India has launched a bold initiative to bolster its influence throughout Southeast and Central Asia. The Indian government is investing significant capital in Iran’s Chabahar free-trade zone and the surrounding infrastructure to secure its economic interests throughout the region, reduce Pakistan’s sphere of influence and com
pete with China. While this policy seems attractive in the short term, this course of action is fraught with unanticipated dangers. Investing in Chabahar not only allows Iran’s rogue regime to fill its coffers with the hard currency it needs to repress its people and facilitate terrorism, but may also harm India’s strategic relationship with one of its most important allies, the United States.
Traditionally, the relationship between India and Iran has revolved around trade. In 2010, the two countries conducted $14 billion worth of business, mostly in oil and gas. India’s decision to invest $100 million in Chabahar, a port in the Sistan-o-Balochistan province on the southeastern tip of Iran, is part of this relationship.
In addition, Chabahar offers India the ability to bypass Pakistan, which often prevents India from transferring goods to landlocked Afghanistan. In recent years, India has invested heavily in roads connecting the Kandahar-Herat highway to Iran so it can get goods and services into Afghanistan using this alternate route. India is being driven by a desire for increased trade with countries throughout Central Asia — including Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan — and for direct access to Afghanistan’s mineral market, worth an estimated $1 trillion to $3 trillion. Investing a relatively small sum of money would, in theory, yield a very nice return: at least 60-90 years of operating Chabahar. Given the likelihood of securing the “Iran route,” India and Afghanistan are now looking to build a 600-mile railway lineconnecting Chabahar to Afghanistan’s Hajigak region, which contains the country’s largest iron ore deposits.
India is also keen to counter Chinese competition in its backyard. Both India and China are investing in critical marine gateways in the Gulf of Oman, primarily for financial gain and to secure a safer corridor to transport their energy and commodities. While India invests in Chabahar, China is pouring resources into developing Gwadar, an equally important port located less than 50 miles away in Pakistan.
Iran is looking to use Chabahar to develop its infrastructure and levy sizable duties, and India’s investment serves as a critical lifeline for Iran in the face of international sanctions. For India, however, despite Chabahar’s financial advantages, there is more to lose than gain by doing business with the world’s most notorious state sponsor of terrorism.
India’s relationship with the United States is very important to it. Bilateral trade currently stands at around $106 billion annually — over 10 times India’s trade with Iran — and there are current negotiations to enter into a free-trade agreement.Whether increased investment in Iran, a country targeted by American sanctions, will hurt the U.S.-India alliance remains to be determined, but it certainly cannot help.
In the last decade, the international community, particularly the United States, has targeted over 180 Iranian entities — individuals, companies and financial institutions— freezing their assets, blocking their access to the international financial sector and imposing travel bans in an effort to force Iran to change its nuclear policy. Any Indian company that plays a role in developing Chabahar could be targeted by the U.S. Treasury Department and placed on its blacklist. The risk to India’s larger strategic interests should be reason enough to reconsider.
But additionally, India’s bet on Afghanistan or Chabahar may turn out to be a poor choice. Afghanistan remains politically unstable. Any government that comes to power after the 2014 elections, if led by the Taliban or another Pakistani-supported political faction, may not be as enamored of increased trade with Iran or India as the current government is. And Chabahar is located in one of Iran’s most explosive regions, where the Sunni Baloch insurgents have carried out repeated attacks against the regime in recent years.
Finally, the Islamic Republic endorses radical Islam and a strict interpretation of sharia law, which is starkly at odds with the tenets upon which India rests. Iran’s heinous record on human rights is well known, and is criticized by Iranian citizens, international and non-governmental organizations and even the UN. The government regularly engages in torture, rape and killing of civilians, dissidents and political prisoners. The ideals of Indian leaders such as Mahatma Gandhi could not be further from those of Iran’s Supreme Leader, Khameinei. As a country that has fought a long struggle against terror attacks in Kashmir, Mumbai and other places, India has itself been a victim of the radical ideology that Iran spreads and supports.
India should consider whether potential loss of access to the U.S. market, instability in Afghanistan and Chabahar and support for a state sponsor of terrorism is worth the bang for the buck. It should cease investing in Iran’s infrastructure so long as the Islamic Republic continues it march towards nuclearization, oppresses its people and proliferates terrorism.