India–Iran Trade Relations Under the Shadow of USA Sanctions

Abstract

India and Iran have a long history of cooperation on various issues ranging from economic to strategic importance. However, the present phase of cooperation is as old as end of the cold war and reached a peak during the period 2001–2003 with the Tehran and Delhi declarations, which established a substantial set of framework for enhanced cooperation. In the present times given the changing regional and global economic and security conditions, many attempts have been made by both countries to increase their cooperation. Since Islamic revolution, Iran faces continuous confrontation and sanctions from the West and the USA. Iran has continuously tried to improve its relations with its neighbours and other friendly countries to minimize the impact of these sanctions which are badly affecting its economy. India, on the other hand, has been growing at a faster pace from last many years which has increased its energy requirements. Given Iran’s nuclear programme and its confrontation with the West and India’s energy requirements, both countries are working together to sustain their economic and energy cooperation from last many years. In 2015, both countries signed a memorandum of understanding worth USD 195 million for the development of Chabahar Port situated in south-eastern Iran and India agreed to make the investment in infrastructural development of Iran. Through this port, India will get easy access to Central Asian and Afghanistan which will increase its trade relations with these countries. The aim of this research article is to examine the impact of sanctions on Iran due to its nuclear programme on trade relations between India and Iran by using threshold autoregressive model and using trade variables including exports and imports. JEL Codes: 00, 05, 05