Iran nuclear deal: India has vested interests in retaining status quo, must find a way of assuaging US and saving deal

The President of the United States is at it again, opting to overturn another "success" of his predecessor, in this case the extremely sensitive issue of the Iran nuclear deal. To do him justice, however, Donald Trump has always been against the deal, right from his campaign days, on the basis of a reasoning that is flawed to some extent. As the US media has pointed out, abandoning the deal will actually free Iran to start up its nuclear programme again, which Teheran has already indicated it will do if the whole deal falls through. And worse still, it will abandon the moderates in the country and embolden the hardliners.

The president's view is that Tehran is a regime that supports extremists, including the Taliban, which is true. The crux of the argument is that being a terrorist sponsor, nuclear weapons in Iranian hands would immeasurably increase its potency, which is also true. But that was precisely the reason why the Joint Comprehensive Plan of Action (JCPA) was devised: In order to incentivise the regime against going down the nuclear path. The deal was never intended to stop Iranian sponsorship of proxies across the Middle East. As many would argue, Iran is hardly the only one to do so in that volatile region.

Reports indicate that major European leaders tried to get Trump to change his decision with diverse arguments. None of that succeeded, in part because this is a president who doesn't even heed his own national security team. In part, this is also a president who is basking — rightly or wrongly — in the glory of bringing North Korea in for talks. Now it's Iran's turn. First, pull the rug out from under its feet, and then manage the situation on terms acceptable to US security. In short, this is an effort at regime change, or at least regime modulation. Trump and his advisers seems to believe that there is popular resentment and anger against the present Iranian leadership. At one point in his speech, he said, "Iran's leaders will naturally say that they refuse to negotiate a new deal; they refuse. And that's fine. I'd probably say the same thing if I was in their position. But the fact is they are going to want to make a new and lasting deal, one that benefits all of Iran and the Iranian people. When they do, I am ready, willing, and able." This is the application of severe pressure, until something gives.

File image of Prime Minister Narendra Modi and Iran president Hassan Rouhani . PTI

File image of Narendra Modi and Iran president Hassan Rouhani. PTI

Until that happens, however, the plan is to rev up crippling sanctions on Iran, and secondary sanctions on anyone who deals with them. Among the main commercial partners of Iran are China, Russia, Germany, France and the UK, all of whom were party to the deal. Of these, Germany, France and the UK have already issued a joint statement stating that they would remain committed to the deal. In a smart move, the White House assured the Europeans that companies would be allowed a grace period before sanctions bite. It also indicated that a US policy would evolve in consultation with Europe. Though this is unlikely to mollify any of these countries, they have in effect been incentivised to persuade Iran to assuage at least some of US' concerns, which includes its missile programme and support to terror. European negotiators who have already put in considerable man hours in trying to figure a workable way out, can either throw up their hands and keep faith with the original deal — thus making a trans-Atlantic divide of no mean proportions — or they can try to persuade Iran. When all is said and done, that's probably less of a mess.

Russia and China have also backed the continuance of the deal. Both have in the past, used the sanction period to ingratiate themselves with the Iranians. Unsurprisingly, a post-sanction Iran has thrown open infrastructure projects to both these countries. China has made Iran the centerpiece of its 'Belt and Road Initiative' in the region. In February 2016, the first cargo train from China to Iran arrived in Tehran, having passed through Kazakhstan and Turkmenistan, a distance of 10,399 kilometers. China is also the third largest importer of Iranian oil, apart from providing large credit lines through Chinese banks like CITIC. Powered by these plans, neighbours like Kazakhstan and Turkmenistan have weighed in to connect to Iran.

Russia, India and Iran are separately partners in the ambitious International North South Corridor (INSC). Russia is also a major player according to major financial analysts, both as a defence partner and with investments in the oil and gas industry. Bilateral annual trade is estimated to reach $10 billion, up from as little as $1.68 billion during the sanctions period. And that's the catch. The largest companies in Iran are not US companies but those of its sworn competitors/enemies. That could be another reason for the sanctions. Remember, Trump is a businessman first and last.

Which brings us to of how this will impact India. The first issue that comes to mind is the future of the Chahbahar project. The arrival of the first shipment of wheat from India in November last year, destined for Afghanistan underscored its strategic impact. After decades of trying to get Pakistan to agree to a Transit Trade Agreement, this was certainly one in the snoot for Islamabad. The fact that the final inaugural of the first phase of the project took place more than 14 years after India and Iran first agreed on developing the port is indicative of the impact of sanctions. A revival of these could risk the next phase of port development, with a contract for this already signed between Iran's Port and Maritime Organsation and India IPGL (India Ports Global Limited), with the latter already putting out tenders for the task. With an eye on possible re-imposition of sanctions — after all Trump has been talking about this loudly and widely — India and Iran had put in place an agreement whereby Indian currency will be used for investment in Iran. This is the first time such a mechanism has been put in place outside of immediate South Asia. This was operationlised in a small way through UCO Bank, and though the Rupee account had been discarded for payment in Euro — which Iran prefers — there is a possibility that this route can be upgraded if sanctions are imposed.

On a second level, however, the importance of Chbahar arises from its role as the lynchpin for the ambitious International North South Corridor which started as a trilateral agreement and now includes 11 more nations including Armenia, Azerbaijan, Belarus, Bulgaria (observer) Kazakhstan, Kyrgyzstan, Oman, Syria, Tajikistan, Turkey and Ukraine. For India, the INSTC envisages the movement of goods from Mumbai to Bandar Abbas by sea; from Bandar Abbas to Bandar-e-Anzali, an Iranian port on the Caspian Sea, by road; from Bandar-e-Anzali to Astrakhan, a Caspian port in the Russian Federation, by ship; across the Caspian Sea, and thereafter into the Russian Federation and further into Europe by Russian Railways. In simple language, the INST will cut the transit time between India and Russia from 40 days to less than 25. That’s a real positive in dollars and cents.

Then there is the sticky issue of paying for oil imports. Iran had slid to seventh place in terms of energy supplies during the sanctions, but rebounded to third in recent years. As of now, India pays for this in Euros using European bank channels. Earlier, it had also used Turkish banks as a source. As long as Europe stays in the deal, India can continue with energy imports, which incidentally are structured extremely advantageously by Iran. Oddly, Dhramendra Pradhan, Minister for Petroleum and Natural Gas, indicated in February that India was planning to double its imports from Iran. That seems to indicate a plan to stay the course of policy.

In sum, Chahbahar is therefore not just a way to blindside Pakistan even while assisting Afghanistan. It is a very real part of the prime minister's focus on expanding trade through finally, opening up connectivity into all those hungry Central Asian markets and elsewhere. It will also serve to bone up somewhat shaky Indo-Russian relations, and is also a very handy way to get into the "connectivity business" ourselves. With the situation changing very quickly, we may ironically need to confer with China to keep this route open and prop up Iran. And since we are the homeand of Kautilya, we may also offer to open a quiet dialogue with Iran with a view to saving the deal, while assuaging US concerns. This is not a time to hang back and let others do the talking.


Updated Date: May 10, 2018 16:46 PM

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