Prime Minister Narendra Modi’s visit to Iran is part of India’s complex West Asian initiative that seeks to balance ties between a quadrilateral of four poles — UAE, Saudi Arabia, Iran and Israel. Given mutual antipathies and subterranean divides, India has to step carefully to ensure maximum gain for itself, even while avoiding the numerous political minefields there.
But the payoffs are many. Sixty per cent of India’s oil needs are
fulfilled by this region and this will only increase in the coming
decades. A significant percentage of our liquified natural gas also
comes from here, mainly from Qatar.
The oil-rich states of the region have
created vast sovereign wealth funds and are keen to shift their
economies away from dependence on oil. India is looking for investments
to develop its own infrastructure and manufacturing industries, and its
companies are also looking for business opportunities of the kind that
may be available in the region.
India is well-positioned to take advantage of this in terms of
proximity and by virtue of the Indian diaspora, 7 million strong, which
is already positioned in the region and which comprises businessmen,
entrepreneurs and professionals, as well as workers.
Given the complex security needs of the region, India also has the
potential of upgrading its ties with regional states to form security
coalitions and partnerships, both, with a view of stabilising the region
and protecting its important sea lines of communications. Another
aspect of this is the partnership with Israel in the area of
agriculture, Information Technology and military technology.
Iran, where Modi has gone, offers a vast range of geopolitical and
economic opportunities. Hit by US-led sanctions for the past decade,
until they were lifted recently, Iran is looking for companies to invest
in its development. The Tatas, Essar, Cipla, Hero, Bajaj and TVS are
already brand names, but they have been on a waiting mode till the
sanctions were withdrawn. Chinese companies have been around and,
following the visit of Chinese President Xi Jinping in January, the two
countries signed a wide range of agreements for development and
connectivity under the One Belt One Road initiative of China. Earlier
this year, the first train from China reached Tehran, cutting 14 days
from the time taken to ship goods through a port.
India’s most important venture is in the area of connectivity as
well, one that will promote development in Iran’s poorer south-eastern
regions, as well as give a fillip to India’s ability to link up with
Afghanistan and Central Asia. This is the two-phase plan to develop Chah
Bahar port and the railway lines radiating north to Zahedan and Mashad.
This plan has been hanging fire since the 2000s and only now, after the
Chinese put in their bid to develop Chah Bahar, did New Delhi get its
Multimodal connectivity from Indian ports like Mumbai and Kandla with
Iran through Chah Bahar and Iran’s main port Bandar Abbas can connect
to Russia’s ambitious North-South Transport Corridor reaching up to
Russia’s Baltic ports. Of course, this will require much higher level of
investment in upgrading the Iranian infrastructure leading from Bandar
Abbas or Chah Bahar north towards Central Asia and Russia. Calculations
are that multimodal transport can reduce the cost of moving a 40-foot
container to $3000, as compared to $4,000 by the sea route that also
takes twice the time. A lot of this presumes a sharp uptick in the
economic growth of the entire hinterland of Iran and Russia.
In turn, access to Afghanistan and
Central Asia — through Chah Bahar, bypassing Pakistan — can provide the
necessary impetus to Islamabad to ease up on its blockade of Indian
trade to Afghanistan. An unintended consequence of this could be closer
South Asian integration.
There is another level of Indian participation in the Iranian economy
— in its oil sector. Again, the Indians, in the form of ONGC Videsh
have been around for a while, but have not been able to do much because
of the sanctions. But now, the openings are there, provided the wily
Iranians give the Indians viable options.
However, the bottom line here is project execution. The experience of
India’s other external connectivity project — the Kaladan multimodal
scheme in Myanmar has not been a happy one. The key to this is to create
a well-managed and viable project management organisation. Currently,
the government intends to deal with this through a special purpose
entity involving Bombay and Kandla Port Trusts, but this is not good
enough. There is need for some apex management directly supervised by
the Prime Minister’s Office to ensure that the timelines are met. India
may not be able to compete with China in the area of project investment,
but it should ensure that what it chooses to do, it does well. A lot of
time has been lost in Iran, and there is need to redouble our efforts
to make up for it.
Mid Day May 24, 2016