28.09.2016 Author: Dmitry Bokarev

India and Iran: Manoeuvres between East and West

1231231231India and Iran used to share quite a warm relationship based on both countries’ religious and cultural similarities, as well as economic cooperation. Back in the day, Iran was ranked third in terms of the volume of the oil supplies to India. The precious black gold was in high demand in India’s fast-growing industrial sectors. However, over the last decade, after the imposition of different sanctions on Iran due to its nuclear program, relations between the two countries have become complicated. Under US pressure, India was forced to join the sanctions regime. At that time, this was very important for Delhi, as it affected the signing of the nuclear agreement with the USA, which had far-reaching consequences on India’s entire nuclear industry.

When India’s secret nuclear weapons testing that it conducted in 1974 became known, an international Nuclear Suppliers Group (NSG) was created under US initiative to monitor the supply of nuclear fuel and the penetration of nuclear technologies into India. At that time, this organization was not powerful enough to control the Indian nuclear power industry. Many countries, including USSR, continued cooperating with India, despite the NSG requirements. As a result, in 1988, USSR and India signed an agreement on the construction of the Kudankulam Nuclear Power Plant. Ten years later, Moscow and Delhi managed to conclude a new contract based on this agreement, as well as launch its operation, despite continued US and NSG opposition.

However, over NSG’s decades of existence, almost all the countries that export nuclear technologies and fuel have joined it. This increased its power. In the 2000s, the Indian nuclear power industry was facing hard times. In addition, NSG put a curb on uranium supply to India. As India’s uranium reserves were not inexhaustible, its reactors had to be switched to reduced capacity operation. The only NSG condition for the removal of sanctions was the nuclear disarmament of India. However, India refused to comply, arguing that both China and Pakistan already possessed nuclear weapons at that time. These developments were proof enough that India’s nuclear power industry was doomed to die, and India was thus forced to make a bargain with the USA. In 2006, the two countries signed an agreement of cooperation in the field of peaceful nuclear technology. This agreement included a number of requirements that India had to meet in order for the NSG sanctions to be lifted. One of these requirements was the support of US and international sanctions against Iran. Thereafter, India several times voted for an anti-Iran resolution at the UN Security Council. India also joined the trade sanctions by reducing the supply of energy sources from Iran, and replacing them with hydrocarbons from other suppliers. If Iran had been the third major oil exporter to India before, in 2015, it was only seventh. In addition, India stopped using the dollar to pay for the volume of the oil that it continued to buy. In recent years, 55% of goods have been paid for in Euros, and 45% in rupees.

All these actions, coupled with the implementation of other requirements laid out by the US, led to the lifting of the NSG sanctions against India in 2008. This was quite a controversial decision, as, in fact, the USA allowed India to own nuclear weapons in direct violation of the Non-Proliferation Treaty. Such unbelievable concessions can be explained by the fact that India is a zone strategically important for the interests of Washington which wishes to keep its influence in the Asia-Pacific region and get an ally to rally against China. The nuclear deal is only a part of numerous agreements through which the US is trying to tie up India and separate it from the rest of Asia. Nonetheless, the recent events have demonstrated that these attempts had failed to reach Washington goals. India is willing to accept US assistance and gifts, but it also has its own agenda, and has no intentions to become an alien in Asia.

At the same time, the Indians understand that the USA will not help them solve their most important issues. Nowadays, any state’s economic and military power is based on its energy industry, and India will ensure security over its energy sector regardless of US interests. The currently unfolding rapid restoration of India-Iran relations proves this statement. In early 2016, anti-Iran sanctions were abolished. In April 2016, the Minister of Petroleum and Natural Gas of India Dharmendra Pradhan visited Iran. The aim of the visit was to increase the volume of trade in hydrocarbons. In Tehran, he met with the Iranian Minister of Petroleum Industry, Bijan Zangeneh, and announced that India wished to purchase Iranian liquefied natural gas (LNG). An agreement was reached that the Iranian government would consider the Indian request and the most convenient methods of delivery. Another important issue that was covered at the meeting between the Indian and Iranian Ministers was India’s participation in the development of the Farzad B Gas Deposit. It was discovered in Iran in 2012, and operations started in 2013. D. Pradhan briefed his Iranian colleague on a detailed field development plan prepared shortly before his visit. Among other things, the plan takes into account the investment that India was going to do on the project to the tune of $10 billion. Shortly before his visit, D. Pradhan reported that the Indian corporations were planning to invest about $20 billion in Chabahar Sea Port in Iran. This port is strategically important for India, as it opens access to Central Asian markets despite the Pakistani blockade. Chabahar is also located close to the Pakistani Gwadar port, which the PRC has been exploiting since 2013. At that time, China stated that the port would not be used by the Chinese army. However, India suspected that plans were underway to set up a military base in Gwadar, which was one of the many bases deployed by China under the Pearl Necklace project. Therefore, Chabhar is important for India not only economically, but also from the point of view of defence. India invested hundreds of millions of dollars in the development of the seaport, back when Iran was under sanctions. The USA attempted to counteract this, but India found its strategic interests to be more important than Washington’s requirements.

Presently, Iran is rapidly developing its energy resources trade after liberating itself from the sanctions. It pays special attention to Asia-Pacific Region. If India wishes to secure its energy supply on the background of a constantly growing demand for oil and gas, it has to focus on further developing relations with Iran and other exporters, while the USA will take the back seat. India has obtained everything it wanted from the USA, including the lifting of the NSG sanctions and the recognition, although unofficial, of its right to possess nuclear weapons. Delhi is now working on fresh objectives.

Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook”.

Please select digest to download: