Breakout Moment for Iran
Mayank Anand Purohit

The Iran Nuclear Deal or Joint Comprehensive Plan of Action (JCPOA) was implemented on 16th January 2016 after Iran completed its obligations for securing suspension of nuclear related sanctions imposed on it. This ends the economic and political isolation of Iran and marks the beginning of a new phase in Iran’s engagement with the world. Economic sanctions have caused significant damage to Iranian economy and curtailed its options to pursue its strategic objectives. Iran is now striving to make up for the lost opportunities and its leadership is wasting no time in deepening existing relationships and building new ones. With significant hydrocarbon reserves and its strategic location, Iran cannot be ignored. Most major nations have started to re-engage with Iran and ink deals. China, expectedly, has stolen a march over others.

Dynamics in US-Iran relations

The USA and Iran are both keen to ease tensions but decades of mistrust weighs down upon their relationship as is evident from the manner in which events have played out immediately before and after the implementation of nuclear deal.

A few days before the implementation of nuclear deal, Iranian Revolutionary Guards Navy captured ten US marines within the territorial waters of Iran. This incident threatened to derail the implementation of accord and snowball into an international crisis but was diplomatically resolved when the all the sailors were released next day. Swift resolution indicates that despite having no formal diplomatic relations, channels for top level communication between the two nations are open and the leadership is invested in getting the nuclear deal operational.

In other confidence boosting measures US and Iran implemented a prisoner swap where Iran released four Iranian-Americans, including a journalist, who were held on charges related to compromising national security and espionage. The US on its part released seven Iranians held for violating sanctions and it also released $400 million of Iran’s frozen money along with an interest of $1.3 billion that had accumulated since 1981.

However such measures did not extend to other aspects of their relationship. A day after the nuclear sanctions were lifted, US re-imposed new sanctions on account of Iran conducting a ballistic missile test in October 2015. These sanctions pertain to entities and individuals linked to Iran’s missile program.1 Iran also did not shy away from propaganda on its detention of US marines and released a video of the incident showing US marines kneeling before Iranian forces. The Supreme Leader of Iran, Ayatollah Ali Khamenei praised the action of Revolutionary Guards and the Iranian navy commanders involved in the incident have been given gallantry medals.2

This sequence of events indicates that while there is some improvement in relations, fundamental differences between the US and Iran remain and the US continues to designate Iran as a state sponsor of terrorism. There has been no exchange of ambassadors between the two, Iran continues to see USA as a threat and has not ceased its criticism of US policies.

Chinese manoeuvres

China has been carefully watching these developments and Chinese president Xi Jinping was the first international leader to visit Iran within a week of lifting of nuclear sanctions. Significantly Xi Jinping clubbed the stopover in Iran with his visits in Saudi Arabia and Egypt. This shows that Chinese are not constrained by compulsions of having to choose between competing parties in West Asia.

Iran is important for China both strategically and economically as China is energy hungry and Iran, with its vast oil and gas reserves, can become a reliable long term supplier at cheap rates. Iran, unlike other Gulf States, is outside USA’s influence which increases its attraction for China to have strategic relations. So it came as no surprise when China supported Iran’s full membership in Shanghai Co-operation Organisation (SCO) during Xi Jinping’s visit. Ahead of his state visit, in a signed article written for Iranian newspapers, Xi Jinping stressed on historical and cultural ties between the two nations through the ancient Silk Road and made the case for Iran to join his one belt one road initiative and deepen economic ties. 3 President Rouhani hopes that bilateral trade will go up to $600 billion over next 10 years.4

China and Iran released a joint statement in which the two nations regard each other as important strategic partners and have agreed to start discussions for a bilateral 25 year comprehensive co-operation agreement. 5 The increasing bonhomie between the two countries can be gauged from the statements of Ayatollah Khamenei who called China a trustworthy country and stated that Iran will never forget China’s co-operation during the time of sanctions. 6 In the document, China supports a greater role for Iran in regional and international affairs and identifies it as a regional power. Iran has expressed its support for China’s Silk Road initiative and reaffirmed its commitment to a One-China policy. Both nations also agreed to enhance cooperation between their armed forces and in combating terrorism. China has already started executing its Silk Road projects concerning Iran and the first train connecting China and Iran arrived in Tehran on February 15. It covered 10,000 kms in 14 days and passed through Kazakhstan and Turkmenistan to reach Iran.7 Plans are underway to extend this rail link to Europe thus enabling Iran to establish closer economic links with the Continent.

Europe Courts Iran

Iran is in interested in forging economic engagements across the board in a bid to rebound quickly from hardships caused by years of economic sanctions. Thus establishing good relations with Europe is important for Iran as the European states do not share the reticence of USA to establish business relations with Iran. The slowdown in global economy has made European companies eager to take advantage of opportunities offered by the reopened Iranian economy. Realising this, Italy and France hosted Iran’s president in the last week of January.8 During his tour, Rouhani met the Pope, Italian PM and French president and signed multi-billion dollar deals including a commercial aircraft deal with Airbus to replenish the ageing fleet of Iran air. 9

European leaders and officials have also made reciprocal visits to Iran. Greek PM, Alexis Tsipras led a delegation of senior ministers and industrialists aiming to develop bilateral ties. German Foreign Minister, Frank-Walter Steinmeier made his second visit to Iran in three months and extended an invitation to President Rouhani to visit Germany.

Russians are not sitting idle either. Ali-Akbar Velayati, a top advisor to Ayatollah Khamenei, met President Putin in Moscow and announced that deals worth $40 Billion are ready to be implemented including a contract to construct a nuclear reactor at Bushehr. Russia is interested in selling weapons to Iran and has also supported full Iranian membership in SCO.

Implications for India

India and Iran have deep historical and cultural links and relations between the two have been cordial. However, the relations stagnated over past few years due to US pressure and nuclear sanctions. India could not pursue relations with Iran in a manner that would safeguard its own national interest. It voted multiple times against Iran in IAEA resolutions censuring it for nuclear program10. Iran’s strategic location that borders West Asia, Central Asia, Afghanistan and Pakistan, makes it crucial for India whether it wants to “Look West”, “Connect Central Asia” or protect its interests in Afghanistan.

India needs to adopt a more vigorous policy towards Iran and has rightly welcomed the nuclear deal and lifting of sanctions as it provides immediate opportunities to India11:

  • Increase in oil and gas imports which went down significantly due to economic sanctions.
  • Entry of Iranian oil in world market will check any rise in oil price thus benefiting India.
  • Speedy conclusion of negotiations to award Farzad B off shore gas field to ONGC.
  • India is interested in investing in Iranian fertilizer sector which will be a mutually beneficial partnership.
  • Investments in steel, power and petrochemicals sectors.

These opportunities, however, come with certain challenges. Iran is opening up to the world and has more options. It is not as dependent on deals with India as it was during sanctions. Consequently Iran’s bargaining power vis-à-vis India has increased. An example of this is Iran’s indication to India to move quickly on development of the strategically important Chabahar port and associated rail line if it wants to retain these projects. 12 A further concern for India is Iran joining the Silk Road initiative of China as it could undermine the objective of using Chabahar port as a strategic counter to Chinese built Gwadar port in Pakistan. India also faces the challenge to balance any deepening of relations with Iran with its existing relations with Saudi Arabia and Israel as both regard Iran as an enemy.

Russia and China are engaging Iran in close strategic and economic partnership and Iran’s entry in SCO is now practically assured with their support. This has raised the possibility of China, Russia and Iran forming a trilateral that cannot be ignored. India cannot afford to be relegated to being a bystander and has to be proactive in strengthening ties with Iran to protect its interests in the region. India needs to actively look for bilateral as well as plurilateral partnerships with Iran and the operationalisation of long planned north-south corridor in partnership with Russia and Iran offers one such opportunity. This corridor can be a multi-modal transport route connecting India to land locked Central Asia and onwards to Eastern Europe. It can potentially make Indian exports competitive due to the time and cost savings it offers over existing routes.

There are many complementarities between India and Iran in strategic, economic and cultural spheres. Both have been autonomous in conduct of their foreign policy. The need now is to build upon these foundations to have an enduring and mutually beneficial partnership.


  3. Full text of the article -
  5. Full text of joint statement -
  11. Following issues figured in the meeting between PM Modi and President Rouhani at Ufa on 9 July, 2015. Source -

Published Date: 23rd February 2016, Image Source:
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

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