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India’s Iran opportunity

India, Middle East & Africa

BY Mohandas Pai & Manjeet Kripalani – expertDB experts in India policy (Foreign policy, national security, terrorism)

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Iran has emerged on to the world stage after 36 years of isolation. India must double up its diplomacy and commercial engagement with Iran, and move boldly beyond the curtain of ‘civilisational’ ties. Time to put that natural advantage to good commercial use through a vigorous private sector engagement with Tehran.

The International Atomic Energy Agency, on 16 January 2015, confirmed that Iran has complied with the first set of steps nuclear deal agreement and therefore, sanctions were being partially lifted. The day was marked as ‘Implementation Day’. The article was originally published in December and has been updated accordingly.

On 16 January, Iran emerged from 36 years of global isolation. The country’s leadership assured the world that its nuclear centrifuges are dismantled, and the process of lifting the three-decade old UN, EU and the U.S. sanctions has now begun.

Expectedly, there is overt and covert Western pressure to sabotage the long-awaited “Implementation Day.” But hopefully, common sense will prevail. Sanctions have strained Iran’s ability to finance its growth and to trade with the world. Now this market of 80 million is ready for – and can afford – everything from airplane spare parts to container ports, consumer goods to technology products.

A recent week-long policy trip by Gateway House members to Iran in November revealed the intense desire of Iranians to re-engage with the world. “Let’s not call it a ‘deal’, says Moustafa Zahrani, the urbane director general of IPIS, the foreign ministry’s think tank, of the nuclear negotiations. “A deal has winners and losers. The nuclear agreement is a political decision by wise actors for the sake of humanity. All will benefit.”

A major benefit will be a strategic one. Since October 2015, Iran has been fighting along with Russia to root out ISIS in Syria and Iraq, a war that the West has been steadily losing. Iran’s participation, its superior intelligence and focus, will pose a formidable challenge for ISIS’ caliphate plans, which include the submission of India.

This is why India must double up its diplomacy and commercial engagement with Iran, and move boldly beyond the curtain of ‘civilisational’ ties. Those exist: the Persian culture is so embedded in the language and culture of India, Iran is hardly a foreign country for us.

But that natural advantage has not been put to good commercial use. The more worldly and profitable presence instead is, despite the crippling sanctions, Western; from Schindler elevators and Bosch microphones, to Pepsi and Coke in hotels and cafes across the country. Boeing already has a $7 billion order for spare parts for Iran Air. Hotels in Tehran are packed with American, European, Chinese and Asian businessmen, and the schedules of Iranian officials and entrepreneurs are overbooked by visiting foreign delegations. A brand new Novotel hotel stands opposite Tehran’s airport, and SWIFT is already active in 12 Iranian state-owned banks. New domestic investment banks like Turqoise Partners are much in demand and are flooded with investment inquiries, as is the Tehran Stock Exchange.

Iran’s many business chambers are fully prepared for the rush: “We are ready to take up any action of any nature and any value,” S. Kamaleddin Sahlabadi, the international counsellor for the Isfahan Chamber of Commerce, told our group.

Taking him up on the offer should be a priority. Both business and security-wise. According to the IMF, in the next five years the GCC’s $750 billion surplus will turn into a $600 billion deficit largely due to the low price of oil. With oil at $40 a barrel and the advance of ISIS in West Asia,  the combination is deadly, putting in jeopardy India’s interests in the region – 16% of of our exports go to GCC countries, we import 60% of our oil from them, and 6 million of our people work there. Shifting some of these assets to Iran immediately will be a wise move – trade, oil and some human capital.

India’s private industry will understand Iran easily enough:it is like India circa 1991, removed from global markets and making do with import substitution. Iran has used the years under the sanctions to develop internally, with good roads, water and housing supplies and an education system where women predominate – nearly 70% of Iranian science and engineering students are women. Close to 300,000 engineers in Iran have built home-grown replacements not just for nuclear technology but also for internet and mobile applications. Iran’s young, 20-something IT community has created Cafe Bazaar in place of Google Play; Bamilo instead of Amazon; Taxi Yaab instead of Uber, Mazando instead of Ebay. Since June 2012, Iran has held 62 ‘startup weekends’, there are innovation accelerators, and banks like Turquoise Partners are seed-funding this e-commerce take-off. This year Germany played tech godmother, hosting the iBridges tech conference for regional start-ups where Iranian players made a spectacular appearance.

Alas, India doesn’t figure in this new picture. Bangalore, with its large entrepreneurial community should loom large in Tehran, but apart from Flipkart, even superstar Hessam Armandehi, the young CEO of Cafe Bazaar, is unfamiliar with India’s startup scene. They look instead northwards. Alireza Jozi, the co-founder of TechRasa – the Iranian version of Bangalore’s Your Story – is an émigré from Austria who returned two years ago to build Iran’s tech ecosystem. His ambition for Iran’s tech talent? To surpass Turkey and “become the tech hub of the region.”

This is possible, given Iran’s aspirations and Turkey’s downward geopolitical spiral. India’s private sector must actively contribute to the Iranian dream. So far, our engagement is largely through government, with the signature bilateral Chabahar port project caught in India’s baroque inter-ministerial rivalries, and the Iranians losing patience. If New Delhi does not move decisively, Chabahar may, like Sri Lanka’s Hambantota port, become a Chinese project and a critical link, through Afghanistan and Pakistan, to its One Belt-One Road initiative.

Meanwhile, there’s a market craving credit and consumer goods. Under sanctions, Hawala financed Iran’s economy. Now Tehran is offering generous incentives to foreign investors to formalise its economy: Equal access to the home market, taxes of 10% or less, 100% repatriation of profits, special economic export zones. India’s private sector can offer consumer credit, factories for auto parts and electric vehicles, a pharma base and technology investments. What Iran cannot buy from Israel – the other big regional supplier – it can get from India, enabling her to become a regional goods and services supplier to the Gulf from a stable West Asian base.

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