India and Israel have had friendly ties for many years, but the rapid expansion of these ties, especially in military and intelligence areas, has become a source of concern for Muslim countries.

Given India’s history of defending Palestinians’ rights within the framework of the Non-Aligned Movement, there is the hope that the negotiations of Iranian officials during Iranian President Hassan Rouhani’s recent visit to New Delhi could persuade India to maintain a balance in its ties with the Israel and Muslim countries.

Rouhani’s three-day visit to India from February 15 took place shortly after the Israeli premier’s trip to India, as well as the visit of the Indian prime minister to Israel and was the first visit by an Iranian president to the country since Ahmadinejad’s three-hour stay stopover in 2008. During Rouhani’s trip, a number of important agreements were signed. This comes as the Indians did not have a satisfactory performance in their economic relations with the Islamic Republic.

Rouhani began his journey from Hyderabad, an important city with more than 30 percent of Muslim population with a history of political and cultural influence by Iran. Over there, the Iranian president held a meeting with Muslim scholars at the Friday prayers of the Sunni-majority city and delivered a sermon among the worshippers.

Rouhani in India wished that the relations between Tehran and Delhi would once again be warm and close as in the time of the two countries’ ancestors. He, of course, took the first step towards fulfiling this wish with his presence in Hyderabad and visiting historical works inspired by Iranian culture and consulting with Indian Muslims. In this city, he emphasized the Islamic Republic’s desire to expand cultural ties with India.

A consultative meeting with Muslim scholars and the emphasis of the Iranian president on the history of the cultural and Islamic ties between the two countries had another strategic message for India. In fact, Iran, as one of the most important Muslim countries with a long history of presence in India, can help resolve the long-standing conflicts between Pakistan and India and reduce the negative security implications of the conflicts in the region.

In terms of economic relations, specialists believe India’s delay in implementing the Chabahar port development project had a negative message for the Iranians, confirming the analyses that Delhi believes its future ties with Tehran would be shaped by the decisions of the US.

The Chabahar project is currently in progress, and during Rouhani’s visit to India, 15 cooperation agreements were also signed by the two countries’ high-ranking officials.

However, taking into consideration the capacities of the two countries for cooperation, one can say the economic relations between Iran and India are not close enough.

This article was first published on IFP.

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The two countries had agreed to settle bilateral trade in rupees after it became difficult for India to route payments to Iran because of the sanctions.

India is Iran’s second-biggest oil client after China.

While Iran is pursuing diplomacy through negotiations with so-called P5+1 group consisting United States, Britain, France, Russia, China and Germany, to settle longtime dispute with west over its nuclear program, US is using unilateral sanctions to pressure Iran to abandon its nuclear program, which the West believes is aimed at making a bomb but Iran insist is for civilian use.

India exported goods from Iran worth $3.36 billion in 2012-13 while its imports were $ 11.6 billion, prompting New Delhi to look for more items to sell to the country.

“We visited Iran and suggested sectors they could look at including engineering, power, steel, auto and pharma. They are keen on automobile and pharma for now,” said a commerce ministry official, adding that the country did not appear keen on a larger trade agreement.

Under the rupee arrangement, India makes part payment into a rupee account maintained with UCO BankBSE 0.06 %. Iran uses this account to import goods from India, reducing the need for routing dollar payments through third country.

A delegation led by Indian commerce secretary SR Rao had visited Iran last month when India presented many import options to Iran to reduce the $11 billion trade deficit it ran with the country last year.

Automobiles and pharmaceuticals are India’s biggest exports adding up to $18.4 billion and $14.6 billion in 2012-13. Currently, India’s exports comprise mainly of agriculture and processed goods and more recently, pharma. Iran had rejected Indian wheat citing quality issues.

The arrangement suits Iran, which was importing most of the automobiles and auto components from EU, but after the sanctions were imposed is facing some difficulty. Indian automakers already meet the stringent quality norms and are in position to meet Iranian demands.

The Iranian industry is working at one-third lower capacity due to problems in importing auto parts. Iran has most European and Japanese, South Korean brands of cars, trucks and buses. India enjoys competitive advantage as it is being driven by R&D, said FIEO.

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