Iran — The Iran Dilemma

India’s strate­gic inter­est in main­tain­ing a pro­duc­tive rela­tion­ship with Iran con­flicts with Unit­ed States’ strate­gic inter­est in a regime change there. India’s polit­i­cal and eco­nom­ic inter­ests in Iran are appar­ent, whether they relate to ener­gy secu­ri­ty, eas­i­er access to Afghanistan, coun­ter­ing Pak­istan-backed Tal­iban in Afghanistan, prof­it­ing from con­tra­dic­tions between Iran and Pak­istan and main­tain­ing a bal­anced pos­ture on the Iran-Sau­di Ara­bia and the devel­op­ing Shia-Sun­ni divide in West Asia. A strate­gic part­ner­ship should have an ele­ment of reci­procity. If India is to take cog­nizance of vital US strate­gic con­cerns, the reverse should be the case too in some mea­sure. The US has tol­er­at­ed nuclear and mis­sile coop­er­a­tion between Chi­na and Pak­istan as it strate­gi­cal­ly bal­anced Indo-Sovi­et ties in the cold war era. Pakistan’s nuclear capa­bil­i­ty was seen as India-cen­tric, not a region­al prob­lem. Even today the US is unwill­ing to make an issue of China’s con­tin­ued sup­port to Pakistan’s nuclear pro­gramme in vio­la­tion of the NSG guide­lines. The fren­zied west­ern oppo­si­tion to Iran’s nuclear pro­gramme con­trasts with the atti­tude to Pakistan’s pro­gramme.

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US pol­i­cy towards Iran con­sti­tutes a big diplo­mat­ic headache for India. Iran cast a shad­ow even on the nego­ti­a­tions with the US on the nuclear deal. The US leg­is­la­tion enabling coop­er­a­tion with India’s civil­ian nuclear sec­tor gra­tu­itous­ly called for an align­ment of India’s pol­i­cy on Iran with that of the US. Since then US inter­locu­tors have per­se­vered in per­suad­ing India to see the Iran­ian real­i­ty through their eyes and down­grade ties with that coun­try. They pre­sume that India needs to rec­i­p­ro­cate Unit­ed States’ strate­gic ini­tia­tive on the nuclear deal by being recep­tive to Amer­i­can demands on the Iran­ian ques­tion. In this back­ground, it should not cause any sur­prise if in fur­ther sanc­tion­ing Iran, the US dis­re­gards India’s inter­ests there.

India has to give pri­or­i­ty to its ener­gy secu­ri­ty, par­tic­u­lar­ly as it already imports 70 per cent of its oil and gas needs and this fig­ure will increase to 90 per cent in the years ahead. While it has diver­si­fied its sources of oil sup­ply, Iran remains its sec­ond largest sup­pli­er after Sau­di Ara­bia, pro­vid­ing about 12 per cent of its annu­al require­ments worth about US$ 12 bil­lion. Iran has the sec­ond largest reserves of gas in the world and can also be a source of either pipeline gas or LNG if pipeline secu­ri­ty issues can be resolved and Iran can have access to embar­goed LNG tech­nol­o­gy. With Iran geo­graph­i­cal­ly locat­ed vir­tu­al­ly next door it makes no sense for India to com­pro­mise its long term inter­ests there by cut­ting off or reduc­ing oil pur­chas­es from that coun­try for extra­ne­ous polit­i­cal rea­sons.

This arti­cle is pub­lished with the kind per­mis­sion of “Defence and Secu­ri­ty Alert (DSA) Mag­a­zine” New Del­hi-India

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The gov­ern­ment has shown polit­i­cal grit in resist­ing US pres­sure to dilute even our ener­gy rela­tion­ship with Iran. The Finance Min­is­ter has expressed most recent­ly in Chica­go India’s inabil­i­ty to dras­ti­cal­ly reduce its oil sup­plies from there. We have stat­ed our will­ing­ness to abide by UN sanc­tions on Iran but not those by indi­vid­ual coun­tries. Iran is not an easy part­ner and its con­duct is ques­tion­able on many counts. Its deci­sion mak­ing process­es are con­vo­lut­ed and its pos­tures on Israel and the Holo­caust are need­less­ly provoca­tive

We have to wor­ry addi­tion­al­ly about com­pe­ti­tion from Chi­na which needs mas­sive oil imports to fuel its fre­net­i­cal­ly grow­ing econ­o­my. Chi­na has already out-com­pet­ed us in a few coun­tries in the oil sec­tor, though in some cas­es our com­pa­nies have entered into col­lab­o­ra­tive arrange­ments to avoid under-cut­ting each oth­er. It is believed that the Gulf region will be the major source for meet­ing India’s and China’s future needs, with falling US depen­dence on oil and gas from this region. Chi­na already has a big head start over us in secur­ing its oil and gas needs from the Gulf region and Cen­tral Asia. In Iran it is now solid­ly entrenched. As mem­ber of the Secu­ri­ty Coun­cil and pos­sess­ing enor­mous finan­cial resources, Chi­na has bar­gain­ing pow­er that we lack. It can defy US and EU sanc­tions more eas­i­ly than us, while its mas­sive exports to the glob­al mar­ket give it the capac­i­ty to enter into barter arrange­ments with coun­tries like Iran. We are floun­der­ing when it comes to pay­ing Iran in dol­lars or euros for the oil we buy, where­as Chi­na has worked out a barter sys­tem based on trans­ac­tions in yuan. India has now reached an under­stand­ing with Iran to pay for 45 per cent of the oil bought in rupees which will be used for Indi­an goods and project exports to that coun­try. With India reluc­tant to amass huge rupee funds and Iran con­cerned about exchange rate fluc­tu­a­tions of the rupee. There are issues to be worked out still, but this seems to be the most prac­ti­cal way out. In any case, India would still be fac­ing the chal­lenge of pay­ing for 55 per cent of its pur­chas­es in hard cur­ren­cy.

Even before the enhanced US and EU sanc­tions, India had prob­lems in invest­ing in Iran’s petro­le­um sec­tor because of con­cerns about poten­tial appli­ca­tion of the 1996 Iran-Libya Sanc­tions Act of the US restrict­ing invest­ment in Iran’s oil sec­tor to US$ 20 mil­lion a year. For that rea­son we have not been able to take hard deci­sions on invest­ing in the off­shore Far­si block (which would require almost US$ 5 bil­lion of invest­ments over sev­en-eight years) and the huge SP-12 gas field. While the gov­ern­ment is opposed to the extra-ter­ri­to­r­i­al appli­ca­tion of US laws, it is also reluc­tant to enter into a polit­i­cal con­flict with the US at a time when the rela­tion­ship is pro­gres­sive­ly shed­ding the inhi­bi­tions and sus­pi­cions of the past and enter­ing into a new phase. More­over, our banks are unwill­ing to jeop­ar­dise their US oper­a­tions or risk being denied access to the US finan­cial sec­tor if they dis­re­gard US sanc­tions, with the result that de fac­to India observes them. All this points to the need to have a clear­er pol­i­cy in prac­tice to pre­serve our equi­ties in Iran and not lose ground there irre­triev­ably to Chi­na.

US pol­i­cy towards Iran con­sti­tutes a big diplo­mat­ic headache for India. Iran cast a shad­ow even on the nego­ti­a­tions with the US on the nuclear deal. The US leg­is­la­tion enabling coop­er­a­tion with India’s civil­ian nuclear sec­tor gra­tu­itous­ly called for an align­ment of India’s pol­i­cy on Iran with that of the US. Since then US inter­locu­tors have per­se­vered in per­suad­ing India to see the Iran­ian real­i­ty through their eyes and down­grade

US-Iran ten­sions are hurt­ing India in oth­er areas too. As India is unable to get access to Afghanistan through Pak­istan, Iran pro­vides a log­i­cal alter­na­tive. India, Iran and Afghanistan should have a shared inter­est in reduc­ing Afghanistan’s depen­dence on Pak­istan by giv­ing the for­mer an alter­na­tive access to the sea. India took the strate­gic deci­sion to build in Afghanistan the Zaranj-Delaram sec­tion of the road direct­ly link­ing the Chaba­har port in Iran to Kab­ul. India and Iran have dis­cussed this project sev­er­al times but progress has been tardy, with Iran slow­ly work­ing on upgrad­ing the port facil­i­ties and build­ing the nec­es­sary rail links in the hin­ter­land. India would be will­ing to invest in infra­struc­ture at Chaba­har but with­out the port declared a Free Trade Zone poten­tial investors think the eco­nom­ics may not be favourable. Even ear­li­er, Iran’s tense rela­tions with the West were prob­lem­at­ic for large scale invest­ments in the coun­try, but now with the sit­u­a­tion fur­ther dete­ri­o­rat­ing and the West engaged in eco­nom­ic war­fare against Iran, the appetite for such invest­ments has got reduced. For India the Chaba­har route acquires even more impor­tance in the con­text of its planned invest­ments in the Haji­gak iron ore project in Afghanistan. Beyond tran­sit to Afghanistan, the height­en­ing ten­sions in the region will also delay plans to devel­op tran­sit facil­i­ties through Iran to Cen­tral Asia and Rus­sia (the North-South Cor­ri­dor), from which India and oth­er coun­tries could have ben­e­fit­ed great­ly.

India’s strate­gic inter­est in main­tain­ing a pro­duc­tive rela­tion­ship with Iran con­flicts with Unit­ed States’ strate­gic inter­est in a regime change there. India’s polit­i­cal and eco­nom­ic inter­ests in Iran are appar­ent, whether they relate to ener­gy secu­ri­ty, eas­i­er access to Afghanistan, coun­ter­ing Pak­istan-backed Tal­iban in Afghanistan, prof­it­ing from con­tra­dic­tions between Iran and Pak­istan and main­tain­ing a bal­anced pos­ture on the Iran-Sau­di Ara­bia and the devel­op­ing Shia-Sun­ni divide in West Asia etc. India is not play­ing any anti-west­ern game in Iran or putting non­aligned sol­i­dar­i­ty ahead of its improv­ing ties with the US. In fact, bar­ring sourc­ing oil sup­plies, which, inci­den­tal­ly, are indis­pens­able for the Man­ga­lore refin­ery, India’s over­all rela­tion­ship with Iran is mod­est in scope. India has not pro­ceed­ed with exist­ing petro­le­um sec­tor projects, con­sid­ered very attrac­tive by ONGC / OVL, because of a reluc­tance to fall afoul of US sanc­tions.

On the sen­si­tive nuclear issue, India has already annoyed Iran by vot­ing against it in the IAEA in the past. This was crit­i­cised domes­ti­cal­ly as our step was imput­ed to US pres­sure. India has expressed pub­lic oppo­si­tion to any Iran­ian nuclear weapon pro­gramme and, while recog­nis­ing its right to peace­ful uses of nuclear ener­gy, has asked Iran to com­ply with its NPT oblig­a­tions and respond to the queries raised by the IAEA about some of its nuclear activ­i­ties. India is cog­nizant of the adverse region­al con­se­quences of Iran going nuclear. We would want sta­bil­i­ty in the Gulf region where we have vast ener­gy and trade inter­ests and where sev­er­al mil­lion expa­tri­ates reside, remit­ting home annu­al­ly bil­lions of US dol­lars.

But we can nei­ther make com­mon cause with the US against Iran on the nuclear issue nor share its apoc­a­lyp­tic view of Iran’s nuclear ambi­tions. India itself has long suf­fered from US-led inter­na­tion­al sanc­tions tar­get­ting our nuclear pro­gramme. Worse, the US has tol­er­at­ed nuclear and mis­sile coop­er­a­tion between Chi­na and Pak­istan as it strate­gi­cal­ly bal­anced Indo-Sovi­et ties in the cold war era. Pakistan’s nuclear capa­bil­i­ty was seen as India-cen­tric, not a region­al prob­lem. Even today the US is unwill­ing to make an issue of China’s con­tin­ued sup­port to Pakistan’s nuclear pro­gramme in vio­la­tion of the NSG guide­lines. The fren­zied west­ern oppo­si­tion to Iran’s nuclear pro­gramme con­trasts with the atti­tude to Pakistan’s pro­gramme even though under cov­er of its nuclear capa­bil­i­ty Pak­istan has used ter­ror­ism as an instru­ment of state pol­i­cy, ear­li­er against india and now even against US inter­ests. Pak­istan not only escapes sanc­tions despite its rogue con­duct, it con­tin­ues to be engaged as a mat­ter of pol­i­cy, iron­i­cal­ly for the rea­son that pres­sur­ing it may result in its col­lapse as a state and its nuclear weapons may fall into the hands of extrem­ists, mak­ing the sit­u­a­tion worse. With Iran the approach is open­ly coer­cive, with mil­i­tary threats evoked from time to time to pre­vent it from going nuclear. Sim­ply because the Pak­istani lead­er­ship does not rant against Israel and the real­i­ty of the Holo­caust does not make Pak­istan less dis­rup­tive of region­al sta­bil­i­ty, or less an incubus of extrem­ist reli­gious ide­olo­gies with their ter­rror­ist links that endan­ger peace and devel­op­ment.

A strate­gic part­ner­ship should have an ele­ment of reci­procity. If India is to take cog­nizance of vital US strate­gic con­cerns, the reverse should be the case too in some mea­sure. If the US does not con­sid­er Pak­istan a black and white case and there­fore its Pak­istan poil­cy has to be insert­ed into a region­al fame­work, the same con­sid­er­a­tions apply to Indi­an pol­i­cy towards Iran. In fact Pak­istan threat­ens India’s secu­ri­ty direct­ly, with­out this inhibit­ing the US from arm­ing it, where­as Iran threat­ens US’s extend­ed region­al inter­ests and not its ter­ri­to­ry direct­ly.

The US should there­fore take cog­nizance of India’s legit­i­mate inter­ests in Iran that tran­scend the present sit­u­a­tion. US elec­toral pres­sures should not affect the barom­e­ter of ten­sions in the Gulf, nor should India be expect­ed to accept with­out demur the nar­row, domes­ti­cal­ly-dri­ven, Israel-incit­ed US con­cerns about Iran. The US should not put seri­ous con­straints on India’s oil pur­chas­es from Iran as the latter’s nuclear defi­ance can­not be coun­tered by under­min­ing India’s ener­gy secu­ri­ty and its broad­er region­al inter­ests.

India itself has long suf­fered from US-led inter­na­tion­al sanc­tions tar­get­ing our nuclear pro­gramme. Worse, the US has tol­er­at­ed nuclear and mis­sile coop­er­a­tion between Chi­na and Pak­istan as it strate­gi­cal­ly bal­anced Indo-Sovi­et ties in the cold war era. Pakistan’s nuclear capa­bil­i­ty was seen as India-cen­tric, not a region­al prob­lem. Even today the US is unwill­ing to make an issue of China’s con­tin­ued sup­port to Pakistan’s nuclear pro­gramme in vio­la­tion of the NSG guide­lines. The fren­zied west­ern oppo­si­tion to Iran’s nuclear pro­gramme con­trasts with the atti­tude to Pakistan’s pro­gramme even though under cov­er of its nuclear capa­bil­i­ty Pak­istan has used ter­ror­ism as an instru­ment of state pol­i­cy, ear­li­er against India and now even against US inter­ests

It is polit­i­cal­ly sim­plis­tic to sug­gest that India can buy more oil from Sau­di Ara­bia in case Iran­ian sup­plies get dis­rupt­ed. Sau­di Ara­bia has announced that it will increase its out­put to com­pen­sate for non-avail­abil­i­ty of Iran­ian oil in the inter­na­tion­al mar­ket, to which Iran has respond­ed sharply. Indi­an oil sup­plies from Iran have in any case got reduced because of pay­ment dif­fi­cul­ties com­pared to vol­umes import­ed a cou­ple of years ago. Our pri­vate sec­tor play­ers could well reduce their pur­chas­es fur­ther. India can react appro­pri­ate­ly to com­mer­cial exi­gen­cies but we should not become an engaged par­ty in polit­i­cal manoeu­vres against Iran on oil sup­plies.

Our effort should be to avoid get­ting entan­gled in the mount­ing Iran-Sau­di Ara­bia rival­ry as much as pos­si­ble as there is a deep­en­ing sec­tar­i­an basis to it. Sau­di Ara­bia fears ris­ing Iran­ian pow­er may make the Shias in Arab coun­tries more restive against oppres­sive Sun­ni dom­i­na­tion, threat­en­ing the pow­er of the elites in the Gulf coun­tries. India’s pro­duc­tive rela­tions with Sau­di Ara­bia and oth­er Gulf monar­chies in the field of ener­gy sup­plies, trade, invest­ment, man­pow­er and remit­tances have, of course, to be pre­served. How­ev­er, India, with its own large Mus­lim pop­u­la­tion com­posed of Sun­nis and Shias, should not be seen get­ting caught in the sec­tar­i­an pol­i­tics of West Asia. We should main­tain a dynam­ic bal­ance between our inter­ests in the Arab world and Iran. US align­ment with Sau­di Ara­bia and the Gulf coun­tries against Iran is not suf­fi­cient rea­son for India to tai­lor its poli­cies accord­ing­ly. This would be com­mon sense, not the lin­ger­ing influ­ence of non­align­ment in india’s think­ing.

India is accused by for­eign as well as domes­tic crit­ics for being a fence-sit­ter, of avoid­ing hard choic­es, of unwill­ing­ness to accept, as a ris­ing glob­al pow­er, respon­si­bil­i­ties at the glob­al lev­el that come with an enhanced inter­na­tion­al sta­tus. India would pre­sum­ably pass the test of act­ing respon­si­bly if it sided with the US and the West on Iran, Libya, Syr­ia and, ear­li­er, on Myan­mar. We have to be care­ful about such argu­ments. It is well to remem­ber that coun­tries make deci­sions in the light of their nation­al or alliance inter­ests, not on the basis of abstract prin­ci­ples. When inter­ests and prin­ci­ples are in har­mo­ny, prin­ci­ples can be invoked to give a moral cov­er to self-inter­est, but when prin­ci­ples and inter­ests col­lide, prin­ci­ples are often aban­doned. Pro­tect­ing human rights and pro­mot­ing democ­ra­cy are unex­cep­tion­able prin­ci­ples but are applied selec­tive­ly in prac­tice in con­son­sance with self-inter­est. The prin­ci­ples of non-inter­ven­tion in the inter­nal affairs of coun­tries and respect for nation­al sov­er­eign­ty are being vio­lat­ed by pow­er­ful coun­tries in order to shape the inter­na­tion­al or region­al envi­ron­ment to their advan­tage. India’s enhanced inter­na­tion­al sta­tus does not require it to give up inde­pen­dence of judg­ment or endorse west­ern poli­cies on the pre­sump­tion that they are nec­es­sar­i­ly right. Assum­ing respon­si­bilty at the glob­al lev­el should actu­al­ly mean sup­port­ing or oppos­ing west­ern poli­cies as nec­es­sary for the equi­table func­tion­ing of the inter­na­tion­al sys­tem. If India gives weight to its own inter­ests in craft­ing its pol­i­cy towards Iran, just as the West does, it does not mean India is shirk­ing its glob­al respon­si­bil­i­ty. It means that India favours a less one-sided inter­na­tion­al view of the com­plex Iran­ian prob­lem.

It is not the mon­ey Iran earns from sale of oil to India or oth­ers that will deter­mine its nuclear deci­sions. Much more impor­tant is Iran’s polit­i­cal judg­ment on the advan­tages and dis­ad­van­tages of going nuclear. As it is, polit­i­cal devel­op­ments have moved in its favour after the empow­er­ment of the Shias in Iraq. The so-called Arab Spring has kin­dled the Shia com­mu­ni­ties of West Asia, gen­er­at­ing pres­sure on Sun­ni regimes. Does Iran need to go nuclear to con­sol­i­date its polit­i­cal advan­tage? On the face of it, Iran is being pushed to the lim­it to go nuclear by west­ern poli­cies of eco­nom­ic war­fare and mil­tary intim­i­da­tion. The remark­able patience they are show­ing in the face of threats of regime change could either reflect lack of domes­tic con­sen­sus on the sub­ject or tech­ni­cal inabil­i­ty to devel­op a nuclear weapon at this point. It is not clear whether the net­works that A Q Khan exploit­ed for Pakistan’s clan­des­tine acqui­si­tion of nuclear weapon tech­nol­o­gy have been uproot­ed to the extent that Iran can­not use them. Can Chi­na, which is still sup­ply­ing nuclear and mis­sile tech­nol­gy to Pak­istan, be relied upon to behave “respon­si­bly” in this regard?

On the whole, the gov­ern­ment has shown polit­i­cal grit in resist­ing US pres­sure to dilute even our ener­gy rela­tion­ship with Iran. The Finance Min­is­ter has expressed most recent­ly in Chica­go India’s inabil­i­ty to dras­ti­cal­ly reduce its oil sup­plies from there. We have stat­ed our will­ing­ness to abide by UN sanc­tions on Iran but not those by indi­vid­ual coun­tries. Iran is not an easy part­ner and its con­duct is ques­tion­able on many counts. Its deci­sion mak­ing process­es are con­vo­lut­ed and its pos­tures on Israel and the Holo­caust are need­less­ly provoca­tive. India is play­ing its dif­fi­cult hand on the Iran­ian ques­tion as well as it can. The US should show bet­ter under­stand­ing of India’s stakes in Iran. India can­not ask the US for exempt­ing it from the appli­ca­tion of its lat­est sanc­tions as it would mean accept­ing the extra-ter­ri­to­ri­al­i­ty of its laws. India should do what it must do and hope that the US will take into account its devel­op­ing strate­gic rela­tion­ship with India to decide what it should do.

About the Author
Amb Dr Kan­w­al Sibal — Amb Dr Kan­w­al Sibal joined the Indi­an For­eign Ser­vice in 1966. He reached the high­est posi­tion in the Indi­an For­eign Ser­vice on his appoint­ment as For­eign Sec­re­tary to the Gov­ern­ment of India from July 2002 to Novem­ber 2003. He is a mem­ber of India’s Nation­al Secu­ri­ty Advi­so­ry Board. He is on the Board of Direc­tors of the New York based East-West Insti­tute. He is on the Advi­so­ry Board of the Vivekanand Inter­na­tion­al Foun­da­tion. He has received the high dis­tinc­tion of Grand Offici­er of the Ordre du Merite from France.

Note by the Author:
India has to give pri­or­i­ty to its ener­gy secu­ri­ty, par­tic­u­lar­ly as it already imports 70 per cent of its oil and gas needs and this fig­ure will increase to 90 per cent in the years ahead. While it has diver­si­fied its sources of oil sup­ply, Iran remains its sec­ond largest sup­pli­er after Sau­di Ara­bia, pro­vid­ing about 12 per cent of its annu­al require­ments worth about US$ 12 bil­lion. Iran has the sec­ond largest reserves of gas in the world and can also be a source of either pipeline gas or LNG if pipeline secu­ri­ty issues can be resolved and Iran can have access to embar­goed LNG tech­nol­o­gy. With Iran geo­graph­i­cal­ly locat­ed vir­tu­al­ly next door it makes no sense for India to com­pro­mise its long term inter­ests there by cut­ting off or reduc­ing oil pur­chas­es from that coun­try for extra­ne­ous polit­i­cal rea­sons

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