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Mainstream, VOL LVI No 1 New Delhi December 23, 2017 - Annual Number

Decertification of Iran Nuclear Deal: Will India face Trouble?

Sunday 24 December 2017

by Nasima Khatoon

The uncertainty over the Iran-US nuclear deal not only has implications for the Arab world and US but also for South Asia, especially India. Until now New Delhi has not issued any official statement on this issue, but this could undermine India’s larger interests in West Asia. If the US Congress decides to impose the economic blockade again, it will be a major setback for India’s West Asia policy, considering some ongoing and upcoming projects between Iran and India and India’s continuous effort to balance among the emerging West Asian blocs.

A Few weeks ago, in a major foreign policy shift, US President Donald Trump announced to terminate the landmark US-Iran nuclear deal—also known as the Joint Comprehensive Plan of Action (JCPOA). Describing the deal as one of the “worst and most one-sided transactions the US has ever entered into”, he left the fate of the deal on the US Congress, which has 60 days to decide whether to reimpose the sanction on Tehran that was lifted under the 2015 Iran nuclear deal.

In this context, some questions are becoming increasingly significant: how would India pursue her larger diplomatic goals in the region specially in the context of Iran? And what role should India play in this nuclear negotiation, being a second-tier nuclear weapon state? Would better Iran-US ties help improve Indo-Iran relationship?

Pivot to India’s interest in West Asia

To pursue its interest in West Asia, India is constantly balancing among Iran, Israel and the rest of the Arab world while fine-tuning its policies. Lack of trust among the countries is a major impediment to achieving nuclear stability in the region. Presence of a nuclear-powered country like Israel (although unrecognised), essentially creates a security dilemma, which demands Iran to build a credible deterrence by producing nuclear arms. But Iran’s evolving nuclear development, beyond a limit, has led other states to question its true intentions.

Implementation of the Joint Comprehensive Plan of Action (JCPOA) has offered an unprecedented success for the international inspectors to access the Iranian nuclear sites. Iran no longer has the capability to develop a nuclear weapon without their knowledge and this was in full compliance with the terms of the deal. By decertifying the agreement, the US and international community will miss the chance of negotiating regional understanding to avoid a developing threat of uncontrolled nuclear arms race in West Asia.

The development will have the potential to jeopardise India’s interest in the region, as a disturbed West Asia will not only affect the energy trade between India and the region, it will also impact on India’s “Look West policy or Link West Policy”. India’s emerging relationships with the main three regional powers, Israel, Saudi Arabia and Iran—in terms of defence cooperation and arms trade, remittances and trade—will be largely hampered. Most importantly, a troubled West Asia will have the capability to interrupt India’s strategy towards its neighbours in South Asia, mainly Pakistan and China. Iran is vital for China. China would not like to be heavily reliant on Saudi Arabia for oil and Iran is a potential alternative. Moreover, Iran’s strategic position and geopolitical values are immense for any country that seeks an ambitious role in West Asia. In this respect, good relations with Iran will help India to curb Chinese dominance in the Persian Gulf and energy trade.

Will Chabahar face the heat?

According to New Delhi, change in the deal won’t affect India’s long standing ties with Iran. But India-Iran relations could be jeopardised if the US compels New Delhi to reduce ties with Tehran, as it did during the 2013 JCPOA negotiation.

Union Shipping Minister Nitin Gadkari stated that India is facing no difficulty in the development of the Chabahar deep water port, for which India has planned to invest $ 500 million. The government has already provided $ 85.21 million to operate multipurpose terminals and US $ 121.5 million for maintenance for a period of 10 years.

The port is strategically important as India looks to bypass Pakistan and move goods to Afghanistan and further to Russia and Europe via the North-South Transport Corridor (NSTC). New Delhi can exploit the port to connect with the NSTC and bypass Bandar Abbas of Iran: a highly congested port that has less capacity to handle large cargo ships than Chabahar. The Chabahar port is also less than 100 km from the Chinese-run Gwadar port in Pakistan. Development of the Chabahar port would benefit India to counter the influence of Pakistan and China in seaborne trade through the Persian Gulf. However, full exploitation and progress of the Chabahar port could be trimmed if the sanction is reimposed. According to a report, large international bankers with exposure to the US remain unwilling to facilitate the port project. The fear of uncertainty over imposition of economic embargo could be a major reason. Some Western manufacturer also refused to supply equipments due to uncertainty over the US policy. Along with that India’s outreach to extended neighbourhood and the Look West policy which envisions to reach Persian Gulf through the trade route could also face restrictions.

Further Sanctions and Implication on Energy Trade 

India’s oil imports from Tehran have declined significantly since June, 2016. It is expected to further decline as New Delhi is planning to order about a quarter less Iranian crude in the fiscal year of 2018 due to a snub over the development of Iran’s Farzad B gas project. ONGC Videsh, Oil India and Indian Oil Corporation discovered the gas field under an exploration contract, signed in 2002. Since 2009 India has been pursuing the contract with Tehran, but poor quality of gas remains an issue for India. Sanction could worsen the situation further, as India would have to limit the energy trade with Iran to abide by the international sanction.

The multibillion dollar project like Farzad B offshore gas field, proposed by ONGC Videsh Limited (OVL), could feel the gravity of the latest turmoil. The most recent development in this field indicates that the future of the project is uncertain. According to Iran, India may lose the bid to Russia due to its inflexibility on pricing. India accuses Iran over prolonged negotiation and altering offers several times. Although commer-cially losing the bid would not be a big problem for India as the Indian Consortium of Investors is not getting good return for their investment, but considering India’s gas requirement, Iran remains one of the best options due to its relative proximity to India than other West Asian neighbours.

While India is one of the largest crude oil importers from Iran, it is essentially in the field of natural gas that the country’s energy relationship is significant. There has been no significant progress in the project like the TAPI gas pipeline, due to the region’s complex geopolitics and contract disagreements. In this context, the possibility of a new undersea gas pipeline from Iran to India, sidelining Pakistan’s exclusive economic zone (EEZ), could be a good opportunity for New Delhi to satisfy the requirement of natural gas. Being cost-effective and one of the most convenient routes, as it could connect Iran’s gas field directly with India’s gas grid via the Chabahar port, the proposed project opens a new avenue in India’s energy sector. Former Oil Secretary T.N.R. Rao, who is the Chairman of Advisory Board of South Asia Gas Enterprise Pvt. Ltd. (SAGE), has suggested the undersea gas pipeline from Iran to Porbandar, Gujarat. The proposed gas pipeline can import gas at a rate cheaper than the rate at which some of the domestic fields supply liquefied natural gas. The study said the cost of the undersea pipeline would save about $1 billion annually. Also gas from Qatar can be pumped into the proposed gas pipeline. But the recent tension over the Farzad B gas field and economic sanction are actually clouding the possibility of this future project.

Policy of Impartiality

The future of the nuclear deal is significant for India-Iran relations. Development of new deals with Iran could affect India-US relations, but having a say on Iran’s nuclear development programme, which is necessary for the regional balance and to curb Israel’s nuclear hegemony, is worth the risk, considering Iran’s strategically important location: gateway to the Persian Gulf and Central Asia. Also, Iran is a valued partner of India in West Asia, which impacts the dynamics of India-Pakistan relations. Trump’s misguided action can undermine all the positives listed above and can lead West Asia to an era of more uncertainty and even war, if on the withdrawal of the deal Iran increases the pace of its nuclear development. It is still to see if the US can risk the potential development of another North Korea. The recent ballistic missile, fired by Iran supported Houthi rebels of Yemen towards Riyadh, indicates the emerging tension. If war broke out, things could be worse as oil and gas supply from the region would be hampered. Moreover, the Indian diaspora, a large source of remittance, will be forced to come back home, posing a loss to the Indian economy.

Therefore, at some point, India has to make a rational diplomatic choice rather than being influenced by unreasonable decisions of another country like the US, whose actions will jeopardise the relationships between India and its distant neighbours in West Asia. The passive foreign policy towards West Asia, specially Iran, has to be upgraded to a pro-active approach to retain India’s big-power ambition in South Asia.

The author is a Research Associate, National Institute of Advanced Studies (NIAS), Indian Institute of Science Campus, Bangalore, India. She can be contacted at e-mail: khatoon.nasima15[at]gmail.com

ISSN : 0542-1462 / RNI No. : 7064/62