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BUSINESS & ECONOMICS

THE INDIAN-IRANIAN CONNECTION AND ITS IMPORTANCE FOR CENTRAL ASIA

Stephen Blank 3/12/03

Far removed from the United Nations’ debate on Iraq, two Iranian warships arrived in India on March 10 for a five-day visit that will include joint naval exercises. The visit underscores the rapid expansion of ties between New Delhi and Tehran in recent years, especially in the realm of trade. Indeed, joint Indian-Iranian economic initiatives may end up exerting significant influence over Central Asia’s development.

The turning point for Indian-Iranian cooperation was an agreement, signed in 2000, committing both countries to establishing a North-South trade corridor. India and Iran would serve as southern terminals for the trade route, with Russia acting as the northern anchor.

Since then, India has improved ties with China, Russia, Iran, Israel and the United States and has started consolidating key partnerships with many of these countries either in military sales or in trade. Meanwhile, Iran has sought to position itself advantageously in the ongoing struggle over export routes for Caspian Basin energy. [For additional information see the Eurasia Insight archive].

Iranian President Mohammed Khatami visited India on January 26 and signed a protocol with Indian Prime Minister Atal Behari Vajpayee. The document pledges the two countries to collaborate on energy issues and technology investment, anti-terrorist action and "strategic collaboration in third countries." While this last term refers primarily to Afghanistan, the Indian-Iranian economic and diplomatic partnership holds large potential for many Central Asian economies.

Both India and Iran aim to become major centers of international trade, especially of goods that originate or end up in Central Asia. This spurs both countries to cooperate with Russia � along with some Central Asian states, especially Kazakhstan � in trying to broaden the North-South trade route. As currently envisioned, improvements would aim to speed the flow of goods, especially energy, from Russia via Central Asia to Iran to India.

Such a corridor, if fully developed, could serve larger Russian and Iranian strategic goals by possibly reducing demand for energy exports via the US-backed Baku-Tbilisi-Ceyhan pipeline, which is currently under construction. [For additional information see the Eurasia Insight archive].

One question that may complicate the corridor’s completion is Pakistan’s possible role. Early on, Pakistan was excluded from North-South trade corridor discussions. Islamabad’s strong support for the Taliban in Afghanistan was a source of friction in its relations with Iran and Russia. Long-standing antagonism between India and Pakistan also worked against Islamabad’s inclusion.

Since the US-led campaign drove the Taliban from power, Pakistan has revealed ambitions of its own concerning the establishment of trade routes through Central Asia. The centerpiece of the Pakistani vision is a trans-Afghan pipeline that would bring Central Asian energy through war-ravaged Afghanistan and terminate at the Indian Ocean port of Gwadar. Pakistan has worked hard to promote the trans-Afghan pipeline, going so far as to announce that India could participate in such a project. Nevertheless, Islamabad’s efforts have met with persistent resistance from New Delhi. Turkmenistan’s erratic diplomatic behavior has further undermined prospects for a trans-Afghan pipeline. [For additional information see the Eurasia Insight archives].

The probable demise of the trans-Afghan option could create an opening for Pakistani participation in the North-South corridor. Recently, Iran has taken steps to improve ties with Pakistan, largely for reasons connected with the energy trade. In particular, Iran has sought assistance in building an overland gas pipeline through Pakistan to India. Options include a pipeline along the shallow water coastline of Pakistan, or on the seabed from the Persian Gulf to India’s West Coast. While Pakistan has guaranteed the safety and security of Indian gas or oil supplies through an overland pipeline from Iran, India remains reluctant.

So far, India and Iran have kept their different approaches towards Pakistan from damaging bilateral ties. Indian policy has placed considerable pressure on Pakistan, serving to exclude Islamabad from the lucrative energy export sphere. At the same time, Indian diplomacy has significantly enhanced New Delhi’s status as a regional power.

Editor�s Note: Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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