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Why Russia and Iran Need India’s Help - by Antonia Colibasanu for Geopolitical Futures - 06.02.23

Moscow and Tehran are getting closer, but that won’t be enough.

Last week, Iran’s central bank deputy governor said Iran and Russia had connected their bank messaging systems, a move that should bolster cooperation and trade between them. Moscow hasn’t confirmed the news, but reports last year indicated that the countries were working on such a plan. This is just one of a series of moves to strengthen ties since Russia invaded Ukraine early last year. Indeed, they’ve been getting closer since 2014, when the West first imposed sanctions on Russia following its annexation of Crimea. That year, Russia and Iran signed agreements on nuclear energy cooperation as well as trade and economic cooperation. In 2016, they signed a deal that allowed Iran to ship its natural gas to Russia.

Though trade between them remains small relative to their trade with other countries, they share more economic interests now than before the Ukraine war. Iran views Russia as a promising market for its manufactured goods, and although it doesn’t produce equipment and semi-finished products that Russian industry desperately needs right now to replace imports from its traditional suppliers, it can ship goods to Russia that it imported from other non-Western producers. However, growing trade between the two countries will necessitate investment in new transport networks and the cooperation of a key emerging market: India.

One of the main facilitators of Russia and Iran’s plans for boosting trade is the International North-South Transport Corridor, which aims to connect markets across Eurasia by ship, rail and road. It was designed based on an agreement signed by Russia, Iran and India in September 2000. According to Russian media, the corridor is already operational, and some reports say it’s now the main route for shipments from Mumbai to St. Petersburg. But certain connections along the route are still under construction, including the 100-mile Rasht-Astara rail line, which will connect the Azerbaijani railway system (ending in Astara) with the Iranian one.

Russian President Vladimir Putin and Iranian President Ebrahim Raisi agreed during a meeting last July that the Rasht-Astara line needed to be completed as soon as possible, though its official completion target is 2025. In addition, some 6,000 kilometers (3,700 miles) of highway, connecting St. Petersburg to the Persian Gulf and the Gulf of Oman, are also still under construction, and by next month, just 1,000 kilometers of highway will be completed.

The key to speeding up the project, especially the strategic Port of Chabahar in southern Iran, is getting India’s full cooperation. The Indian and Iranian ministers of transport met last summer and a senior Iranian diplomat visited India in November to discuss the development of the port, which will connect India with the rest of the corridor. New Delhi and Tehran agreed to develop the port back in 2003. India again committed to helping Iran construct the project, as well as a related railway, in 2015 so it could boost trade with Central Asia and conduct business with Afghanistan without Pakistan’s interference.

India invested about $85 million in phase one of the port’s development, but more work needs to be done before it can realize its potential. The associated rail line from Chabahar to Zahedan, key to integrating the port into the multi-modal infrastructure corridor and costing $1.6 billion, also remains unfinished.

India has been hesitant to get more involved in the project because of the shifting attitudes, particularly in the United States, toward Iran. It initially negotiated and made its major investment commitments to the Chabahar project when Western countries were still in talks with Tehran on a nuclear deal. In 2018, the U.S. withdrew from the Joint Comprehensive Plan of Action and reimposed sanctions on Iran, and since then, India has suspended work on the port.

Now that Russia is shifting its trade focus eastward, it may be able to convince India to commit to the project more firmly than before. Last year, Russia became India’s largest oil supplier, selling its crude to New Delhi at a discount after getting locked out of Western markets. Russia’s pivot east has included increased use of the Northern Sea Route, where goods are shipped from Murmansk across Russia’s northern coast into the Pacific and onward to the Indian Ocean. According to local media, Indian energy companies are interested in acquiring additional stakes in Russian energy assets in the Arctic and Russia’s Far East region. This comes after Indian Prime Minister Narendra Modi said during a meeting with Putin last September that his country would be keen on strengthening cooperation with Russia.

India has been eager to cash in on the benefits of maintaining friendly relations with Russia amid the onslaught of Western sanctions against Moscow. It has refused to join the Western sanctions regime, and so far, the West has been reluctant to impose penalties on India for its continued purchases of Russian energy. Whether India’s cooperation with Russia will extend to a renewed interest in building the Chabahar port remains to be seen, but for New Delhi, this kind of transport infrastructure also has strategic value. Chabahar gives India not only a link to Central Asia but also a route to Afghanistan that bypasses Pakistan and could rival Pakistan’s Gwadar port, which is being funded by China’s Belt and Road Initiative.

Chabahar could also turn into a sort of checkpoint for goods coming in and out of India’s Kandla and Mundra ports – which will become increasingly necessary as the Indian Ocean becomes an even bigger hub for transport and travel. About 80 percent of the world’s maritime oil trade passes through the Indian Ocean, which is also home to some of the world’s fastest growing populations.

Last year, the U.S. launched the Indo-Pacific Economic Framework for Prosperity, an initiative designed to foster cooperation in the region and divert trade away from China.

For Russia, the Indian Ocean will grow more important as it seeks alternative partners. But growing its footprint just by shipping more oil through the Northern Sea Route isn’t enough.

It wants to convince New Delhi to become its partner in developing the International North-South Transport Corridor, which would enable Russia not just to reduce the time it takes for its products to reach markets farther afield but also bypass all European NATO members in shipping its goods worldwide. Its interest in building the corridor goes beyond economics – it wants to create a containment line with Europe running parallel to the NATO containment line, from the Baltic Sea to the Black Sea.

India, however, is friendly with the United States, and both countries are part of the Quad security pact, which also includes Australia and Japan. This is why New Delhi will be the one to watch as the economic war between the West and Russia plays out.

Moscow will continue to try to draw New Delhi closer. But for India, this would have major repercussions for its relationships with its other strategic partners – especially since it would mean drawing closer to Iran. India needs to consider the potential effects on its supply chain, access to international financial networks and, perhaps most important, its security alliance in the Indo-Pacific. Any steps it takes toward boosting cooperation with Moscow could put these components at risk. But that won’t stop Russia from trying.

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Antonia Colibasanu is Geopolitical Futures’ Chief Operating Officer. She is responsible for overseeing all departments and marketing operations for the company. Dr. Colibasanu joined Geopolitical Futures as a senior analyst in 2016 and frequently speaks on international economics and security topics in Europe. She has published several works on geopolitics and geoeconomics, including Contemporary Geopolitics and Geoeconomics and 2022: The Geoeconomic Roundabout. She is also lecturer on international relations at the Romanian National University of Political Studies and Public Administration.

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