Under US shadow

After the civil nuclear deal with the United States, New Delhi is clearly seen as Washington's ally for good or for bad.

Our relations with Iran can be clearly divided into two phases in the new millennium. The pre-‘Indo-US Civil Nuclear Deal’ period (up to June 2005), and the ‘post-2005 period’. Before 2005, India and Iran dealt with each other as sovereign nations, independent of their relations with any other country.

India imported large quantities of crude oil from Iran as it did not want to be solely dependent on any one source from the Gulf. Though our imports of crude were largest from Saudi Arabia, Iran was our second largest supplier accounting to an annual bill of $12 billion to $14 billion at its peak.

Our civil nuclear deal with the US changed all that. We were now clearly seen as US allies for good or bad. One of our first acts after the agreement was to vote against Iran in the International Atomic Energy Agency (IAEA) General Conference of September 2005, an act that went against all our previous votes but helped send the Iran dossier to the United Nations Security Council (UNSC) for failure to comply with the IAEA inspections regime of its nuclear activities. That was the beginning of the rift.

Soon after, India started soft-pedalling on the Iran-Pakistan-India oil pipeline. That pipeline hardly had any prospect of materialising as it was to traverse much of its route through a terrorist-infested territory in Pakistan but our message to Iran was clear.
Subsequently, as the then Obama administration tightened the sanctions on Iran in the fall of 2011, we gradually reduced our imports of Iranian oil to less than $4 billion per year by around 2014.

What really hurt our relations with Iran was our inability to pay for the oil imports in US dollars. The US Treasury systematically shut out all our banking options, first a German bank and then a Turkish bank. Later, we worked out part payment in Indian rupee and part in credit to Iran’s payments to a third country.

It must be said, however, to the credit of Obama that he never gave up his efforts for a negotiated settlement of the nuclear issue with Iran. The Joint Comprehensive Plan of Action that was signed between Iran and the P5+1 countries on January 16, 2016 was to begin a new era of peace for Iran but the much-promised prosperity is yet to come.
India began to reap the benefits of the West’s rapprochement with Iran and soon our oil imports started to rise. Prime Minister Narendra Modi’s government renewed the stalled Chahbahar project and began a series of visits by our ministers. This was capped by a visit of Modi to Tehran in May 2016.

That gave a significant push to our bilateral relations as India decided to commit billions of dollars in the Chabahar Free Trade Zone (FTZ) to set up industries ranging from aluminium smelters to urea plants. Shipping Minister Nitin Gadkari declared on the occasion that India’s investments could go up to “over Rs 1 lakh crore” in the Chabahar FTZ. Iran too returned the favour by granting us the Farzad B gas fields to the Oil and Natural Gas Corporation-led consortium for exploration.

Phase of uncertainty
Now, with President Donald Trump in the White House, a new phase of uncertainty has emerged in India’s relationship with Iran. Trump, during his campaign days, had threatened to tear up the nuclear deal with Iran calling it a ‘bad deal’. Now that he is in office, he seems to have been advised that ‘tearing up the deal’ is not such a good idea as the other signatories to the deal (UK, France, Germany, Russia and China) may not do the same. Nevertheless, the US Senate passed a legislation to halt the sale of Boeing and Airbus commercial planes to Iran, and then went on to renew the ‘Iran Sanctions Act’ for another 10 years.

On January 27, 2017, President Trump signed an executive order titled ‘Protecting the Nation from Foreign Terrorists’ and placed Iran in a list of seven countries whose nationals were banned entry into the US. The Trump administration imposed a fresh set of sanctions on Iran on February 3, 2017, for test firing a ballistic missile in a clear message that Iran has not really entered a ‘post-sanctions era’ and that he was not going to be as ‘kind’ as former president Obama.

Soon after Trump was sworn-in in January 2017, India’s foreign secretary and national security adviser were quick to meet their US counterparts and a few Republican senators. On March 26, NSA Ajit Doval went to the US and met his new counterpart H R McMaster. He also had a meeting with the new Defence Secretary John Mattis, who had threatened Iran not to provoke the Trump administration with any more missile tests, as Michael Flynn (the earlier NSA who lasted a month in his job) declared Iran ‘has been put on notice’.
Surprisingly, soon after the NSA’s return to Delhi, the Ministry of External Affairs (MEA) asked the departments concerned to go slow on the projects planned for the Chabahar FTZ. The MEA asked the Fertiliser Department to instruct the state-run Rashtriya Chemicals and Fertilisers to go slow in selecting an Iranian partner for the proposed urea plant. A similar message was sent to the National Aluminium Company for the proposed $3 billion investment in the aluminium smelter plant.

While this decision has been taken on the possibility of Indian investments getting caught in the crossfire of US sanctions on Iran, what is striking is the inability to protect and defend our bilateral relationships from becoming hostage to the arbitrariness of American policies. Certainly if Russia and China could do business with Iran, we should be able to do too.

(The writer is Visiting Fellow, Observer Research Foundation)

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