WHY INDIA NEEDS IRAN?

• Conventionally, for energy security

1. Iran is amongst India’s top oil suppliers

• But since the 1990s, Iran’s importance has become ‘strategic’

1. Iran’s cooperation is critical for India’s security given that
2. Pak supports terrorism in India
3. India’s influence in Afghanistan is marginal

• India needs Iran to moderate Pak’s influence in West Asia

1. Iran is a leader in the Muslim world
2. Pak is anti-India

• Access to Afghanistan and Central Asia
  1. Till 1947 (undivided India), India shared a border with Iran

WHY IRAN NEEDS INDIA

1. India is Iran’s second largest oil buyer after China.
2. While Iran is of strategic importance to India, the reverse is not true. India is, at best, a trade partner for Iran

IRRITANTS IN INDO-IRAN TIES

• Growing Saudi-India-US-Israel relations have irked Iran.
  1. in retaliation, Iran, for the first time, has linked the plight of Muslims in Gaza, Yemen, and Bahrain, with those in Kashmir
• Warming Iran-Pak-China ties have annoyed India.
• Slow Chahbahar port development has annoyed Iran
  1. Iran has indicated that the port will not be used exclusively by India and that China and Pak may be invited

JOINT COMPREHENSIVE PLAN OF ACTION (JCPOA)

• About the deal
  1. Signed between Iran and P5+1 (the five permanent members of the U.N. Security Council and Germany) in 2015.
  2. Iran agreed to a joint comprehensive plan of action (JCPOA) in return for removal of the economic sanctions against it.
  3. The JCPOA drastically reduced Iran’s uranium enriching capacity & levels, enriched stockpiles and centrifuges. Besides, it provided for stringent inspection and monitoring by international agencies.
• Has Iran complied?
  1. Yes. All other signatories as well as the UN (The IAEA) have confirmed Iran’s compliance of the deal (latest report, Aug 2017)
• Benefits for Iran
  1. Removal of sanctions boosted her economy. GDP grew at 9.2% in the latest quarter (jul-sep 2017).
• Why USA/Trump wants to trash the deal?

1. The present deal doesn’t address (US ally) Israel’s concerns adequately.
2. Moreover, Trump administration has never explicitly stated why it considers the JCPOA “the worst agreement in American diplomatic history”.

• Trump has been hawkish towards Iran since he took over as President.

1. Imposing new sanctions on its missile programmes and joining hands with its regional rivals in West Asia have been part of Trump’s Iran policy.

Possible ramifications of cancellation of the JCPOA

1. Hardliners in Iran will make a political comeback which will lead to uncertainty and instabilty in West Asian geopolitics
2. Threat of nuclear proliferation as Iran may resume its nuclear weapons programme.
3. Since EU supports Iran, the withdrawal will hurt US-EU relations. The Trans-Atlantic Security Partnership will lead to secondary US sanctions against EU companies dealing with Iran.
4. USA’s unilateral decision to withdraw will hurt its stature as a global leader.

Impact on India

• Indian Diaspora

1. Political instability in West Asia will undermine their security and remittances.

• Crude Oil

1. Iran accepts payment in Indian currency for its oil.
2. India will have to depend more on Saudi Arabia and Iraq for oil supplies.
3. Reduction of supplier diversity will make India more vulnerable to oil price shocks

• Chabahar

1. India could lose access to Chahbahar port of Iran which is a strategic necessity for India’s access to Central Asia.

• Iran-Pak-China

1. This axis could get strengthened.

Way ahead for India

1. India will have to maintain a fine balance between US, Israel and Saudi on the one hand and Iran on the other.
2. India should make greater use of Euro-denominated transactions for its oil trade to minimise the adverse impacts.
3. Also, efforts should be made to revitalise mechanisms like the Asian Clearing Union.