Round Table Discussion on Iran Nuclear Deal and its Implications on India

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The Vivekananda International Foundation (VIF) held a Round Table Discussion on “The Iran Nuclear deal and the Implications for India”. Former Ambassadors to the US, Iran and Middle East were invited to participate in this discussion for their inputs from their vast knowledge and experience in the area.

Dr. Arvind Gupta, Director, VIF started the discussion by giving a brief on the situation in the Middle East. He pointed out that it is imperative for India to assess the situation as this new development might affect India’s relations with Iran and other members who are party to the Joint Comprehensive Plan of Action (JCPoA). India has crucial interests in Iran. The Chabahar Port project and Iranian crude oil supply are both important. The Chabahar Port project gives India access to Afghanistan and will help fulfill its increasing commitments in Afghanistan. India and Iran have had good trade relations, which will take a hit because of proposed US sanctions.

The discussion started with a view that President Donald Trump had never accepted the JCPoA. The participants assessed the 12-Point agenda enunciated by the US Secretary of State which included the demand for Iran to cease its alleged proliferation of ballistic missile and stop enrichment of uranium. The proliferation of ballistic missile technology and Iran’s involvement in Yemen and Syria could have been the tipping point for the US action. Keeping these changes in mind, The US would not want Israel and Saudi Arabia to accommodate Iran through JCPoA. These new developments have put undue pressure on India’s relations with Iran.
There was a general consensus among the participants that renewed sanctions on Iran and the ‘Countering America’s Adversaries Through Sanctions Act’ (CAASTA) against Iran has put India in an awkward position and it is going to test India's Foreign Policy. Iran's pre-occupation with JCPoA could lead to Pakistan getting more involved in Afghanistan, which might undermine India's role there. The Saudi's might follow the US and enforce sanctions on Iran. The US is trying to prioritize Israeli and Saudi interests and the US pull-out of JCPoA has helped. Economic instability in Iran could lead to the Saudis instigating minority Sunnis in Iran.

For India the challenges are manifold. It has faced difficulties in establishing rupee payment system to buy crude oil from Iran in the last round of sanctions even before JCPoA. As things will get more difficult, the Indian Ministry of Finance and Reserve Bank of India need to cooperate by working on a productive and stable payment system as transactions with Iran in US Dollars will not be in effect from 6 August 2018. The US administration expects its allies Japan, South Korea, and in this particular case India, to reduce their dependence on Iranian crude oil. It was suggested that India needs to diversify its oil suppliers and reduce its dependence on Iran, Iraq and Saudi Arabia who cater to 3/4th of India’s oil imports. But this is not easy.

Even if India decided not to reduce its dependence on Iran for oil, the issue of payment would persist. India cannot utilize Euro as an alternative currency to deal with Iran as the sanctions might affect European Union (EU) banks that have businesses in the US or have investors who are US citizens and could be sanctioned by the US administration. Even if EU banks become the transaction party, they might not cater to Indian needs as the banks might be pre-occupied with EU transactions with Iran. India also cannot use the Asian Clearing Union as the US sees it as a money laundering mechanism.

On India's projects in Iran, especially Chabahar Port, the Indian Government is expected to take over the Port on 1st June 2018. It should be a priority now to make it operational as soon as possible. The Chabahar project will help India to get some form of a waiver to deal with Iran by providing the US an alternative to transport the supplies to their troops and international force in Afghanistan in light of their deteriorating relationship with Pakistan. India needs to engage the US to address their concerns because of the sanctions on Iran which have led to complications in India Iran economic relations.

Overall, it was felt that the US sanctions would have wide ranging consequences besides undermining its credibility as a reliable partner in the Middle East. This could further strengthen China’s position as it would take advantage of US action. The Chinese are already on the threshold of being militarily involved in the Middle East, but they have refrained till now. This is mentioned in the Chinese government’s Arab Policy Paper.

The participants concluded the discussion by suggesting that India should not align its policy with the US and must have independent discussions with EU on Iran. The US expects India to back its decision on pulling out of JCPoA but India needs to craft its policy carefully and balance its interests with all the players, including Russia. The US India relationship is no doubt a high priority one for India but it puts undue pressure on Indo-Russia relationship especially defence procurement because of CAASTA. India should act adroitly to protect its multi-faceted interests.