What is the issue?
- Trump administration is seeking to isolate Iran in the international arena.
- This has put India in a tight spot, as it has been pursuing deep business and strategic ties with both Iran and the U.S.
How is India currently engaged with Iran and U.S.?
- Iranian Engagement - Iran has been a major crude supplier to India, and India is the 2nd largest buyer from Iran (China is the 1st).
- India’s investment in the Iran has been increasing and recently, India committed to enhance its investments in the Chabahar Port by $500 million.
- India is also in the process of securing Iran’s Farzad –B gas field and has promised to increase its oil off-take from Iran by 25% this year.
- It has also committed to build a rail road to Afghanistan, a project that will help India circumvent Pakistan and enhance cooperation with Afghanistan.
- U.S. Engagement - U.S. is India’s largest trading and technological partner and India enjoys a big trade surplus with it.
- Indo-U.S. defence ties have been growing in recently years and strategic engagements between them are strong.
- But recently, the ties have come under severe strain due to imposition of tariffs on Indian goods and India’s engagements with China and Russia.
What is the challenge now?
- Recently, Trump administration, has asked India to cut trade ties with Iran, which is straining India to take a stand.
- Considering the situation, more than the energy security perspective, it is the geopolitical aspects of the directive that worries India.
- If India overlooks U.S. pressures and continues engagements with Iran, it risks antagonising an all powerful trade and strategic partner.
- On the contrary, if U.S. directives are adhered to, Iran might turn hostile to Indian projects on its soil like Chabahar Port and the allied transit corridors.
- Notably, Iran is already hedging the fallouts of a confrontation with U.S. by seeking to engage with EU and other powers like China.
How did India navigate the previous such situation?
- In 2012, the Obama administration wanted to maximise pressure on Iran in order to secure a deal for curtailing Iran’s nuclear program.
- Back then, Obama had sent tough messages to New Delhi through discreet channels (unlike Trump’s open threats), to reduce ties with Iran.
- India had then agreed to cut oil imports by 15% subsequently, but asserted its autonomy, by attending a meet with Iranian leaders in Tehran.
- India even operationalised a ‘rupee-rial’ mechanism, under which Iran could use some of its oil bills with India to procure India goods.
- While the current government would seek to emulate its predecessor’s line on the issue, the stakes are higher this time.
What lies ahead?
- Complex negotiations between New Delhi and Tehran, and New Delhi and Washington are likely in the near future.
- Considering the increasingly globalised business context, it would be risky for India to face U.S. sanctions as it might affect business considerably.
- Obliging to the U.S. fully will reduce India’s independent stature, and countries like China and Turkey have already refused to comply with U.S.
- As India can’t afford to antagonize both Iran and the U.S., it needs to play its card correctly to tide over this diplomatic tussle.
Source: Indian Express
