Exclusive: Iran’s instability threatens India’s trade and energy amid China’s growing influence, says ex-diplomat

Iran instability threatens India’s trade, energy

India has invested heavily in projects that enhance its regional connectivity and energy security. Among the most critical is the Chabahar port, located on Iran’s southeastern coast. The port provides India a direct route to Afghanistan and Central Asia, bypassing Pakistan, offering a strategic corridor for trade and regional influence. Similarly, the International North-South Transport Corridor (INSTC), a multi-modal network linking India to Russia and Europe via Iran, forms a central pillar of India’s regional trade strategy, reducing reliance on longer maritime routes, former diplomat Anil Trigunayat told Moneycontrol in an interview.

Trigunayat stressed the stakes for India:

"India wants stability and security in the region. For us, Iranian stability is very, very important. We also have a very large population of Shia in India. Both the Chabahar port and the INSTC are very critical objectives and projects for India."

He highlighted the risks posed by continued unrest:

"If there is definite, continued volatility for prolonged periods in Iran, that will be very adversely impacting our own interests. So I think that India will also be taking into account all these factors and the way things are playing out."

In practical terms, instability in Tehran could slow operations at Chabahar, disrupt trade flows along the INSTC, and compromise India’s broader regional engagement plans. This makes Iran’s political and economic health directly relevant to India’s strategic and commercial interests.

Regional trade and logistics threat

Beyond individual projects, Iran’s instability can affect India’s broader trade and logistics ecosystem. Delays at ports, customs slowdowns, or infrastructure disruptions could ripple across supply chains connecting India to Central Asia, Russia, and Europe.

Trigunayat elaborated:

"New Delhi wants to ensure that trade and regional connectivity continue smoothly. Any significant disruption in Iran, especially if infrastructure or ports are affected, will have direct ramifications for India’s regional logistics and economic engagement."

This is particularly critical as India works to expand its footprint in Eurasian trade, integrate its markets with West Asia, and secure alternative transport routes. A volatile Iran could mean longer transit times, higher costs, and uncertainty for Indian exporters and importers, directly impacting businesses and regional investments.

China’s growing influence

With Venezuela largely unavailable as an oil partner, China has been strengthening its relationship with Iran, increasing oil imports and projecting influence in the region. Trigunayat clarified the nuance:

"As far as China is concerned, China is a very close partner of Iran. It has been buying a lot of Iranian oil in sustaining the economy of Iran. At the same time, now with Venezuela nearly closed, I think they will likely want to import more from Iran."

He emphasised India’s continued leverage and historical ties:

"But will it directly impact India’s interest? I don’t think so, because Iranians also want to spread their friendships across the aisle. That is why they are keen to talk to India, to remain a strategic partner, because of the civilisational connect that we have."

This underscores that while China’s influence in Iran is growing, India retains a unique civilisational and diplomatic bond with Tehran, allowing it to remain a valued partner even as the regional balance shifts.

India’s strategic response

Given the complex dynamics, India is likely to pursue quiet diplomacy rather than overt alignment, focusing on stabilisation and de-escalation. Trigunayat explained:

"India will have to continue to talk to all the other regional powers. It is not that Iran is a small country or totally ineffective. It is still very strong. Any war or conflict there can destabilize the whole region, directly impacting India — energy security will be affected, the welfare of our diaspora will be in question, and economic engagement will be disrupted."

He added that India’s approach aims to diffuse tensions while respecting Iran’s internal sovereignty:

"Therefore, India will be more proactive in trying to see the situation gets diffused, while respecting Iran’s internal sovereignty. The next few days are very important and critical, but most likely it appears the regime this time will survive."

India’s focus is clear: protect energy interests, secure trade corridors, and maintain regional influence, while avoiding entanglement in Iran’s internal politics or US-Iran tensions.

Why this matters for India

Iran’s political instability is not just a diplomatic or security concern, it carries real economic consequences for India. Disruptions at Chabahar or along the INSTC could increase trade costs, delay critical shipments, and impact the welfare of the Indian diaspora. Any prolonged unrest could also affect energy imports, especially crude supplies, which are vital for India’s growing economy.

At the same time, India must navigate a complex geopolitical landscape, balancing China’s growing influence in Iran with its own historical ties. As Trigunayat points out, Tehran seeks to maintain multiple partnerships, providing India the space to protect its interests while promoting regional stability and connectivity.