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10 April 2012, Pragati

Between Washington and Tehran

Over the past thirty years, the U.S. and Iran have been at odds over Iran's alleged nuclear weapons programme. India too has a large stake with both countries - with the U.S. as a strategic partner and Iran for its oil imports - and resolving this conundrum will require some creative diplomacy.

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Resolving India’s Iranian conundrum will require some creative diplomacy

As even a cursory look at Western newspapers these days will show, the world has entered a new round of antagonism in the confrontation over Iran’s alleged atomic weapons program. Ronen Bergman’s article in the New York Times is the latest to suggest that Israel is on the verge of an attack on Iran’s nuclear facilities.

Since both US and Israeli intelligence have concluded, however, that there is no evidence that Iran has actually decided to build a nuclear weapon, this cycle of sabre-rattling is better seen as part of a larger effort to ensure that punitive measures (and not diplomacy) remain the preferred means of dealing with Tehran. Thus Washington has succeeded in convincing the Europeans, and ostensibly the Russians and Chinese, to participate in ever-tighter sanctions against Iran, persuading Saudi Arabia to increase energy outputs to make up for the shortfall.

In this context, India, Washington’s “natural ally,” appears to be a potential spoiler. It was in the middle of this standoff that India eclipsed China as the number one importer of Iranian crude oil, relying on Iran for about 12% of its supply. And for a time, India had provided Tehran with over 30% of the refined gasoline that Iran consumed. This energy relationship has been so intimate, in fact, that many of India’s refineries have been constructed to run on Iranian crude, and would have to go through difficult retrofitting procedures to be able to process oil from other countries.

New Delhi has kept this economic relationship alive in the face of sanctions by devising “creative” means of engaging Iran. These include creating new corporate entities that are independent of Western financial institutions, purchasing Iranian oil with gold rather than dollars (reverting to a barter system that requires Iran to buy Indian goods), and sending currency through institutions such as Turkey’s Halkbank, which remains outside the purview of Western sanctions. New Delhi worries that if it drops Iran, Beijing could easily the pick up the pieces under preferential financial terms, while any shock to India’s energy supply could threaten its growth in the midst of a global recession.

Former US Under Secretary of State R. Nicholas Burns, long a staunch supporter of India’s rise, recently lambasted New Delhi for its intransigence on the issue of censuring Iran, arguing that despite this energy dependence, “India has had years to…make alternative arrangements.” Indeed, the foundational document of Indo-US amity, the 2006 nuclear deal, contains multiple references to India’s full participation in efforts to “dissuade, isolate, and, if necessary, sanction and contain Iran.”

Yet, forsaking Iran would not be as simple as shifting energy suppliers. Because Pakistan has not allowed open transit trade between Afghanistan and India, New Delhi is forced to look further afield. By constructing a road from Iran’s Chabahar port on the Arabian Sea to western Afghanistan, India has gained strategically pivotal access to Central Asia. This 135-mile road, along which India is constructing a railway, is far shorter and more reliable than the two other routes in Pakistan that connect landlocked Afghanistan to the sea. The road is the most efficient transit route to Central Asia and ends Pakistan’s monopoly on Afghanistan’s maritime trade, which has been a key enabler of Islamabad’s pernicious influence in Kabul’s affairs. The link gives India direct access to the mineral resources of Afghanistan and ultimately the vast energy supplies of Central Asia, including Iranian, Turkmen, and even Kazakh — natural gas — not to mention the ability to physically step into the political fray should it come to that.

Given the fact that it is a relatively stable, energy-rich geographic lynchpin, Iran cannot be discounted so easily. And of course, given India’s long-term objectives of balancing China, cooperating in defence matters, and accessing markets, neither can America. Or even Saudi Arabia and Israel — Delhi’s number one sources of hydrocarbons and foreign exchange, and arms, respectively — relations with whom may also come under the weight of New Delhi’s ties with Tehran.

In balancing these divergent interests, it appears that India has little choice but to continue to juggle its ties with both blocs; to oscillate between siding with Washington (as in India’s IAEA votes condemning Iran and decision to prohibit oil purchases through the Asian Clearing Union) and supporting Tehran (as in Delhi’s continued investment in Iran) as situations arise.

Yet given the current configuration, this will inevitably amount to each relationship severely limiting the other. One of the most emblematic examples of Indo-Iranian cooperation, for example, the Iran-Pakistan-India gas pipeline, was thwarted due primarily to pressure from Washington and the resulting disputes with Tehran over pricing. An alternative proposal to access Iranian natural gas — liquefied natural gas plants that keep imports fungible and reduce dependence on any one country — also requires American-made parts that are restricted under the Iran Sanctions Act (ISA), which limits annual investments in Iran’s energy sector exceeding $20 million. US-Iranian enmity is a fly in almost any ointment.

Of course, none of these countries deal with New Delhi out of the kindness of their hearts; they do so because they too need Indian money or longer-term strategic assistance. India is not without leverage. Still, faced with such a conundrum, India ought to revamp its nonalignment doctrine for the new world — and do so by taking a page from the other “swing states” in the international system. Turkey in particular has used its multi-civilisational clout and broad-ranging interests to successfully mediate between parties from the Balkans to Mesopotamia and the Levant. In 2010 Ankara even joined forces with Brasilia to broker a deal in which Tehran agreed to parameters on its nuclear program recognized by US President Barack Obama: that Iran’s low-enriched uranium (LEU) be shipped abroad, that a swap for fuel rods take place outside of Iran, and that the rods be delivered to Iran after nine to twelve months. (Washington nonetheless rejected the resulting ‘Tehran Declaration’ for being too little, too late).

India ought to take a turn at facilitating an unofficial dialogue between Washington and Tehran — perhaps in tandem with countries like Turkey and Brazil — until a more public engagement is possible. In addition to stabilising Afghanistan, countering Sunni militants like the Taliban, enabling energy and commodities trade throughout the region, reducing regional dependence on Pakistan, working toward a stable Gulf, and limiting Chinese influence in the region, paradoxically, nuclear issues, which Washington insists on addressing above all, may in fact be an area of confluence.

An early hiccup in the US-India nuclear deal was what was to be done with spent nuclear fuel, radioactive waste that is no longer able to generate energy but can be reprocessed for industrial and medical uses. That question was resolved in 2010 with the establishment of an international reprocessing centre in India that would serve the entire region. The centre could tie up the loose ends of the US-India nuclear deal while serving as a credible host to Iran’s LEU while the l
atter awaits reprocessed fuel for its own civilian reactors.

Of course, given the current standoff, it appears unlikely that either side is ready to compromise at the moment; both are taking pains to convince the world of the wisdom of their positions and dragging it down with them.

Yet, as Trita Parsi writes, “only through sustained, persistent, and patient diplomacy” that engages “the many power centers in each country — the supreme leader’s office, the parliament, the president’s circle of advisers, the National Security Council and influential clergymen…the White House, the State Department, the Pentagon and Congress,” the private sector, media, and K Street — can agreement be reached. For India, this would include more effectively (and less self-righteously) projecting its own narrative on events in Central Asia in global and American media.

Though Washington stayed in constant contact with Moscow even at the height of Cold War tensions, it has not had a direct means of communicating with Tehran in over thirty years. New Delhi can provide that bridging power to ensure that its own interests — and the world’s — are reconciled and not threatened through a debilitating regional conflict.

Neil Padukone is the Fellow for Geopolitics at the Takshashila Institution.

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Copyright © 2012 by Pragati The Indian National Interest Review.

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