Background

• India and Iran share a millennia-long history of interactions starting before the times of Alexander, the great. 
• India and Iran signed a friendship treaty in 1950. 
• The Tehran Declaration in 2001 and the New Delhi Declaration in 2003 deepened the India-Iran cooperation. The two documents identified areas of cooperation and set the strategic vision for the India-Iran partnership.

Significance of relations with Iran

• Energy Security: Iran possesses vast reserves of oil and gas, which can be useful  for India’s growing energy needs. Before U.S. sanctions in 2019, Iran supplied nearly 12% of India’s crude oil imports.
  • Projects like the potential Iran-Oman-India undersea gas pipeline could diversify India’s energy sources and reduce dependency on volatile regions.
• Strategic Connectivity: Chabahar Port is vital for India’s access to Central Asia and Afghanistan, bypassing Pakistan. It also enhances regional trade through the International North-South Transport Corridor (INSTC).
  • Chabahar facilitates India’s humanitarian and developmental assistance to Afghanistan, particularly during crises.
• Gateway to West Asia and Central Asia: Iran serves as a bridge for India’s broader engagement in West Asia and Central Asia, providing opportunities for trade, energy, and political influence.
• Diplomatic Mediation: India’s ability to balance ties with adversarial powers like Iran and Israel positions it as a possible mediator in regional conflicts, such as the ongoing Gaza crisis.
• Shared Security Concerns: Both nations face challenges from terrorism, particularly emanating from Pakistan. Collaborative counterterrorism efforts can enhance regional stability.
• Multilateral Engagement: Iran’s inclusion in forums like the Shanghai Cooperation Organization (SCO) and BRICS, supported by India, enhances India’s role in shaping global and regional power dynamics.

Challenges in the relations

• U.S. Sanctions:  U.S. sanctions on Iran severely limit India’s ability to import Iranian oil and invest in energy and infrastructure projects.
  • India-Iran bilateral trade came down to USD 2.33 billion during the FY 2022-23 from a high of USD 17 billion in 2018-19. This is a fall of 86.29 per cent in the last four years in the wake of US sanctions on Tehran.
  • Also, India has to balance its strategic relations with the U.S. and its desire to engage with Iran, which can constrain bilateral cooperation.
• Conflict in West Asia: Iran’s involvement in regional conflicts, including the Gaza crisis and its strained ties with Gulf Cooperation Council (GCC) nations and Israel, creates problems for India’s West Asia strategy. This is due to the fact that India shares close ties with Israel and the GCC countries. 
  • Tensions in the Persian Gulf and Strait of Hormuz threaten the security of trade and energy routes critical for India.
• Religious and Political Sensitivities: Comments by Iranian religious leaders on issues like  the state of Indian Muslims or Kashmir, which are internal issues of India,  strain bilateral ties.
• Economic and Infrastructure Hurdles: Progress on projects like the Chabahar port and the Chabahar-Zahedan railway has been slow, often hindered by bureaucratic, financial, and logistical issues.

Way Forward

• Maintain Strategic Autonomy: India should continue engaging with Iran independently while maintaining strong ties with the U.S., Israel, and Gulf nations.
• India should expand Security and Defense Collaboration with Iran to get and improve new systems like  armed drone systems which are being supplied by Iran to countries like Russia
• India can also develop intelligence-sharing mechanisms and conduct joint exercises to address shared security challenges, especially concerning threats from Pakistan.
• Developing smooth and a working partnership with Iran gives more benefits to India in its path to development.