A short note on Iran and India

Introduction

Ever since the withdrawal of the US from the JCPOA (Joint Comprehensive Plan of Action), or the Iran nuclear deal, in 2018, Iran-India economic linkages have taken a hit. The impact on the bilateral economic relationship between New Delhi and Tehran became even more pronounced after India stopped purchasing oil from Tehran in 2019. The US had ended the waiver from sanctions, which had provided to India and a number of other countries, the continued ability to import oil from Iran.

In 2018-2019, bilateral trade between India and Iran was estimated at over $17 billion (mineral oil and fuel imports accounted for a significant percentage of the $17 billion). In 2019-2020, for the period from April-November, bilateral trade was estimated at $3.5 billion. There was a significant drop in Iran’s imports to India, owing to the reduction of Iranian petroleum imports by India to zero.

Downward trajectory in the bilateral relationship

2019 witnessed a downward trajectory as far as New Delhi-Tehran ties were concerned, with Iran expressing its disappointment with New Delhi for not taking a firm stance against Washington. Iranian Foreign Minister, Javad Zarif, in 2019, while making the above point in an interaction with Indian journalists, also stated that ‘if you can’t lift oil from us, we won’t be able to buy Indian rice.’

Chabahar Port and the India-Iran relationship

The US on its part has exempted the strategically important Chabahar Port Project, India’s gateway to Afghanistan, from sanctions. The Port was earlier touted by many as India’s counter to the Gwadar Port (Balochistan Province, Pakistan), which is at a distance of 70 kilometres and an important component of the China-Pakistan Economic Corridor (CPEC). The Government of India had taken over Phase 1 of the Shahid Beheshti Port in December 2018 (according to an agreement India was to operate two berths within Phase 1 of the project). During the Covid-19 pandemic, India had used the Chabahar Port to deliver relief materials to Afghanistan.

After India’s decision to stop the purchase of oil from Iran, and the souring of ties between both countries, Iran has given indicators that it is keen to get Pakistan (Iran had proposed to connect the Chabahar Port with Gwadar Port) and China on board. Iran has also complained that progress on the Chabahar Port was slow due to India’s cautious attitude towards the project, (as a result of both American pressure and delays in funding).

In the aftermath of the Iran-China 25-year agreement, India has been paying greater attention to ties with Iran in general, and the Chabahar Project in particular, a point strongly reiterated by the back-to-back visits of India’s Defence Minister, Rajnath Singh, and External Affairs Minister S. Jaishankar, to Tehran respectively. Connectivity, economic linkages, and issues of regional security (specifically Afghanistan) were discussed during both visits.

There were reports that India had been elbowed out of the Chabahar-Zahedan railway project, an important component of the Chabahar Project, but Iran has categorically dismissed this claim.

Indian exports of Basmati to Iran hit by sanctions

While the India-Iran bilateral relationship is often viewed from the prism of the Chabahar Port and Oil, Iran also accounts for a large percentage of India’s Basmati (an aromatic long grain rice) exports – 34%. There is likely to be a dip this year, due to sanctions, and Iran is already substituting Indian Basmati with Pakistani basmati.

The North Indian states of Punjab and Haryana account for 75 percent of Basmati exports. Indian Basmati exporters and growers have expressed their concern over the likely fall in exports to Iran (which is an important market).

Conclusion

The impact of US sanctions on Iran’s economic ties with India, with Basmati exports being an important example, reiterate the point that the Iran-India relationship is far deeper and multifaceted than is often perceived. While the thrust is on connectivity and geopolitics, the economic links are often overlooked. It is important for New Delhi to seek the views of all domestic stakeholders as far as economic ties with Iran are concerned.

New Delhi should also take a cue from the UK, France, and Germany – also referred to as the E3 – which set up a special purpose vehicle (SPV), known as Instrument in Support of Trade Exchanges (INSTEX), in 2019, to circumvent US sanctions. (During the Covid-19 pandemic, INSTEX was used to provide relief materials to Iran). New Delhi clearly needs to think out of the box, and accord its ties with Iran greater priority given the economic, historical, and political context. The visits of India’s Defence Minister, Rajnath Singh, and External Affairs Minister S. Jaishankar to Tehran in the month of September clearly emphasize the point that India is doing a re-think with regard to its Iran policy, factoring its strategic and economic importance. There is also a realization that Washington’s approach towards Tehran may witness a significant shift if there is a change of guard in November 2020 (which can not be ruled out).

Nightcap

  1. War with Iran: the target package Irfan Khawaja, Policy of Truth
  2. A century of sanctions Benjamin Coates, Origins
  3. The tragedy of the liberal middle class Jonathan Rutherford, New Statesman
  4. The novel Morocco had to ban Adam Shatz, NYRB

American protectionism and Asian responses

On October 10, 2018, a senior Chinese diplomat in India underscored the need for New Delhi and Beijing to work jointly in order to counter the policy of trade protectionism being promoted by US President Donald Trump.

It would be pertinent to point out that US had imposed tariffs estimated at $200 billion in September 2018, Beijing imposed tariffs on $60 billion of US imports as a retaliatory measure, and US threatened to impose further tariffs. Interestingly, US trade deficit vis-à-vis China reached $34.1 billion for the month of September (in August 2018, it was $31 billion). Critics of Trump point to this increasing trade deficit vis-à-vis China as a reiteration of the fact that Trump’s economic policies are not working.

Ji Rong, spokesperson of the Chinese Embassy in India, said that tariffs will be detrimental for both India and China and, given the fact that both are engines of economic growth, it is important for both to work together.

The Chinese diplomat’s statement came at an interesting time. Continue reading

Sanctions, restrictions and other “accumulations of peace”

Hello there. Long time no blog. I hadn’t enough time and there were a lot of work. From now on I will write in english. As you know, english is not my native language, so I expect a lot of mistakes: please reload your facepalms. By the way, it’s not a point of discussion. I do my best – keep in mind that I live in Russia and I don’t have very special abilities in your-language-speaking. Anyway, I hope that you will understand “main course” of every single post that I’ll write. So.

There are a lot of new restrictions from Happy West now: individual sanctions, military and trading restrictions. Many people think that Russia is “main problem” in Ukrainian issue. I don’t want to argue, because The Great Machine Of Propaganda works well – you have your own position, and I have mine. Every single toaster and fridge in Russia (rest of the world) scream that we not using military force in Ukraine (that Empire Of Evil Soviets trying to conqueer our asses, so behold!!!1). That’s why I don’t want to argue about that. I want to tell you how we live under that restrictions: how workers, engineers and house-hold-wifes are living. Another “by the way” here: I speak russian and english, and now learning norsk, but I don’t have a big vocabulary in my head, so sometimes I will use words that probably did not exist. I will combine simple words that I know in one lo-o-o-o-ong word to describe some events. For example, under “house-hold-wifes” I mean “a wife who sitting at home, preparing food, acting with children, etc.”. So on… Excuse my english.

We have a lot of problems now. Prices are getting higher and there’s lack of foreign food in our stores: milk productions, cheeses, yogurts, fish, sea-products and so on. We are not starving – there are a lot of russian food, but prices getting higher and higher, while salaries are still the same. Sometimes we riding to Finland and buying foreign food from the Union in suomi-shops, but it works well only for ones, who live near that country: people from Moscow, Saint-Petersburg and so on are riding to Finland or Estonia so often… I like these countries, they are beautiful! Nature, lakes, forests, you know. And you can buy everything – if you have money, of course!

I don’t like how all the world are looking at us now. I don’t want to be a part of a country that is under a bullet-less fire, because it’s unfair. Seems that I and every single person in Russia did nothing personally to Union or mr. Obama – but we have problems. Not our government – but we. Citizens. On every single foreign forum I try to make people understand us too, but it’s like a farting in the pond – loud but useless.

But I keep trying.