Iran could be the key to cementing India and Japan ties

US President Donald Trump has elevated India and Japan to the top of his list of strategic partners in the Indo-Pacific region. At the same time, US efforts to isolate and redirect Iran away from its nuclear weapons programs resulted in another round of sanctions being implemented in early November.

Iranian sanctions complicate matters for New Delhi and Tokyo in their relationship with Washington, as neither shares the intense US dislike for Tehran. 

Iran will continue to ship oil in lesser amounts to eight nations including India, China, Japan and Turkey after 180-day waivers were approved by the US in early November. Both Japan and India want to ensure their access to Iranian oil and LNG supplies. Japan now obtains 5% of its imported oil from Iran, while India is second only to China as a purchaser of Iranian oil.

With Japan and India seeking to retain ties with Iran, the US faces challenges as it attempts to seal off Iran economically and politically from the rest of the world. Creating an effective alliance with its Indo-Pacific partners such as Japan and India would be much easier if their interests converged, a very rare phenomenon.

A key case may be Chabahar Port on the southern coast of Iran, which India is spending up to $500 million to develop. Chabahar is the most reliable way to connect India to Afghanistan after Pakistan sealed India off from all the direct East-West overland routes years ago.

India has already started to build the related railroad and highway infrastructure. And India is bearing the cost not only financially, but also in lives lost – dozens of Indian workers were killed by the Taliban in the initial phases of the project.

“Beyond oil, Iran and Chabahar are important to India because they allow India access to Afghanistan and Central Asia to circumvent Pakistan,” said James Dorsey, a senior fellow focusing on the Middle East and North Africa at the Rajaratnam School of International Studies (RSIS) in Singapore. “That access is important to India in and of itself as well as in terms of India’s response to China’s Belt and Road Initiative.”

In early November, Washington granted the project a sanctions waiver – the only non-energy sector Iranian waiver granted by the US thus far. And it is not only India that is behind Chabahar: US military officials in the region also endorsed the project last year.

Japan has openly discussed its willingness to invest in Chahabar, but doing so proved difficult given the US stance. Now, the waiver may prod Japan into taking a more active role. Iran is important for both Japan and India as both nations seek to counter China.

But Japan has not yet made a move. Yoshi Kobayashi, a senior economist at the Institute of Energy Economics in Tokyo, told Asia Times that he is, “a little skeptical whether there is any Japanese company that intends to join this development project under the current geopolitical environment, even though the Japanese government shows an interest.”

Japan’s interest in Iran is more about securing energy supply. Recent reports on the Japanese national energy mix by 2030 have concluded that nuclear may fall short. For Tokyo, vast quantities of Russian LNG are close at hand, but the two countries are divided over territorial issues, meaning Russian LNG may not reach Japan any time soon.

“Because Iran holds abundant natural gas resources, Japan also expects that Iran might become another LNG supplier in the future, although currently there is no LNG facility in Iran,” said Kobayashi. “Japan also views Iran as a potential market for its manufacturing products as it has one of the largest populations in the region – 82 million-plus.”

India has energy partnerships with Russia, but it is much less economical for India to obtain its energy supplies from anywhere outside its already energy-rich neighborhood. Another issue is Iran’s geopolitical position.

“Iran is also a major geopolitical player in the region thanks to its location so it is natural that India and Japan would take this into consideration. India and Japan have always had cordial relations with Iran,” Collin Koh Swee Lean, a research fellow at RSIS, told AsiaTimes. “Japan, for example, will not hesitate to speak up for Iran.”

Not everyone agrees that Tokyo has an interest in Iran that goes beyond energy, though.

“It is all about the oil, and ensuring that the flow of oil remains insulated from political sandstorms,” said Jeff Kingston, director of Asian Studies at Temple University Japan. Japan’s hedging strategy in the Middle East is not in play there as Iran is really not that important as a counterweight to the rapid construction by China of vast intermodal infrastructure in Eurasia, Kingston said.

If India and Japan were to partner up in Iran, they do not have much history to fall back on. India and Japan have a limited track record when it comes to sustained shared programs; Indian-Japan bilateral trade was $13 billion last year – but that is dwarfed by the $300 billion that Japanese companies earned in China during the same period.

Yet, when it comes to global competition with China, “India’s interest also becomes Japan’s interest,” said Dorsey. As China continues to make significant inroads into Africa and the Middle East, via its Belt and Road Initiative, Tokyo is reaching out with more modestly-funded alternatives which stress Japan’s ability to deliver quality infrastructure.

“China’s recent gains appear rather discomforting to Japan. And there could be a concern that China’s growing forays and influence in the Middle East and Africa, not just Iran, could be potentially detrimental to Japan’s long-term interests,” said Koh. “However, with the Sino-Japanese rapprochement following Japanese Prime Minister Shinzo Abe’s recent visit to Beijing, there is also an agreement for both countries to cooperate on infrastructure development in third countries. One of the recipients of this joint effort could be Iran.”

India needs to proceed cautiously toward China, and New Delhi’s foreign policy approach emphasizes non-alliance, noted Koh. However, an enhanced strategic partnership between India and Japan can be expected in the face of rising China, as “India has misgivings towards China over a host of issues including its involvement with Pakistan,” Koh said.

For Japan, ties with China encompass multiple contentious issues. “Seen in this context, Iran might turn out to be a party where China, India and Japan could find some form of mutual accommodation,” Koh said.

The US is aware that Iran has considered offering the Chabahar project to China in the event that India retracts or scuttles the agreement New Delhi signed with Iran and Afghanistan in 2016 to develop the port.

For now, Washington looks willing to allow the parties engaged in the Chabahar port development venture the added time to make the port an essential part of an important new land route to Afghanistan.