PM Modi meets Hassan Rouhani, India, Iran sign pacts after ‘substantive’ talks

Prime Minister Narendra Modi with Iranian President Hassan Rouhani at Hyderabad House in New Delhi on Saturday. Photo: PTI

New Delhi: Trade, investment and regional connectivity between India and Iran received a boost on Saturday with the two countries signing a dozen pacts including one on double taxation avoidance and another for the leasing by an Indian company of a container terminal facility in Iran’s strategically located Chabahar port. New Delhi is keen to develop the port to access Afghanistan, bypassing Pakistan.

The pacts were signed after “substantive” talks between Prime Minister Narendra Modi and visiting Iranian President Hassan Rouhani in New Delhi.

The two countries also exchanged documents bringing an extradition treaty signed between the two countries in 2008 into force.

Rouhani, who arrived in Hyderabad on Thursday, is the first Iranian President to visit India in a decade. The last presidential visit was by then president Mahmoud Ahmadinejad in 2008.

“Both leaders held substantive & productive discussion on cooperation in trade & investment, energy, connectivity, defence & security & regional issues,” said a Twitter post by external affairs spokesperson Raveesh Kumar soon after the two leaders sat down for talks.

The Iranian president’s visit to New Delhi comes after a four nation trip by Modi to West Asia and the Gulf region, which has seen new alignments with Israel and many of its former adversaries—the Gulf Arab states like Saudi Arabia and the United Arab Emirates—seemingly allied against Shia majority Iran. The region is of key significance to India given that it hosts about 7 million expatriate Indians, a source of valuable foreign remittances and energy for Asia’s third largest economy.

Ties between India and Iran have in the past been buffeted by the impact of international sanctions on Tehran mainly for its nuclear programme. But with Iran reaching a pact with the international community on the subject in 2015, India-Iran ties have gathered momentum. In May 2016, Modi visited Iran and the two sides signed a pact for the development of the Chabahar port. India and Iran also signed another trilateral pact with Afghanistan that would allow the transport of goods among the three countries.

Boosting economic and trade links

According to information provided by India’s ministry of external affairs, the pact on “the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on Income,” was signed to “avoid burden of double taxation between the two countries in order to promote flow of investment and services.” The pact, under discussion for a decade, was signed and exchanged on Saturday, Deepak Mittal, joint secretary in charge of Iran in India’s foreign ministry told reporters.

A PTI report quoting a statement from the Central Board of Direct Taxes said the pact would “stimulate flow of investment, technology and personnel from India to Iran and vice versa, and will prevent double taxation.”

“It will improve transparency in tax matters and will help curb tax evasion and tax avoidance,” the report quoting the statement said adding it meets the latest minimum standards set by the G-20 (Group of 20) Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting Project.

Separately, the Engineering Export Promotion Council of India and the Trade Promotion Organization of Iran signed a pact for increasing collaboration.

Three other Indian industry lobbies—the Federation of Indian Chambers of Commerce and Industry (Ficci), the Associated Chambers of Commerce and Industry of India, and the PHD Chamber of Commerce and Industry—signed separate pacts with the Iran Chamber of Commerce, Industries, Mines & Agriculture to boost trade.

During talks between Rouhani and Modi, it was agreed that the two sides would look at concluding a preferential trade agreement and a bilateral investment treaty to improve trade and commercial links, Mittal said.

Modi and Rouhani also “recognised the need to put in place an effective banking channel for business transactions,” the joint statement said. “It was noted that permission for the Iranian Pasargadbank to open a branch in India was under advance consideration. It was also agreed to set up a Joint Committee of officials to examine feasible options... to establish functional payment channels,” it said.

Connectivity

The pact on connectivity—the lease contract for the Shahid Beheshti Port, Phase 1 of Chabahar—allows an Indian company, India Ports Global Ltd (IPGL), to take over the interim operations of the port at Chabahar, Mittal said.

The pact was signed between Iran’s Port and Maritime Organization and IPGL and permits the latter to operate the terminal for “a term of one and half solar year (18 months).”

The India-Iran joint statement released after the Modi-Rouhani talks said “India conveyed its readiness to support the development of Chabahar- Zahedan Rail line,” that will aid the transport of goods right up to the Afghan border. Indian and Iranian companies, engaged in discussions of the railway line construction “were tasked to finalise the technical parameters and financing options for the project in a time bound manner,” the joint statement said.

“Both leaders encouraged greater efforts for cooperation in railway sector including supply of steel rails, turnouts and locomotives,” it added.

“The Iranian side expressed its readiness to enhance enabling environment to attract Indian private and or public sector investments, in Chabahar FTZ (free trade zone),” the joint statement said. “In this context, Iran will organise a business promotion event, with participation of countries from the region and beyond, with the objective of showcasing the economic opportunities offered by the Chabahar Port,” it added.

India is trying to develop the port of Chabahar on Iran’s east coast as a way to gain access to the markets of Central Asia as well as Afghanistan by bypassing Pakistan. The port is about 72km from the Pakistani port of Gwadar, which China is developing.

Energy cooperation

On energy cooperation, the joint statement said India and Iran had “agreed to move beyond traditional buyer-seller relationship and develop it into a long term strategic partnership.”

Foreign ministry official Mittal added that both sides had spoken of making the energy partnership a more “comprehensive” one. India and Iran are currently engaged in trying to reach an agreement over India developing Iran’s Farzad-B gas field. Ahead of Rouhani’s arrival in New Delhi, a delegation from the National Iranian Oil Company had held crunch talks with Indian authorities to see whether an agreement could be struck. According to New Delhi, Iran has shifted the goalposts several times since the start of negotiations on the deal in 2007.

Iran has been trying to reach a better bargain with India after crippling economic sanctions against it were eased following its 2015 nuclear pact with six world powers—the US, UK, Russia, France, China, and Germany, according to news reports.

In his comments to reporters, Rouhani said Iran was “fully ready” to intensify cooperation in the areas of energy.

Terrorism, Afghanistan and other issues

According to Mittal, there was unanimity of views between India and Iran on the need to condemn terrorism in all its manifestations and that sanctuaries for terrorism must be destroyed.

“Iran and India have a common stance on confronting terrorism and extremism, and we are determined to confront terrorism and extremism through culture and the exchange of information and experience,” Rouhani said a statement to reporters after talks with Modi.

On Afghanistan, an immediate neighbour of Iran and a country that India sees as part of its extended neighbourhood, Modi and Rouhani were unanimous on the need for any peace process in the country to be Afghan owned and Afghan-led, Mittal said.

Iran and India, along with Russia, were the three main backers of the erstwhile Northern Alliance resistance group seen as ranged against the Taliban in the 1990s. But now Iran and Russia seemingly have differences with India with the former perceiving the Islamic State as the bigger threat in Afghanistan than the Taliban. According to analysts, the change in stance is also due to the US presence in Afghanistan that Russia and Iran are watching warily given that neither have a good relationship with Washington.