It is important for India that the Gulf region remains stable and a military conflict wouldn’t serve its interests. India also have extensive trade, investment, security and people-to-people ties with countries in the region.
Iran’s retaliation for the killing of its top commander Qassem Soleimani was quick. Two airbases housing United States troops in Iraq were hit by more than a dozen ballistic missiles from Iran further escalating an already tense situation. Most regional and extra regional stakeholders in West Asia have been calling for de-escalation and India has been no exception. India’s entanglement in the US-Iran dynamic is not new but this time stakes could be much higher.
Until May, India was the second-largest buyer of crude oil from Iran, after China. However, after the US ended its sanctions waiver, which had allowed India to import Iranian crude oil, India’s energy ties with Iran have undergone a change. Tehran had previously attracted Indian buyers with lucrative provisions such as free shipping and extended credit, but the US diktat to cease oil imports from Iran has led New Delhi to change its calculus.
In 2018-19, despite mounting US pressures to cut oil imports, India had purchased 479,500 barrels of crude oil per day, more than what it had purchased in the previous fiscal year. After the Donald Trump administration ended its Iran sanctions waivers for a select few countries last year, the US encouraged its oil-producing allies, including Saudi Arabia and the United Arab Emirates, to boost production and stabilise the international oil markets, which would have otherwise entered a tumultuous phase due to the absence of Iranian crude oil. In an interesting shift, there has been an increase in India’s oil imports from the US, outpacing imports from its traditional suppliers in West Asia.
In addition to purchase of oil from the US, India has also got assurances from the UAE, which has promised to cover for any shortages that India would face owing to the current situation.
The continuing tensions in the Strait of Hormuz and the proximate region have made India nervous. The ongoing crisis could have further ramifications, as India’s dependence on imported crude oil hit a multi-year high of 84 per cent in 2019. Even as consumption has steadily ticked up in recent years, India’s domestic oil output has fallen from 36.9 million tonnes in 2015-2016, to 34.2 million tonnes in the most recent fiscal year, raising concerns in New Delhi about the future of the country’s energy security.
It is therefore important for India that the Gulf region remains stable and a military confrontation or conflict wouldn’t serve its interests. India also have extensive trade, investment, security and people-to-people ties with countries in the region. As External Affairs Minister S Jaishankar underlined during his meeting with US Secretary of State Mike Pompeo last year, “energy security is part of it [situation in the Gulf] but there are other concerns as well about diaspora, regional security, and trade.”
The US sanctions regime has certainly affected India’s relations with Iran, where New Delhi has important strategic and economic interests. In addition to the purchases of Iranian crude oil, which have now been curtailed, these include the ambitious Chabahar port project in southeastern Iran — which India has a major stake in developing — and Indian investments in Iran’s oil and gas sector.
Though India had earlier stated that it only adheres to United Nations sanctions and not to unilateral sanctions by a foreign country, it has been less explicit in expressing its discontent regarding the US policy towards Iran. That is despite the fact that the US sanctions have clearly hurt India’s trade with Iran. Indian fossil fuel companies are now hesitant to do business with Iran, and foreign companies, including those from Europe, are refusing to participate in the Chabahar project, slowing its development.
Despite assurances from the US that its sanctions regime would spare non-fossil-fuel-related business between India and Iran, US secondary sanctions target companies which indulge in Iran’s port and shipping sector, which make Indian investments in Chabahar and other associated developments around it vulnerable. Having comprehensive trade ties with Iran is simply not viable for any Indian entity at the moment. Though the US has issued India a waiver to develop Chabahar port, the Trump administration’s crippling economic sanctions on Iran have ensured that companies remain wary of engaging Iranian ports, resulting in slowing down of trade via Chabahar. Just last month, India and Iran had decided to accelerate Chabahar port cooperation during Jaishankar’s Tehran visit.
As a result, the Iranian issue has emerged as one big irritant in an otherwise robust Indian-US partnership. The Trump administration’s hawkish position on Iran has made things difficult for Indian diplomacy, though there are signs that Washington is not keen to push the Iran issue beyond a certain point when it comes to Indian-US engagement. During his meeting last year with Prime Minister Narendra Modi on the sidelines of the recent G20 summit in Osaka, Japan, US President Donald Trump was keen to play down this issue: “We have a lot of time. There's no rush, they [India] can take their time. There is absolutely no time pressure.”
However, New Delhi faces a different timetable. India’s West Asia policy has traditionally tried to balance the three poles in the region: the Arab Gulf states, Israel and Iran. As Trump turns the screws on Iran, this policy will increasingly become untenable.Harsh V Pant is director, Studies at Observer Research Foundation, New Delhi and professor of international relations, King’s College London. Views are personal.