As India takes it seat on the United Nations Security Council as the new non-permanent member after nearly a two-decade hiatus, India’s latest move vis-à-vis Iran has signalled New Delhi’s desire to be viewed as a responsible rising power and a potential permanent member of the Security Council. The Reserve Bank of India (RBI) has declared that oil payments to Iran can no longer be settled using the Asian Clearing Union (ACU) mechanism — it is a system run by the central banks of nine countries, including India and Iran. This was a bold move, for India imports 12 million barrels of crude oil every month from Iran, which accounts for 12 per cent of India’s supplies. As the two countries try to find ways to solve this problem permanently, India will be paying for Iranian crude oil through a German bank based in Hamburg as an interim measure.
It was Iran that had asked India to use the ACU to avoid being targeted by the US sanctions. The ACU mechanism made it difficult for third countries to trace transactions and that ambiguity has troubled Washington for some time. The US has complained that the transactions lacked transparency, allowing payments to be made to Iranian companies controlled by groups banned under the sanctions regime. The US was quick to support India’s decisions, suggesting the RBI “has made the right decision to carefully scrutinise and reduce its financial dealings with the Central Bank of Iran”.
The US has long wanted India to scale down its dealings with Iran. But India continues to view Iran as an important regional player, especially in the context of the evolving security situation in Afghanistan where Iran is seen as a potential bulwark against growing Pakistani influence. Notwithstanding this convergence on Iran, recent months have seen a significant cooling in the Delhi-Tehran ties. Iran’s Supreme Leader Ali Khamenei has described Kashmir as a “besieged” region of the world. He has been speaking of Kashmir in the same breath as Pakistan and Afghanistan and asked the Islamic community to assist in the “struggle” against “aggressions” of the “Zionist regime”. When Khamenei’s diatribe was repeated in November, India made its displeasure known by issuing a demarche and, as a first, abstained from voting on a United Nations resolution condemning the state of human rights in Iran.
The pace of economic and trade cooperation between Delhi and Tehran has slackened. Recent attempts by the two to insulate their oil trade from western sanctions have not been very productive. Indian oil imports from Iran have declined this year in light of the Reliance Industries ceasing to use crude oil from the Persian Gulf State, even abandoning its plans to invest in an oil refinery in Iran. The companies that have invested more than $20 million in Iran find it hard to deal with the western corporate sector given the sanctions regime. The Iran-Pakistan-India (IPI) project has not moved while the Turkmenistan-Afghanistan-Pakistan-India (TAPI) project has recently got the green light. After 15 years of negotiations, the four states signed the TAPI pipeline deal last December, although it is unclear how quickly the project can move forward given the worsening security situation in Afghanistan and the Pakistani Baluchistan region.
India has continued to affirm its commitment to enforce all sanctions against Iran as mandated by the Security Council since 2006 when the first set of sanctions was imposed. However, like Beijing and Moscow it has argued that such sanctions should not hurt the ordinary populace of Iran. India and Iran have long held significantly different perceptions of the global nuclear order. Iran was not supportive of India’s nuclear tests in 1998 and backed the UN Security Council Resolution that asked India and Pakistan to cap their nuclear capabilities by signing the Non-Proliferation Treaty (NPT) and the Comprehensive Nuclear Test Ban Treaty (CTBT). Iran has repeatedly called for a universal acceptance of the NPT, much to India’s discomfiture. Though Iran has claimed this was directed at Israel, this has far-reaching implications for India too. The conclusion of the Indo-US nuclear deal saw Iran warning that the pact had endangered the NPT and would trigger new “crises” for the international community.
Iran’s position on several other issues crucial to India has been against India’s interests. India’s position on the Iranian nuclear question is relatively straightforward. Though India believes Iran has a right to pursue civilian nuclear energy, it has insisted Iran should clarify the doubts raised by the International Atomic Energy Agency (IAEA) so far as Iran’s compliance with the NPT is concerned. India has long maintained that it does not see any further nuclear proliferation as being in its own interests. This position has as much to do with India’s desire to project itself as a responsible nuclear state as with the very real dangers that further proliferation in its extended neighbourhood would pose to its own security.
The crucial regional issue on which India and Iran need each other is the evolving security situation in Afghanistan. America’s Af-Pak policy in particular has been causing consternation in Delhi and Tehran. Iran is worried about the potential major role for leaders of the almost exclusively Sunni Taliban in the emerging political dispensation in Afghanistan. It has even encouraged India to send more of its assistance to provinces in northern and western Afghanistan that are under the control of those associated with the Northern Alliance. India is now part of a trilateral initiative on Afghanistan and this India-Iran-Afghanistan initiative is aimed at countering Pakistan’s attempts to freeze India out of various other regional initiatives. Both New Delhi and Tehran are unlikely to accept a political dispensation in Kabul that serves as a springboard for the projection of Pakistani military’s interests. But that can happen only if Iran is also interested in stabilising Afghanistan. If Tehran’s interests are primarily driven by its desire to see America’s withdrawal, then New Delhi will be forced to re-think its approach towards Iran.
India’s ties with Iran will continue to face problems in the comings years and will remain inherently unstable. New Delhi’s outreach to Tehran will remain circumscribed by the internal power struggle within Iran, growing tensions between Iran and its Arab neighbours and Iran’s continued defiance of the global nuclear order. As a rising global power, India will have to make some tough choices in the months to come and the road ahead will not be an easy one.
The writer is with the Department of Defence Studies,King’s College London
