India mustn’t bend to US pressure on Iran

Sanjay Kapoor | Updated on September 23, 2019 Published on September 23, 2019

Spot rates for hauling cargo on oil super tankers, aframaxes and suezmaxes have jumped five-fold. Representative image   -  Reuters

By toeing the US line, New Delhi has squandered major opportunities after making diplomatic and financial investments in Iran

Two days after mysterious drones and missiles, evading Saudi Arabia’s expensive Patriot missile system, blasted state owned Aramco’s refinery in Abqaiq and the oilfield of Khurais, India’s Foreign Secretary Vijay Gokhale was sitting with Iranian officials in Tehran to discuss ways to improve bilateral ties in the area of energy, connectivity and trade in an era of US sanctions against Tehran.

The attack on Abqaiq that spiked oil prices and exposed the vulnerability of Saudi’s promise of uninterrupted oil supplies to its Asian customers allowed Tehran to remind New Delhi that it could restore its supplies whenever it was ready. Iran was one of the biggest suppliers of oil to India before US sanctions brought it to zero earlier in May this year. Iran supplies oil to China, Russia and countries that do not countenance bilateral sanctions. Initially, India had announced that it did not recognise US sanctions, but later succumbed to the pressure.

Though planned earlier, the fact that this meeting between India and Iran was not cancelled after the “game changing” attack on the Saudi Arabian refinery suggests that the Indian government, little by little, is realising how its pusillanimous conduct towards US sanctions has contributed to it squandering major opportunities after making diplomatic and financial investments in Iran. Tehran that was keen to have Indian investments in energy sector and connectivity projects has now given the first right of refusal to China after it inked a gargantuan $250 billion deal with them.

Iranian sources deny that it would have any impact on the much-vaunted trilateral Chabahar project, which India signed in 2016 with Iran and Afghanistan that allowed it to side step Pakistan and access the land route to Central Asia. After the deal that China has signed with Iran, it would now have a larger presence in Chabahar’s freezone now and could give comfort to Pakistan that was worried by India’s presence in its neighbourhood.

What happens to the protracted negotiations with Farzad-B gas-field in the Persian Gulf, where Tehran was keen on Indian participation? Sources in the Iran government claim that the delay in negotiations with New Delhi has allowed Saudi Arabia to extract more gas from the field. Iranian sources claim that they would be soon close the window for negotiations on the gas field if India’s ONGC Videsh (OVL) does not seal the deal.

However the biggest worry for the Indian government has been in its investment in Chabahar. Though Trump administration imposed no sanctions on Chabahar as it was meant for Afghanistan reconstruction, but India’s company mandated to manage the port Shahid Behesti there found it difficult to transfer funds — due to the refusal of Brussels-based SWIFT to process payments to Iran. Though Iranians blame the Indian company for dragging its feet, there is considerable merit in their claim that moving money in a country cramped by sanctions is difficult.

So impeccable has been India’s conduct in following the sanctions till now that a US official in response to a question that it was violating the sanctions through Chabahar port said, “We have no evidence of India running afoul of US sanctions”. However, US officials have been pressuring India to stop trading with Iran to squeeze it further. In the past few months, India’s trade with Iran has jumped to $18.5 billion. Goods other than petroleum are finding their way into the trade portfolio. Iranians are dangling a carrot to New Delhi that they could increase their imports from India if it shows greater “strategic autonomy”.

INSTEX option

India could be helped by the alternative trade system that the European Union has been putting together after US sanctions prevented countries from using a dollar-led SWIFT to trade with Iran. European Union, which is still committed to the nuclear deal signed in 2015, attempts to mollify an enraged Iran resulted in the creation of a system, INSTEX, which is nothing but a complicated barter system that side steps the dollar route.

European countries that began its usage in July have confined it to humanitarian goods only so that they do not antagonise Washington. Iranian authorities claim that goods worth $14 billion have been lined up for trading, which excludes oil.

Many countries including India that want to disengage from US controlled trading order also want to explore INSTEX. Washington sees in INSTEX beginning of a revolt of against its hegemony of the financial world order and are keen to smother it. Their fear that this method of trade could also be used for sale of oil has seen a quick reaction from US treasury after the Saudi refinery strike, which has now imposed new sanctions on Iran’s central bank. The Central Bank of Iran manages trade in humanitarian goods and INSTEX and these sanctions, Iranian observers claim, could be enduring and hurt the West Asian nation in the long run.

Iran is still producing oil, though far less than before it was hit by sanctions, which were meant to squeeze it out of the market. After the sanctions came into full force after May this year, Iranians began to park much of their oil in China’s strategic reserves through their tankers that had their transponders shut off to prevent US satellites from locating them or their routes. This has begun to peter off.

Britian pushed back

In an endeavour to deter Iran from trading in oil, Britain detained an Iranian oil tanker on July 4 claiming it was heading to Syria. Iran hit back claiming that they had not been subjected UN sanctions and they had the freedom of navigation. In a tit for tat operation, it seized a British ship at the volatile Strait of Hormuz and forced them to release their tanker.

This success coupled with the way they downed a US drone near Strait of Hormuz brought in a swagger that is now being challenged after the refinery attack, which they claim has come from Houthis. A spillover of a bloody war unleashed by Saudi Arabia that has seen almost 95,000 deaths, the Houthis have been attacking the Kingdom with major military success. Houthis have managed to bring about a rapture in ties between Saudi Arabia and the UAE — a factor that Iran believes could further hurt oil supplies to India and the world.

With its close ally Israel in turmoil after the electoral defeat of Prime Minister Benjamin Netanyahu, and Saudi Arabia scrambling to save its oil resources, the US is sending troops not just to preserve its influence in the region, but also chasten Iran, which has been emboldened by the support it is getting from China and Russia. If Iran emerges from the allegations of being behind blowing up Saudi refinery unscathed then the world could well see the rehabilitation of the West Asian nation and emergence of a new trading order.

The writer is Editor, Hardnews magazine

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Published on September 23, 2019
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