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This month, even as Tehran took one step further toward Beijing with the formalization of its membership of the China-led Shanghai Cooperation Organization (SCO), its projects with Russia and India also moved ahead. Since Tehran will be working closely with India as well as China and Russia, balancing ties may not be that simple anymore.
A trilateral meeting took place July 3 between Iran, Russia and India in Tehran on the development of the International North-South Transport Corridor (INSTC). Established by Moscow, New Delhi and Tehran in 2000, the INSTC project can connect the Indian Ocean and Persian Gulf to the Caspian Sea via Iran once it is completed.
Acting as a transport corridor between South Asia, the Middle East, Iran, Azerbaijan onto Russia, the INSTC can help Moscow and Tehran develop new markets and evade sanctions. Since trade between Russia and Iran increased by 20% in 2022, reaching around $4.9 billion, the implementation of this project has acquired some urgency.
But the Rasht-Astara railway passing through Azerbaijan, crucial for connecting the land-locked sections of the INSTC, remains a missing link. Trying to speed up this railroad, Moscow and Tehran signed an agreement early this year and Russia will be investing 1.6 billion euros ($1.75 billion) for it to be constructed within 48 months.
Speaking to Al Monitor on condition of anonymity, a European diplomat posted in Islamabad said, “The three countries are perfectly aware of the strategic relevance of the INSTC and the degree of symbolism it projects in the overall region."
But the diplomat said "there is a long way to go despite some operational steps taken recently to relaunch the initiative."
Even though the INSTC was expanded to include 11 more countries, progress remained erratic. Last July, the first train along the INSTC arrived in Iran, while in September, the second train reached India from Russia via Iran’s port of Bandar Abbas — and that’s about it.
“The delay in the implementation of the mentioned railway project — because of a number of obstacles — is just one example of the problems the project will face in the current scenario. The main issue in the long term will be, in my opinion, the sustainability of financing large-scale investments necessary to build the infrastructure related to the overall INSTC project,” the diplomat noted.
“Though the [INSTC] project is seen in Tehran as a way to balance its oil revenues through additional earnings, the countries involved must be aware that with the international sanctions network still in place against Iran, it will be extremely difficult to envisage significant operational and logistical progress in the medium-term, regardless of optimistic statements of goodwill,” the diplomat added, unsure whether Moscow and Tehran can dodge sanctions.
Lately, Tehran has become so reliant on its largest trade partner, Beijing, that it gladly resumed diplomatic ties with Saudi Arabia as China had mediated. Having made negligible progress in reviving the Joint Comprehensive Plan of Action (JCPOA) agreement with Washington and its allies, Iran sided closer to Beijing and its allies such as Pakistan.
China may have the last word
Maintaining equal terms with Moscow and with Beijing is not a problem for Iran as Chinese and Russian interests are more or less aligned with those of Tehran. Even after the Ukraine conflict, China’s Belt and Road Initiative investments into Russia did not get stalled, reaching $1.6 billion in 2022. In fact, China, Russia and Iran conducted a joint naval drill just months ago.
Ashok Swain, professor of peace and conflict research at Uppsala University in Sweden, told Al-Monitor that Beijing may have the last word. “China has become Russia and Iran's primary security and economic partner. Any arrangement between Russia and Iran with India will have to have the approval of China. The long-running war in Ukraine has forced Russia to play second fiddle to China,” he said.
“If it comes to choosing between China and India, Russia will at any time go with China instead of India. Moreover, India is much more dependent upon Russia than Russia on India, so India continues to side with Russia on the Ukraine issue despite strong objections from the United States. So the international North-South Transport Corridor's future depends on how China evaluates it concerning its geostrategic interest in the region,” Swain noted.
In the meantime, India announced an $80 million investment in Iran's Chabahar port last month.
Connecting India to Russia by sea and a part of the INSTC, the Chabahar port development project has been stalled since 2016 as India Global Ports Ltd, the Indian group appointed as port operator of Chabahar, could not deliver due to difficulties in getting finance into Iran on time, even though waivers to US sanctions were announced for this port.
In order to rehabilitate this project, the Iranian and Indian transport ministers met in Tehran last year to extend the role of Chabahar in regional transit and trade.
Ali Akbar Safaei, head of the Iranian Ports and Maritime Organization, has announced that disagreements in the past with the Indian operator at Chabahar have been cleared and a new contract would be signed between Iran and India regarding the $80 million investment in the port.
However, where India is concerned, engaging with Beijing and New Delhi on the same level may not be possible for Tehran anymore, as China has a lot more to offer. Unless the JCPOA nuclear deal is saved, Iran-India ties cannot really prosper, not unless Iran is on amicable terms with the West once again.
Interestingly, India is balancing both the East and West with its SCO membership and its participation in the “Quad” a small bloc comprising of the United States, Japan and Australia to counter Beijing’s clout. In fact, New Delhi’s presence in the SCO can get embarrassing for it if the grouping gets pronouncedly anti-West.
During the recent virtual annual summit held in New Delhi, Beijing proposed the creation of a SCO development bank, and China’s Xi Jinping urged all the members and other allies to resist Western sanctions and “ensure common security” and regional peace.
Notably, though both Tehran and New Delhi are part of the SCO, including Pakistan and the founding members Russia and the Central Asian states, New Delhi also diverges from them all as it is the only member that is not part of China’s Belt and Road Initiative.
“The Iranian leadership is aware of the economic and diplomatic opportunities both India and China can offer. The signed Iran-China 25-year cooperation agreement and the India-Iran collaboration on Chabahar port are seen in Tehran as strategic assets. In this context, it is not an easy task for Tehran to balance its relationships with both New Delhi and Beijing. It will try to manage its new SCO membership without necessarily getting too much closer to one of the two, especially if the eventual revival of nuclear talks with the West offers interesting economic alternatives to the Iranian leadership,” the diplomat said.
Russia can help with India
In the long run, Russia might hold the key to better Sino-India relations that could make Iran’s balancing act much easier, as Moscow remains New Delhi’s biggest arms supplier as well as a source for cut-price Russian oil.
“Russia is primarily maintaining its relations with India because of its arms market. This strategy also helps China because it stops India from fully aligning with the United States,” Swain said.
“Both China and India have pursued a similar bilateral approach toward Moscow during the Russia-Ukraine war. Both have refrained from a direct condemnation and, significantly, they distanced themselves from the Western economic and diplomatic approach. Fair to say that from an economic point of view, China is more connected with Russia,” the diplomat noted. “How China and India ties with Russia will evolve will determine new power dynamics in the relationship between Beijing and New Delhi in the medium/long term.”
Interestingly, Indian refiners have started paying for some oil imports from Russia in Chinese yuan to avoid sanctions, since New Delhi is the largest buyer of seaborne Russian oil — long-running political differences with Beijing are being ignored.
