Monday, February 20, 2012

In Need of Oil and Facing State Elections, India Walks a Delicate Tightrope on Iran

As Iran’s global isolation grows amid reports that it’s begun operating a new generation of centrifuges at its main uranium-enrichment facility at Natanz, India is the last major power adamantly maintaining close ties with Tehran.

The West wants India to join Western trade sanctions against Iran and accept its global responsibilities. But India’s resistance to the pressure underlines how deeply intertwined the country’s foreign policy is with its domestic concerns. Loss of Iranian oil and the ability to provide subsidized fuel could affect the electoral outcome for the ruling coalition. The bomb blast in New Delhi last week targeting an Israeli diplomat, which Tel Aviv was quick to blame on Tehran and its proxies, has posed a further challenge to India’s policy makers.

Meanwhile, Iran has pre-empted the West before the latest round of sanctions, due to start this summer, by threatening to block shipments of crude oil to six European nations. And on Wednesday, Iran’s president announced intentions to share nuclear technology abroad.

Publicly, India maintains a brave face. Yet there are growing concerns about Iranian actions making India a battleground for the proxy war between Iran on the one hand and Israel and the West on the other. India too is eager to maintain ties with Iran, as both share concern about preventing a Taliban takeover of Afghanistan after the forthcoming US withdrawal.

The Indian commerce minister was quick to underline that trade between New Delhi and Tehran was unlikely to be affected by recent events. A huge trade delegation is slated to go to Tehran in March to explore export opportunities, which according to some estimates are worth more than $10 billion annually.

So far, India’s response has been low key, but New Delhi is readying itself to tackle the challenge of growing Iranian isolation. Saudi Arabia has offered to make up for the Iranian oil shortfall. But India opposes the US and EU unilateral sanctions, particularly if Turkey blocks India’s use of an intermediary bank to make payments for $12 billion worth of Iranian annual crude exports. US policy makers have warned New Delhi that it would be subject to American sanctions if New Delhi is seen in any way trying to bail out Iran from its tough economic situation.

India imports 12 percent of its oil from Iran, its second-largest supplier after Saudi Arabia. India’s finance minister was merely reflecting on the intersection between domestic and foreign policy when he suggested that it’s impossible for India to “reduce the imports from Iran drastically” in light of a growing budget deficit and need to continue oil subsidies so as not to enrage citizens during a state election year.

India and the United States have begun to transform their ties, with the 2005 framework for the Indian-US civilian nuclear agreement, which accommodated India into the global nuclear order. Given the US obsession, Iran has become a litmus test that India is occasionally asked to pass to satisfy US policy makers: India has been asked to prove its loyalty to the United States by lining up behind Washington at the International Atomic Energy Agency on the question of Iran’s nuclear program.

The Bush administration stated that if India voted against the February 2006 US motion on Iran at the IAEA, Congress would likely not approve the Indian-US nuclear agreement. India finally voted with 26 other nations to refer Iran to the UN Security Council.

Still, many members of Congress continued to demand that Washington make the nuclear deal conditional on New Delhi’s ending all military relations with Tehran, a demand rejected by the Bush administration as it would have led the collapse of the nuclear deal.

At the same time, the Indian Left parties also developed a parallel obsession, making Iran an issue emblematic of India’s “strategic autonomy,” an attempt to coerce New Delhi into following an ideological, anti-American foreign policy.

These trends persist in New Delhi and Washington. Navigating the crosscurrents, India’s official position on the Iranian nuclear question has remained largely consistent. Although India maintains that Iran has the right to pursue civilian nuclear energy, it has insisted that Iran should clarify doubts raised by the IAEA regarding Iran’s compliance with the Nuclear Non-Proliferation Treaty.

India shares with the West the belief that Iranian nuclear ambitions would destabilize the Middle East. The Indian prime minister is on record suggesting that a nuclear Iran is not in India’s national interest. But New Delhi does not have the luxury of viewing Iranian nuclear ambitions only through the prism of Iran-Israel rivalry, a norm in the West. India, a country with sizable Sunni and Shia Muslim populations, must consider this issue from a wider perspective where the Iranian nuclear drive instigates Arab-Iran and Sunni-Shia rivalry.

For Tehran, its nuclear ambitions are as much a counter to a two-front encirclement of Shiites by Sunni Pakistan and Sunni Saudi Arabia as it is about ending Israel’s nuclear monopoly in the region.

The 2010 Saudi-Indian Riyadh Declaration asked Iran to “remove regional and international doubts about its nuclear weapons program.” India even endorsed the Arab call for a nuclear-weapons free Middle East — a proposal traditionally targeting Israel, but increasingly focused on Iran.

India has its own energy interests and would like to increase its presence in the Iranian energy sector. Given rapidly rising energy needs, New Delhi feels restless about its own marginalization in Iran.

Western sanctions over the years have led to an entrenchment of Chinese companies in the Iranian oil and gas sector with contracts worth up to $40 billion in recent years. Chinese companies bring much-needed foreign capital to Iran, and its oil trading companies are likely to be main beneficiaries of the Western embargo on Iranian oil exports.

Where Beijing’s economic engagement with Iran is growing, India’s presence is shrinking, as firms like Reliance Industries have, partially under Western pressure, withdrawn from Iran and others shelve investment plans.

India has enforced UN measures against Iran, often to the detriment of its energy investments. Yet China, as a permanent Security Council member, helps shape UN policy toward Iran and has been able to sustain its own energy business in the country with little trouble.

The strategic reality confronting New Delhi in the Middle East today is that India has significant interests to preserve in the Gulf. As tensions rise between Sunni Arab regimes and Iran, India’s larger stakes in the Arab world will continue to inhibit Indian–Iranian ties. At the same time, New Delhi’s outreach to Tehran remains circumscribed by the internal power struggle within Iran, growing tensions between Iran and Arab neighbors and Iran’s defiance of the global nuclear order.

Tehran’s purported role in a bomb attack on an Israeli Embassy vehicle in New Delhi and the use of India as a platform for such an attack would further intensify pressure on India to curtail its trade relationship with Iran.

Yet given the domestic political situation shaped by the coming elections and growing energy needs, and a looming void in Afghanistan after the US leaves, New Delhi isn’t in a position to jettison Tehran completely in the near future.


Harsh V. Pant teaches at King’s College London.

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