, exporting 23.9 million tons of crude oil to India in the same year.

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Girish Linganna
Girish Linganna
Girish Linganna is a Defence & Aerospace analyst and is the Director of ADD Engineering Components (India) Pvt Ltd, a subsidiary of ADD Engineering GmbH, Germany with manufacturing units in Russia. He is Consulting Editor Industry and Defense at Frontier India.

In the backdrop of the war in Ukraine, followed by western sanctions, Iran has shown enthusiasm in convincing India to restore its crude oil purchases. The latter had cancelled these purchases in 2019 after threats of U.S. sanctions. 

The two countries have also “surveyed” the possibilities of settling trade transactions in rupee or through a barter system. Reports say they have also discussed the need to establish a banking mechanism. India and Iran had already devised a mechanism to settle trade whereby Indian refiners paid for Iranian Oil in rupees to a local bank, and Tehran then used the funds to pay for imports from India.

After Iran’s Foreign Minister Hossein Amir Abdollahian had met with Prime Minister Narendra Modi the previous month, External Affairs Minister S. Jaishankar called for the United States and Europe to permit Iranian and Venezuelan Oil into the international market if they wished for India to decrease its Russian oil imports. He also accused the West of “squeezing” all alternative sources of Oil for India. This was not the only show of support for the country that made headlines in June. On June 8, the Modi government also abstained from a vote on Iran’s nuclear activities at the International Atomic Energy Agency (IAEA) Board of Governors in Vienna.

These days, Iran and the United States are trying to unsuccessfully speed up negotiations on the Iranian nuclear deal to allow Iranian crude to be available in the market to counter Russian oil sales. 

Iran was India’s third-largest crude oil supplier in 2018-19, exporting 23.9 million tons of crude oil to India in the same year.

 Russia offers crude oil at a much lower price to New Delhi, but issues like insurance and, to a certain extent, shipping and shipping cost issues from Russia persist.

Chabahar Port momentum still on

In a recent phone call, India’s Foreign Secretary Vinay Kwatra spoke with Iran’s Deputy Minister for Political Affairs- Dr Ali Bagheri Kani- about progress on the Chabahar Port, amongst other things.

India and Iran have discussed further operationalising the Chabahar port, where goods to Afghanistan were sent before the government in Kabul fell last year.

Reports mentioning the Chabahar port had popped up last month, too, during Abdollahian’s meeting with Prime Minister Modi during his official visit to India. Back then, New Delhi and Tehran had reaffirmed their dedication to continuing cooperating on the development of the Chabahar Port. 

The talks regarding the port are the latest in a line of events that point towards revitalising India-Iran relations. 

What is the Chabahar Port, and how is India’s relationship with Iran budding?

Chabahar port is located in Sistan and Baluchestan province in southeastern Iran. The port, situated on the Indian Ocean’s edge, is the only deep-sea port in Iran with direct ocean access. It is close to nations such as Afghanistan, Pakistan, and India and holds the status of a critical transit centre on the burgeoning International North-South Transport Corridor. This means that it has the potential to become one of the most important commercial hubs in the region. Chabahar is also exempt from U.S. sanctions- a privilege that does not stand for most places in Iran. Immunity from embargoes significantly simplifies trade procedures with other countries.

Another important fact about the port is that it provides a way for India to access Afghan and Central Asian markets without having to rely on land routes that go through Pakistan. It is no surprise then that India has served as the primary investor in Chabahar port. Some experts also believe that the port can strengthen Indo-Iranian cooperation, which could, in turn, counter growing Sino-Pakistani ties.

Strengthening India-Iran Relations

Many experts believe that Iran is a regional power that has the potential to become a global superpower. This analysis is often based on the country’s military might, natural resource wealth, and robust population. However, Iran faces severe challenges due to its antagonistic relations with the United States and Saudi Arabia, amongst other countries. Tehran is also facing severe economic sanctions that have incapacitated its international trade abilities. The government has been looking to forge stronger ties with Asian nations to bypass these constraints. 

Challenges And The Path Ahead

However, the relationship has also had its own bumps over the decades. These issues, whose shadow still drones over the countries’ ties, have often extended beyond bilateral relations. These include the stoppage of oil imports from Iran after May 2019, India’s close relations with Israel, and Iran’s ties with China, including signing a 25-year strategic partnership agreement. 

There are other issues, too. For instance, Iran-backed Houthis in Yemen have launched drone attacks against Saudi Arabia and the UAE- close partner countries of India. Iran also made a statement on the Modi government’s abrogation of Article 370 of the Indian Constitution. 

Yet, a new trajectory in the nations’ outlook toward their bilateral relationship is now visible. India has already insisted on and showcased its strategic autonomy while importing Oil from Russia amid sanctions. The country could explore an identical decision point in Iran, thus making way for the huge potential for trade and cooperation to be materialised.

India’s close relationship with the US, Israel and other states in the Middle East that Iran is not inclined towards makes it an unusual ally to Tehran. At the same time, it also makes New Delhi the ideal actor to oversee a responsible economic partnership between Kabul and Tehran.


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