India – Iran: riding the crest of political commotion

By K.N. Pandita

India and Iran, the two Asiatic neighbours are the inheritors of a rich and ancient civilization. Their peoples trace ethnic commonality in the Aryan saga of the hoary past. Their dialects are sourced in the Vedic Sanskrit.


With the shaping of Iran’s Islamic revolution in 1979 under the leadership of grand patriarch Ayatollah Ruhollah Khomeini, the millennia-old Iranian monarchical system was replaced with Islamic theocracy of Shi’a brand. The new political arrangement had a far-reaching impact on regional strategies forcing a realignment of perspectives and concerns in the West Asian and the Gulf region.

With the rise of a theocratic regime and the type of radicalism it espoused, two countries namely the US and the Saudi Kingdom came directly into the focus of its impact. Iran’s hatred for the US was rooted in the recent history of how the US brazenly suppressed the populist Musaddegh-led leftist movement of the 1950s. Iran felt that the US was obstructing her aspiration of nationalizing the oil industry, the backbone of her economy. The Shah played in the hands of his American handlers but only to lose his crown and the kingdom at the end of the day. To his American buddies now he was only “a dead mouse” in their own words.

Iran’s race-based and politico-sectarian rivalry with the Saudis is almost proverbial. She labels the Saudi Kingdom a spineless American proxy to impose her hegemony on the entire Gulf region. Khomeini gave his anti-Saudi spite a new dimension by challenging that the House of Saud was not the sole Keeper (Trustee) of the holiest place of the Muslims meaning the Ka’aba. Sharpening his anti-Saudi tirade, Khomeini asserted that the institution of monarchy was anti-Islamic and that all monarchs from the times of the Umayyad down to his day anywhere in the Islamic states were all “usurpers”.

India did not find it necessary to question Khomeini’s political philosophy. However, when he pontificated that Islamists had their religious duty to replace all world religions with Islam, India looked at it with caution because a vast majority of Indian Muslims professes the Shia’ faith.

Theocratic Iran’s animus against Israel, a country with which she does not have a common border or a clash of commercial interests, is for two reasons. One is that Iran thinks the majority of Jewish members in the American Congress play a crucial role in consolidating American-Saudi camaraderie to the detriment of Iran. Many top American business magnates and oil barons have huge economic interests in the oil-rich Gulf. The second reason is that knowing the Arab nations are soft-peddling with the State of Israel; Iranian clergy wants to tell the world that they are more Islamic than any other Islamic state despite being non-Arabs, and, thereby, establish the legitimacy of Shi’a ascendency.

Notwithstanding the nitty-gritty of Islamic Republic of Iran’s political and religious prognosis, India adopted the route of trade and commerce for stabilizing her ties with the important Gulf nation without getting mired into her religious transformation or regional political entanglement. Of course, India’s first priority was uninterrupted oil supplies from Iran. Iran’s trade with India exceeded US$13 billion in 2007, an 80 per cent increase in trade volume within a year. Trade conducted via third-party countries such as the UAE this figure reaches $30 billion.

Energy resource

With crude oil imports from Iran increasing by 16.5 per cent, Iran emerged as India’s second largest oil supplier. About 40 per cent of the refined oil consumed by India is imported from Iran. In June 2009, Indian oil companies announced their plan to invest US$ 5 billion in developing an Iranian gas field in the Persian Gulf. Taking note of expanding oil trade between India and Iran, in 2010 the US officials warned New Delhi that Indian companies using the Asian Clearing Union (ACU) for financial transactions with Iran run the risk of violating a recent US law that bans international firms from doing business with Iranian banks and her oil and gas sector and that Indian companies dealing with Iran in this manner may be barred from the US. The United States criticized the ACU of insufficient transparency and suspected the assets being funnelled to “blacklisted repressive organizations”. This made the Reserve Bank of India issue instructions to the country’s lenders to stop processing current-account transactions with Iran using the ACU channel. Notwithstanding this hurdle, India objected to further American sanctions on Iran in 2010 and stated that she would continue to invest in Iranian oil and do business. An Indian foreign policy strategist dismissed the idea that a nuclear-armed Iran was a threat to India. Despite increased pressure by the US and the EU and a significant reduction in oil imports from Iranian oil fields in 2012, leading political figures in India stated that they were not willing to stop trade relations altogether. To the contrary, they aimed at expanding the commodity trade with the Islamic republic.

Though the overall history of Indo-Iranian relationship is not dull and unsavoury yet there have been intermittent periods of closeness as well as of distancing from each other temporarily. This is owing to the complexities arising out of shifting strategic, economic and political interests. Developing countries have gone through variegated experiences and have also learnt how to harmonize their national interests with the harshness of the realpolitik.

Iran and India both considered the rise of Pakistan-supported Sunni extremist Afghan Taliban in the 1990s as a threat to the well being of their societies. Both supported the Northern Alliance in Afghanistan against the rabid Taliban regime. The two countries collaborated in supporting the broad-based anti-Taliban government of President Ashraf Ghani, which has the backing of the United States. They have signed a defence cooperation agreement in December 2002. Iran objected to Pakistan’s attempts to draft anti-India resolutions at international organizations such as the OIC in 1994. Reciprocating this goodwill gesture, India supported Iran’s inclusion as an observer state in the South Asian Association for Regional Cooperation (SAARC). Some Iran watchers believe that India withdrew from the IPI gas pipeline project because the US had agreed to provide India with a nuclear energy source. This thinking actually emanated from a reckless statement of a frustrated Pakistani diplomat given to the Iranian newspaper Mehr. The fact is that there were differences in the end cost of gas supplied to India under the IPI project. More importantly, India had many misgivings about the security of the pipeline passing through the turbulent Baluchistan province of Pakistan. However, there have been occasions when differences in the policy perception of the two countries interacted. When India voted against Iran in IAEA, Iranian Supreme Religious leader Ayatollah Khamenei broadcast an appeal to the Muslims of the world to “support the struggle of Kashmiris against oppression.” New Delhi had to summon the Iranian Ambassador for lodging a protest. Iran has been a votary to anti-India resolutions on Kashmir recurrently passed by the OIC.

These hiccups notwithstanding, there is a wide spectrum of cooperation and collaboration between the two countries in a host of areas. Iran-India collaboration in infrastructure building is conspicuous by its political and strategic outreach. The Zaranj-Delaram Highway built with India’s financial support gives India access to Afghanistan bypassing Pakistan. The Iranian port of Chahbahar in the Gulf of Oman is jointly developed by the two countries. India plans to invest 20 billion US dollars in the prestigious project. The port will give India access to the energy resources in Iran and the Central Asian states. India, Iran and Afghanistan have signed an agreement to give Indian goods, heading for Central Asia and Afghanistan, preferential treatment and tariff reductions at Chabahar. Iran and India are jointly upgrading the Chabahar-Milak road and India’s BRO is laying the 213 km Zaranj-Delaram road. The Chabahar port project is Iran’s chance to end its US-sponsored economic isolation. Along with Bandar Abbas, Chabahar is the Iranian extra port on the North-South corridor. A strategic partnership between India, Iran and Russia is intended to establish a multimodal transport link connecting Mumbai with St Petersburg, providing Europe and the former Soviet republics of Central Asia access to Asia and vice versa.

North-South Transport Corridor

Another important facet of Indo-Iranian collaboration in infrastructure development area is of the North-South Transport Corridor. The ship, rail and road route will be used to move freight between northern and southern countries of the Eurasian region. The route primarily involves India, Iran, Azerbaijan and Russia providing trade connectivity to major cities like Mumbai, Bandar Abbas, Tehran, Baku, Bandar Anzali etc. The transport costs are expected to be reduced by the US $ 2,500 per 15 tons of cargo

Nuclear dilemma

Away from these crucial elements of Indo-Iranian relationship, a situation was developing in Iran that adversely impacted their cordial relationship but certainly not of their choosing. The US and the European powers had come to know that Iran was clandestinely engaged in developing the weapon of mass destruction. They would not allow her to have the nuclear device because of her avowed hostility towards the two important allies of the US in the region, namely Israel and Saudi Arabia and also the strategic importance of the security of the Gulf.

Suspicions that Iran was using its nuclear energy programme as a cover to develop a nuclear bomb prompted the UN, US and EU to impose sanctions on Iran with the aim of persuading the country to curb its sensitive nuclear activities. Iran defended her stand by insisting that its nuclear programme was peaceful. Nevertheless, in 2015 it reached a deal with 5+1 countries – the US, UK, France, China, Russia and Germany. Suspicions that Iran was using its nuclear energy programme as cover to develop a nuclear bomb prompted the UN, US and EU to impose sanctions with the aim of persuading the country to curb its sensitive nuclear activities.

Iran insisted its nuclear programme was peaceful. This notwithstanding, in 2015 Iran agreed to a long-term deal on its nuclear programme with a group of world powers known as the P5+1 – the US, UK, France, China, Russia and Germany. In the Joint Comprehensive Plan of Action Iran agreed to limit the enrichment of uranium, which is used to make reactor fuel but also nuclear weapons; redesign a heavy-water reactor being built, whose spent-fuel would contain plutonium suitable for a bomb; and allow inspections by a global watchdog. In return, relevant sanctions were lifted, allowing Iran to resume oil exports – the government’s main source of revenue.

The crisis

President Donald Trump’s abandoned the deal in May 2018 and began reinstating sanctions. In November 2018, the sanctions targeting Iran’s oil and financial sectors took effect.

Evidently, sanctions have triggered an economic meltdown in Iran and soaring inflation.

Iran has now responded by scaling back its commitments under the deal. It suspended obligatory sales overseas of surplus enriched uranium and heavy water. It also gave the five countries, still party to the deal, 60 days to protect Iranian oil sales from US sanctions. If they failed, Iran would suspend its restrictions on uranium enrichment and halt the redesign of its heavy-water reactor.

Trump administration says that the JCPOA is unfair to the US. Its argument is that Iran is clandestinely and secretly increasing its capability of manufacturing a nuclear device. Trump also accuses Iran of patronizing terrorist outfits in the Middle East.

However, Russia and China find Iran adhering to the clauses of the JCPOA and the IAEA, too, believes that Iran has not violated the agreement. The European powers are not prepared to abandon their interests to the policy of Trump administration essentially because of their extensive trade relations with Iran. In short, there is a stalemate of sorts in which Iran is bringing pressure on the European powers to decline suspension of the JCPOA by the US.

India, along with some more big customers of Iranian oil, like China and Japan, has been drawn into the vortex of Iran-US controversy over the nuclear deal. Iran is a key player in the crude market as it meets 3 per cent of the global demand and is the third largest producer in the Organization of the Petroleum Exporting Countries (OPEC) contributing 2.5 million barrels per day. Iran meets 80 per cent of India’s requirement for the crude oil which computes to 4.34 million barrels per day. This explains Iran’s significance to India.

Apart from meeting the quantum of our requirement, Iranian crude exporters offer India easy terms like extending 60-day credit period for payments which is twice the average period extended by other export parties in the market. Added to the extended credit period is the cheap freight option for shipping Iranian oil to Indian shores and these factors together make Iran an attractive supplier of crude oil for India.

No more waivers

Trump administration has announced it is not going to give India (and other countries in the loop) a second waiver. Obviously, India will have to face a difficult situation when oil supplies from Iran are stopped. New Delhi does see a contradiction in Washington’s policy in the region. If its concept of “free and open” Indo-Pacific region, where China is flexing its muscles, is the baseline for countering China’s growing influence, then the denial of Iranian oil to India does not fit in this chemistry. Understandably, India is on the horns of dilemma how to wriggle out of a precarious situation. Trump’s main allegation is that Iran uses oil money to fund terrorism in the Middle East and continue with her aggressive designs in the Gulf. Trump administration holds Iran responsible for the recent attack on an American oil tanker in the Gulf. India and the US are on the same page as far as the policy of counter-terrorism is concerned.

Political circles believe that India’s effort to prepare Washington for another waiver did not succeed nor did India’s goodwill mission bring forth a thaw in the frozen relations between Tehran and Washington. When Teheran got the indication that India would not resist oil sanctions, her supreme religious leader threatened that Iran could opt for a link between Gwadar and Chabahar ports, which she knows would offend India and the US both.

US Secretary of State Pompeo will be visiting India on June 24 as his first stop of a week-long tour of the Indo-Pacific region. His meeting will be followed by the Trump-Modi summit in Osaka where they will be attending the G-20 meeting. Apart from the Iranian oil sanctions issue, there are other irritants between India and the US which are likely to be discussed. On June 5, the US removed India from the list of its preferential trade partners.

Thus, in the final analysis, we find that sanctions on Iran’s oil supplies and financial assets are gradually assuming bigger dimensions in which two major Asiatic countries namely China and India are directly affected. One aspect of the sanctions imposed on Iran is that besides Russia and China, the European Union does not consider it a step in the right direction.
(The writer is the former Director of the Centre of Central Asian Studies, University of Kashmir).

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