The US withdrawal from the Iran nuclear deal could open new opportunities for India.
On May 8, 2018, US President Donald J Trump announced that the US was withdrawing from the Iran nuclear deal and would reimpose sanctions on Iran had been in place prior to the deal. In doing so, Mr. Trump made good on his election campaign promises to either renegotiate or terminate the deal, which he had referred to as “an embarrassment” and the “worst deal negotiated” by the Obama administration.
The Joint Comprehensive Plan of Action (JCPOA, known more commonly as the Iran nuclear deal) was signed in July 2015 by members of the P5+1 (The US, China, Russia, France, the UK and Germany) and the EU with Iran. The deal required Iran to take steps to roll back its nuclear program in exchange for a lifting of sanctions that would allow Iran to return to the fold of mainstream global trade and commerce.
In the short term, the US’s high profile departure from the deal and re-imposition of sanctions against Iran is likely to reignite tensions between the US and its regional allies — Israel and Saudi Arabia — and Iran. Tensions between Israel and Iran are already at a heightened state, with Iran targeting Israeli forces in the Golan Heights, and Israel, in turn, striking Iranian targets in Syria last week. It is possible that tensions between Iran and Saudi Arabia, which has been a consistent, vocal opponent of the Iran nuclear deal, will also exacerbate in Yemen and other areas of contention in the Gulf.
For now, the Iranians have indicated a commitment to abide by the terms of the JCPOA. In a televised broadcast, Iranian President Hassan Rouhani criticized the US’s decision and indicated that he had instructed his foreign minister to hold discussions with the remaining parties to the JCPOA to obtain “clear guarantees” that Iran’s economic interests are protected.
The EU, meanwhile, is considering introducing “measures to nullify” the effect of potential sanctions on European companies that want to continue to do business with Iran under the terms of the JCPOA. Of course, given the symbiotic economic relationship between the US and Europe, it remains to be seen just how the EU can insulate its companies from the impact of US sanctions. Such sanctions could also further complicate ties between the US and China, engaged as they are in what some describe as a “trade war,” should the U.S. sanction Chinese firms doing business with Iran.
For India, rising regional tensions in the Middle East and uncertainty over the sanctions regime is bad for business. However, the true impact to India of the US’s withdrawal from the JCPOA is as yet undetermined. New Delhi reacted cautiously to the US’s decision, advising that the disputes ought to be resolved peacefully through dialogue. India sees Iran as a key regional actor and important trading partner. For Iran, India is its second-largest market for crude oil exports after China.
Over the years, however, India has significantly diversified its oil imports to insulate its economy from unpredictable geopolitical events. As a result of Iran’s increased tensions with the US and the implementation of UN and US sanctions against Iran beginning in 2006, India opted for other sourcing options, most significantly, Iraq, which (as of March 2018) is India’s top supplier of crude oil. The re-imposition of US sanctions on Iran, therefore, might not have a material impact on India’s oil imports. In fact, the encumbrances placed on Iran may actually allow India to renegotiate its import agreements with Iran on more favorable terms, including mechanisms to settle payments.
To Iran and India, as well as to Afghanistan, the importance of the continued operational viability of Chabahar Port cannot be understated. There are very many things that Iran and the US disagree on, but the stability and security of Afghanistan is not one of them. Chabahar is significant in promoting the economic independence of the fledgling Afghan state, which was hitherto hostage to the whims and fancies of its hostile eastern neighbor.
Since the operationalization of Chabahar, Afghanistan has moved 80% of its cargo traffic from Karachi to Chabahar and Bandar Abbas. Both India and previous US administrations have agreed that reducing Afghanistan’s dependence on Pakistan is important to the Central Asian state’s viability. India must therefore use its good offices with key actors in the US to ensure that trade via Chabahar can be protected from sanctions.
The reimposition of sanctions also provides opportunities to the most unlikely of states to cooperate in shaping regional security and stability. India and China have long been at loggerheads, and indeed will likely continue to be so in the future. But their recent attempts at a modus vivendi envisaged a number of confidence-building measures, including cooperation on projects in Afghanistan. Given China’s support to Iran on the JCPOA, could the three parties, with sufficient and sustained political support, work with each other in creative and bold ways to promote the economic security of Afghanistan and political viability of the state?
While India might adopt a wait-and-see approach to assess the impact on US sanctions on Iran, it is likely to find common ground with the EU, China and Russia in ensuring that these risks are mitigated. New Delhi may believe that the re-imposition of sanctions on Iran could also open new opportunities that India is better positioned to leverage. India has long sought a leadership position in influencing outcomes in its extended neighborhood. The imposition of sanctions on Iran, while disrupting the status quo, might yet provide new opportunities to New Delhi.