Balancing between India and China will not be an easy task for Iran New markets for security guarantees

On July 4, Iran officially became a full member of the Shanghai Cooperation Organization (SCO) during a virtual summit hosted by India for the SCO Heads of State Council. After 16 years of negotiations and observer status, Tehran’s membership bid was unanimously confirmed by member states. Since Tehran will be working closely with India, China, and Russia, balancing ties may be more complex now.

For many years, Iran developed individual strategic partnerships with China and Iran, two main geopolitical rivals. India-Iran bilateral relations have faced several challenges ever since the United States imposed sanctions on Iran after pulling out from the Joint Comprehensive Plan of Action (JCPOA) in 2018. As a result, India briefly stopped oil imports from Iran until further notice to circumvent the possible pressure from the US and Western partners. However, with the inception of the Ukraine war and the global energy deficit, the Indian government launched new negotiations with Iran to restore oil imports in 2022.

India has long been Iran's top energy client alongside China; between 2020 and 2021, Delhi purchased millions of dollars worth of Iranian petrochemical and petroleum products from sanctioned Iranian petrochemical broker Triliance.

Moreover, at the end of 2022, Tehran and Delhi discussed the possibility of signing a 25-year-long strategic partnership, similar to the deal it signed with China in 2021. The agreement envisioned the supply of Iranian oil to China at a discounted rate, while Beijing is supposed to invest around $400 billion in Iran’s infrastructure and energy sector under a 25-year cooperation agreement.

Indeed, Iran is keen to attract more Indian investments amid its shrinking economy. Amid a severe economic crisis in Iran, the Ebrahim Raisi government has focused more on deepening ties with their regional allies and expanding cooperation with China, India, and Central Asia.

Consequently, Iran’s membership in the SCO marks its first foray into a regional organization with a defence and security function since its withdrawal from the Central Treaty Organization (CENTO) in 1979. This development will have a number of consequences in different areas, one of the most significant being its impact on the security arrangements in Central Asia.

In addition to the individual partnership, Iran's membership in the SCO will enable it to foster partnerships with Delhi and Beijing, even though it will be hard to manoeuvre between the two partners.

The current geopolitical terms are not a problem for China, Russia, and Iran as their interests are more or less aligned, particularly in light of the Ukraine war. For example, unlike many countries, China and Iran maintain their defence and business ties with Russia and even conducted joint military naval drills in March 2023.

Nevertheless, Iran may struggle to simultaneously initiate joint projects with China and India, considering the ideological disparities between the states and their geopolitical interests. Hence, any arrangement between Russia and Iran with India will have to have the approval of China.

As for India, the country values the partnership with Iran more than with Russia and Central Asian states, as Iran-India are actively engaged in trade partnership within transit route projects, namely the North-South Corridor that runs through Iran’s Chehbahar port and continues toward Russia.

However, the Rasht-Astara railway passing through Azerbaijan, crucial for connecting the land-locked sections of the INSTC, remains a missing link. Trying to speed up this railroad, Moscow and Tehran signed an agreement early this year, and Russia will be investing $1.75 billion for it to be constructed within two years. For many years, Russia, India, and Iran pushed a lot for a breakthrough in the INSTC project, but despite its expansion to more countries, progress remained erratic.

Despite technical obstacles, Delhi and Tehran seem very comfortable with the current partnership level and the emerging new opportunities with Iran’s SCO membership. Moreover, membership in the organization with China and India will open new horizons for Iran to make inroads into the energy-rich Central Asian region and boost its regional influence. In this regard, China has more to offer Iran, unlike India, which keeps a distance in partnership with Iran due to the sanctions.

Any sign of deepening ties with Iran in energy, defence, and economy could raise stakes for India. Delhi has more concerns regarding Chinese influence in the region and, therefore, is balancing the East and West with its SCO membership and participation in the Quad, a small bloc comprising the United States, Japan, and Australia to counter Beijing's clout.

Iran aims to deter Western influence and its long-term isolation by exploring new geopolitical landscapes to get political and economic dividends. In this regard, the SCO membership highlights new favourable conditions for Tehran to stand closer to its main partners, China, India, and Russia, to deepen its security influence.