MUMBAI // India is strengthening its energy and trade ties with Iran.
The Indian prime minister Narendra Modi yesterday concluded a two-day visit to Iran, during which he met the Iranian president Hassan Rouhani. The two countries signed an agreement to develop Chabahar port in Iran, with India pledging to commit US$500 million to the project, among other deals. The port is on the south coast, close to the border with Pakistan, and is significant in terms of the access it could allow India to central Asia and Afghanistan.
Western sanctions against Iran were lifted in January, which has paved the way for India to boost its economic ties with the country and increase investment.
“Expanded trade ties, deeper connectivity, including railways, partnerships in oil and gas sector, fertilizers, education and cultural sphere are driving our overall economic engagement,” Mr Modi said in a statement. “The bilateral agreement to develop the Chabahar port and related infrastructure is an important milestone,” he said. “This major effort would boost economic growth in the region. We are committed to take steps for early implementation of the agreements signed today.”
India is one of the world’s largest buyers of crude oil from Iran. Before the sanctions were lifted, India was under pressure from the United States to reduce its imports of Iranian crude and it steadily cut its shipments. India increased its imports after sanctions were lifted.
“One of the main impediments was the sanctions that were there on Iran,” said Abhimanyu Sofat, a co-founder of AdviseSure, an investment advisory in India. He said that it was in India’s interests to expand its relations with Iran given its energy needs.
The port deal could help to boost exports for Indian companies in the longer term, he added.
Talks between India and Iran to build the port started years ago.
Iran can be crucial to India as a means of exporting to landlocked Afghanistan and central Asia, given India’s frosty relations with Pakistan.
China is developing the Gwadar port in Pakistan about 100 kilometres from the Chabahar port.
“The distance between Kandla and the Chabahar port is less than the distance between New Delhi and Mumbai, and so what this agreement does is to enable us quick movement of goods first to Iran and then onwards to Afghanistan and Russia through a new rail and road link,” Nitin Gadkari, India’s minister for road transport and highways and shipping, told the Press Trust of India news agency.
He said that Iran had cheap natural power and gas and that India could leverage this and build aluminium and urea plants in Iran.
“We spend 45,000 crore rupees [crore = 10 million; Dh24.47 billion] annually on urea subsidy, and if we can manufacture it in the Chabahar free trade zone and move it through the port to Kandla and onward to hinterland, we can save that amount,” he said.
India yesterday afternoon said it would also sign a trilateral transport and transit agreement with Iran and Afghanistan later in the day.
“Looking to reinforce connectivity, infrastructure and energy ties with Iran, Indian prime minister Narendra Modi’s visit to Iran is really vital for both nations,” said Mike van Croonenburg, the chief executive of Petrol Storage Broker. “India is one of a handful of countries that continued trade links with Iran despite it being isolated by western countries against its disputed nuclear programme. Another most important impact will be rise of regional transit and connectivity.”
Follow The National’s Business section on Twitter