A cocktail of volatile scenarios have started to rock India’s already prickly ties with Iran, threatening to undermine the relations that the two countries assiduously built up over the years. Trade relations between India and Iran hit a new low last year when Iran appeared to freeze out India’s public sector oil and gas entities from participating in the development of the Farzad B field – a prospect that the Indian had started to expect was in the bag because of the support they had extended to Iran during its dog days including the discovery of the giant gas field. That development wrecked the relations between the two countries with each side embarking on a perilous course of tit-for-tat retaliation. India reduced its crude imports from Iran and the latter hit back by reducing the freight discount. There was one brief stab at restoring ties during the recent visit of Iranian president Hassan Rouhani to India and his meeting with Prime Minister Narendra Modi. Iran agreed to restore the freight discount on the sale of crude to India and, in turn, India pledged to import more crude oil from Iran. Indian PSUs were invited to submit a bid to develop a part of Iran’s Azadegan field for which quite a few international giants are in the fray.

If there was anyone who was optimistic about a revival of friendly ties with Iran, he would have to reconsider his position, especially after Iran opted last week to invite Pakistan and China to participate in the Chabahar port project. This sudden overture to India’s bitter foes has caught India’s external affairs ministry by surprise even though it has tried to mask its obvious dismay over the development.

“India’s relationship with Iran is tottering,” said an expert on Iranian affairs. India may have good reason to feel miffed by this sudden development. The first phase of the Chabahar port was developed with India’s help and it was inaugurated four months ago, opening a new strategic trade route connecting Iran, India and Afghanistan while bypassing Pakistan. This port was perceived as a counter to Pakistan’s Gwadar port which is being developed with Chinese investment. In November last year, India delivered the first consignment of wheat to Afghanistan through the Chabahar port and followed that up with four other shipments. India was planning to rope in Japan to help develop the Chabahar Port. But Japan shied away fearing further US sanctions on Iran. By inviting China and Pakistan to participate in the Chabahar port, Iran is once again trying to convey its deep-seated grievances against India over its dramatic shift in its foreign policy. India, on the other hand, feels it has been wronged by Iran, especially after all the help it extended to that sanctions-hit state. Both sides are now bickering over everything and the whole caboodle of economic ties and trade relations seems to be up in the air.

So, what precisely went wrong? A major issue appears to be the India’s growing proximity to Israel. The UPA government used to keep its ties with Israel under the wraps. But the Narendra Modi government does not seem to believe in such diplomatic niceties and refuses to play a dissembling game. Local Iranian politics demands that a friend of Israel be characterised as an enemy of Iran. Remember, Iran’s supreme leader Ayatollah Khomeini issued an appeal to the people of Kashmir to revolt against the “colonisers” the day before Prime Minister Modi visited Israel. Iran has strong likes and dislikes about the people it trades with. Normally, trade relations are conducted with a touch of diplomacy, but Iran does not follow such a style. Iran’s public sector executives in charge of petroleum trade feel uncomfortable in dealing with a couple of heavy weights in India’s petroleum industry. They believe that petroleum minister Dharmendra Pradhan and D.K. Sarraf, former ONGC chairman, are biased against Iran. Of course, this could be an erroneous perception. Both Pradhan and Sarraf are known to aggressively protect the country’s interests. The fact that Iran’s perception is not shared by Prime Minister Modi was clear after he rewarded them for their performance: Pradhan was elevated to a minister with cabinet rank and Sarraf, on superannuation, was appointed as the downstream regulator.

Iran believes that these developments only reinforce their suspicions about India’s intentions. However, the most substantive issue, in my view, is India’s refusal to join the Iran-Pakistan-India (IPI) gas pipeline that was proposed more than a decade ago. Iran has always been keen to see India purchase its natural gas and, consequently, expected India’s support to the IPI pipeline. Iran was also willing to transport CNG to India through special tankers by sea. Iran has large proven natural gas reserves of 33.5 trillion cu.m, second only to Russia’s 48.7 trillion cu. m. Eighty per cent of Iranian natural gas reserves are located in non-associated fields. Although the proposed pipeline was supposed to traverse Pakistan to reach India, Iran knew that Pakistan would not pay for its gas. The viability of the pipeline was heavily dependent on the sale of gas to India, which was expected to become a huge market for Iranian gas. The Indian government has never been averse to buying Iran’s gas but was prevented from doing so by the US administration which branded Iran as one of the three evil powers, with North Korea and Iraq being the other two. India shied away from the pipeline citing security reasons, as the pipeline would have to pass through terrorist –infected areas in Pakistan.

Iran was obviously annoyed when India readily joined Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline which would also have to traverse the same insecure areas of Pakistan.

It is an acknowledged fact that one of the hidden conditions for the US support for India’s civil nuclear deal signed during George Bush’s tenure was the that India would not join the IPI gas pipeline. The TAPI pipeline has the US support though it is unlikely to become a reality in the near future. President Donald Trump seems to have hardened his stand against Iran from the position that George Bush had taken. He has threatened fresh sanctions against Iran. Israel is egging him to do so. India faces the prospect of walking a tightrope as its relations with Iran start to crumble. Delicate diplomacy on both sides is the only way to rescue the situation. Otherwise, an economic relationship that has been profitable for both sides for decades will sink into a quagmire.