Why India is ignoring US sanctions and sticking with Iran
It's not just about oil – there's a complex interconnection of geopolitics and geoeconomics between the two countries
By
PEPE ESCOBAR JUNE 3, 2018 1:07 PM (UTC+8)
India buys Iranian oil with rupees, circumventing the US dollar. Illustration: iStock
Pay very close attention to what India’s External Affairs Minister, Sushma Swaraj,
said after meeting with Iranian Foreign Minister Mohammad Javad Zarif earlier this week in New Delhi:
“Our foreign policy is not made under pressure from other countries … We recognize UN sanctions and not country-specific sanctions. We didn’t follow US sanctions on previous occasions either.”
After fellow BRICS members China and Russia, India left no margin for doubt. And there’s more; India will continue to buy oil from Iran – its third top supplier – and is willing to pay in rupees via state bank UCO, which is not exposed to the US. India bought 114% more oil from Iran during the financial year up to March 2018 than in the previous term.
India-US trade amounts to $115 billion a year. In comparison, India-Iran trade is only $13 billion a year. India may grow an impressive 7% in 2018 and has reached a GDP of $2.6 trillion, according to the IMF, ahead of France, Italy, Brazil and Russia. To keep growing, India badly needs energy.
So for New Delhi, buying Iranian energy is a matter of national security. Couple it with the obsession in bypassing Pakistan, and it’s clear this is all about a complex interconnection of geopolitics and geoeconomics.
The comprehensive India and Iran partnership revolves around energy, trade and investment connectivity corridors, banking, insurance, shipping and – crucially – the imminent possibility of doing everything using the rupee and the rial, bypassing the US dollar.
India-Iran already trade in euros – so that is step one in bypassing the long arm of the US Department of the Treasury. Both nations are still using SWIFT. Assuming the EU does not give in to the unilateral US violation of the Iranian nuclear deal, known as the JCPOA, India’s oil imports won’t be sanctioned.
If that’s the case, step two will be turbo-charging the already booming trade in rupees and rials to the energy front – facilitated by the fact Tehran has invested in upgrading and perfecting insurance for its fleet of tankers.
Indian Prime Minister Narendra Modi’s Hindu nationalist Bharatiya Janata Party’s (BJP) energy strategy, unsurprisingly, needs to cover all fronts; solar, wind, oil and gas. Not only is Iran central to the strategy; Central Asia also features heavily, with New Delhi eagerly expecting to import oil and gas from Turkmenistan, certainly transiting via Iran and Kazakhstan.
New Delhi, by all means, needs plenty of access to natural gas from South Pars, the largest gas fields on the planet; either via the still ongoing Pipelineistan soap opera IPI (the Iran-Pakistan-India pipeline) or, more plausibly, an underwater pipeline from the Persian Gulf to the Indian Ocean.
Enter the Indo-Pacific Command
Also not surprisingly, the Holy Grail for India is Iran-related: the so far $500 million investment in Chabahar port in the Indian Ocean, as well as completing the Chabahar-Zahedan railway. Chabahar is the starting point of the Indian version of the New Silk Roads, linking India to Afghanistan and Central Asia, bypassing Pakistan.
For Indian trade, a straight sea lane to Iran and then overland to Central Asia, including direct access to the mineral wealth of Afghanistan, is absolutely invaluable. A trilateral memorandum of understanding signed two years ago committed $21 billion: $9 billion for the whole Chabahar project and the rest for developing Afghan iron ore.
If Iran, for Beijing, is a solid hub in the New Silk Roads, or Belt and Road Initiative (BRI), and an essential plank in the Eurasia integration project, Tehran is simultaneously courted by New Delhi as a counterpunch to one of BRI’s standout projects, the China-Pakistan Economic Corridor (CPEC).
So it’s no wonder that the External Affairs Ministry in New Delhi continuously raves about the India-Afghanistan-Iran connectivity corridor, “from culture to commerce, from traditions to technology, from investments to IT, from services to strategy and from people to politics,” in the words of Swaraj.
Washington’s counterpunch so far has been to rename PACOM – the Pacific Command, which includes India, China, Mongolia, Southeast Asia, Australia, Antarctica, in fact, the entire Pacific Ocean – as the
“Indo-Pacific Command,” thus flattering New Delhi. Most of all, the move aligns with the Indo-Pacific strategy deployed by the Quad – US, India, Japan, Australia – which is a barely disguised containment of the China follow-up mechanism to the Obama administration’s pivot to Asia.
It’s still unclear how the Trump administration might “punish” New Delhi for non-stop trading with Tehran. In the case of Russia – also under sanctions – pressure is relentless. India has been encouraged not to buy S-400 air defense systems from Russia. The excuse is not exactly subtle; that would “complicate interoperability” with US forces and “limit … the degree with which the United States will feel comfortable in bringing additional technology” into India, according to House Armed Services Committee chairman Mac Thornberry (R-Texas). New Delhi will announce its decision in October.
The Shanghai Cooperation Organization (SCO) summit in Qingdao, China, on June 9, will be the privileged arena to discuss all these issues. Russia, China, India and Pakistan, as full members, will be there, as well as Iran and Afghanistan as current observers and, inevitably, future members. It’s clear that fellow SCO/BRICS members China, Russia and India will refuse to isolate Iran. And there’s nothing the Indo-Pacific Command can do about it.
