On Iran, India is of two minds

MUMBAI -- Anyone trying to get a handle on the dilemma-ridden relations between India and Iran need look no further than the tankers plying their away across the Arabian Sea that separates the two countries.

In the first quarter of the year, as the Western-led sanctions campaign against Iran tightened, India surpassed China to become the biggest importer of oil from the Islamic republic. Direct imports averaged 433,000 barrels per day, compared with 256,000 to China, according to data compiled by Geneva-based firm Petrologistics and reported by Reuters last week.

But on a monthly basis, India’s crude purchases from Iran fell steadily from a high of 531,000 barrels daily in January, suggesting that purchases of Iranian crude are trending lower. Analysts say India is not so much defying the boycott or expressing support for the embattled regime in Tehran as it is exploiting Iran’s desperation in order to negotiate favorable terms.

The data point up India’s conflict over Iran. On the one hand India’s growing economy needs a steady diet of Iran petroleum. It resents pressure from the West to join the sanctions regime. On the other, New Delhi isn’t anxious to see another Muslim nuclear power emerge close to its arch-rival Pakistan. India has developed close relations with Israel in recent years and its ties with the Gulf are cemented by its need for Arab oil as much as Iranian oil and by a sizable India Diaspora in the region.

“While we are certainly closer to Israel and have no desire to see Iran develop and have a nuclear weapon so close to our borders, we are faced with the realities of our population,” Rajneesh Gudnartne, a Foreign Ministry official in New Delhi, told The Media Line. “If there are not alternatives [to boycotting Iranian oil] coming forward, we will do what we believe is right for India and Indians.”
Like China, India is a new and an increasingly important factor in the Middle East, which was once a playing field for the US, Europe and the Soviet Union. While the two countries still keep a relatively low diplomatic profile, their growing economic clout has turned them into major customers for the region’s oil, therefore a critical part of the campaign to stop Iran’s nuclear ambitions via an economic boycott.

“What we are witnessing right now is a turn toward the West, but not the West as in Europe or America, but the West of the Middle East. This is changing the dynamics of the region and India’s global position,” Mehdi Hassanein, an assistant professor in political science at University of Mumbai, told The Media Line.
Those conflicting pressures are felt as much by ordinary Indians as by the government. As more and more Indians buy cars, they have a personal stake in ensuring the country’s energy needs are supplied. But India’s Hindu majority is also concerned about their Muslim neighbors over the border and about the 180-million-strong Muslim minority inside the country. Patriotic resentment over the US trying to impose its sanctions policy complicates the situation further.

“We’re looking forward to this renewed push toward the Middle East because the Western countries don’t deal with India in a respectful manner,” said Yeerash Meeri, an owner of a transport company where the price and availability of oil and gasoline are a major concern.

But he has worries, too. “I don’t want India to be held hostage by a conservative Muslim country and their relationship with Pakistan,” he told The Media Line.

Openly opposed to Western-led sanctions to pressure Tehran, India was denied a US waiver from the measures. That has angered many in India, who contend that its economy can’t quickly and easily end its reliance on key source of oil. Iran is India’s second-biggest supplier, providing it with about 12% of its oil needs.

New Delhi is committed to the narrower scope of United Nations sanctions, but in an effort to skirt them, it created a mechanism with the Iranians that lets refiners pay for imported oil in rupees instead of dollars. The mechanism, which is supposed to cover about 45% of Iranian crude purchases, has been plagued by technical problems.

According to a recent US Congressional Research Service report, the Iranian concessions have made it irresistible for India to continue to buy Iranian oil in defiance of Washington.

To encourage the trade, India’s Finance Ministry last week began to offer tax incentives for the rupee deals. The two countries plan to increase bilateral trade by more than 60% to $25 billion by 2015. Nevertheless, New Delhi has reportedly quietly begun pushing refiners for substantial cuts in imports from Iran.

But Hassanein said that behind the scenes New Delhi and Washington are more understanding of each other’s positions on Iran than it appears.

“Iran is not really that extreme and has cultivated a relationship with India, albeit one based not on mutual respect, but on Iran’s need to offload its oil. India is the one benefiting from the arrangement,” Hassanein said. “We can see the outward animosity with Washington, but the officials I know and speak to are saying behind closed doors, relations with the US are amiable.”

A US diplomat in New Delhi, speaking on condition of anonymity, told The Media Line that the situation is far from worrying, “considering India’s continued strong relationship with Israel over recent terror matters.” Israel has been able to create what he said are “positive” atmosphere for India siding with the US and Israel in any matter concerning security in the Middle East.”

Gudnartne of India’s Foreign Ministry expresses views on Iran’s nuclear efforts that seem to mirror those of Washington and Jerusalem. India’s relationship, he said, “largely depends on Tehran’s acceptance of international standards and their willingness to be transparent over their nuclear program.” India, like Israel, does not want another Islamic country with a nuclear bomb, he stressed.

But Hassanein of Mumbai University says both countries should listen to Iranian officials and accept their stance on nuclear power. “The world needs Iranian oil and the fact is clear, Tehran doesn’t want, nor do they need, a nuclear weapon. It is fear mongering mainly on all sides that has put the Gulf region and India on edge,” he said.