Inside India’s barrel of concerns: US sanctions, alternative to Iran oil and good old ties

Prime Minister Modi and Iranian President Hassan Rouhani in February 2019. | Narendra Modi's official Twitter handle @narendramodi

The Trump administration appears to have decided not to extend waivers from sanctions on those countries that continue to buy oil from Iran. The decision not to extend another round of Significant Reduction Exceptions (SREs) will have a significant impact on big Asian oil importers including India, China, Japan, and South Korea, which had each initially secured a 180-day exemption from US sanctions last year.

Among these countries, India is likely to be significantly impacted. India is the second largest importer of Iranian crude oil after China, and New Delhi is reported to be buying a considerable share of its oil from Tehran, making Iran the third largest oil supplier to India after Iraq and Saudi Arabia. This means that the Indian government will find it difficult to accept the US decision.

The issue also raises broader questions about New Delhi’s relations with Washington. Among those is whether India has miscalculated its capacity to manage the United States. Given the centrality of India in the US’ Free and Open Indo-Pacific strategy, the Modi government may have assumed that India will get another exemption from the sanctions that kickstarted on 1 May.

Indian Petroleum Minister Dharmendra Pradhan tweeted to say that India has “a robust plan for an adequate supply of crude oil to Indian refineries. There will be additional supplies from other major oil-producing countries; Indian refineries are fully prepared to meet the national demand for petrol, diesel & other petroleum products.” But while India may have possibly been ready for additional reduction of oil imports from Iran, New Delhi is certainly not ready for a complete halt.

The US decision is likely to create some negative reaction in New Delhi and raise once again the rhetoric of the United States as an unreliable partner that encroaches on Indian interests and sovereignty. Such a dynamic has been seen in the past as well whenever there have been tensions between the United States and India.

But in truth, India does have alternate options – Saudi Arabia, the UAE, and even the United States are potential suppliers that could replace Iran as an oil source. In fact, a White House statement made just this point: “The United States, Saudi Arabia, and the United Arab Emirates, three of the world’s great energy producers, along with our friends and allies, are committed to ensuring that global oil markets remain adequately supplied. We have agreed to take timely action to assure that global demand is met as all Iranian oil is removed from the market.”

Nonetheless, there are a number of strategic reasons why India wants to continue buying Iranian oil in spite of other options available. For instance, Shia Iran is seen in New Delhi as an ally against the predominantly Sunni Pakistan. Pakistan’s traditionally close relations with Saudi Arabia made Iran a possible ally. Iran’s position on Pakistan’s flank is also attractive, as is the perception of common Indian-Iranian interest in countering Pakistan’s influence in Afghanistan.

From a wider perspective, New Delhi also sees Iran as a conduit to Central Asia, a region that India considers strategically vital. India has invested in Chabahar port in Iran and highways that provide an alternative route to both Afghanistan and Central Asia, bypassing Pakistan. And despite the growing closeness with the United States, there is residual sympathy in New Delhi for some of Washington’s opponents, including Iran, that is rooted in India’s historic cultivation of multiple alignments with a diverse array of states.  Finally, there is a question of timing too: In the midst of a tough national election campaign, the Modi government will not want to be seen as bowing to US diktats.

But the impact of the US decision on India can also belie India’s own challenges in its relationship with Iran, which are important to keep in mind as well. For one, India has invested more in its relationship with Saudi Arabia and other anti-Iranian Gulf monarchies. Such improving relationships will put pressure on India to moderate its support for Iran.

India has also grown increasingly close to Israel, a country that is the source of vital military equipment for India, but which is also engaged in severe competition with Iran. New Delhi has so far managed to insulate these relationships, but they also mean that India cannot be seen to be going out of its way to support Tehran.

Iran’s positioning on a number of issues that matter to India is no longer very reassuring to New Delhi. For instance, Iran appears to be more closely aligned to Pakistan on Afghanistan than before, as evidenced by Pakistan Prime Minister Imran Khan’s recent trip to Iran.

Last and certainly not least, all said and done, the United States itself is an increasingly vital partner for India. Joining Beijing in defying American wishes on the Iran issue may not be particularly wise given the broader interests that Washington and New Delhi and share. All of this ensures that New Delhi will find itself in a strategically difficult position in the coming weeks.

Rajeswari Pillai Rajagopalan is a Distinguished Fellow & Head of the Nuclear and Space Policy Initiative, at Observer Research Foundation. She is also the senior Asia defence writer for The Diplomat.

This article was first published on ORF.