India – Iran relations under stress

By K.N. Pandita (from July 2, 2019)

The US has withdrawn from the US-Iran nuclear deal arguing that the deal is imbalanced and inequitable. Iran says she has stuck to the terms of the deal but would resumption of enrichment of uranium for manufacturing nuclear device since the US has broken the deal. The US is determined to coerce Iran into abandoning enrichment of uranium. One coercive tactics used by the US is of imposing sanctions on Iranain oil supplies. She has warned major oil customers of Iran like China, India and Japan not to buy Iranian oil because it alleges Iran uses oil booty to fuel terrorism sponsored by Iranian terrorists in the Middle East.

India is on the horns of dilemma. Iran is her major supplier of oil and she is among the oil hungry developing countries. It is said that the US has promised to provide India with nuclear energy to supplement her energy requirements. It may be so, but the question is of relations with an ancient country with which India is bound by numerous ties.

With the rise of a theocratic regime in Teheran, and the type of radicalism it espoused, two countries namely the US and Saudi Kingdom came directly into the focus of its impact. Iran’s hatred for the US is rooted in how the US brazenly suppressed the populist Musaddegh-led leftist movement of 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.

Iran’s race-based and ethno-sectarian rivalry with the Saudis is almost proverbial. She labeled the Saudi monarchs as the stooge of America that wants to impose its hegemony on the entire Gulf region. India did not find it necessary to question Khumeini’s political philosophy. However, when he pontificated that Islamists had their religious duty to replace all world religions with Islam, India looked at Islamic Iran 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-paddling with the State of Israel; Iranian clergy want to tell the Muslim world that they are more Islamic than any other Islamic state despite descending from non-Semitic ethnicity.

Notwithstanding the nitty-gritty of Islamic Republic of Iran’s political and religious prognosis, India adopted the route of trade and commerce for perpetuating her ties with the important Gulf nation without getting mired into her religion-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.

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 funneled 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 unsavory 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.

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