India’s US-Iran Dilemma
India has already reduced its imports from Iran to appease Washington but bringing them down to zero is impossible
United States President Donald Trump is known to be mercurial. He has praised India as a “great country” only to mock it days later as a “tariff king”. Over the next few weeks, the moment of reckoning in India-US relations will arrive. Unprecedented US sanctions on Iran kick in on November 5. Trump wants Indian imports of crude oil from Iran to drop to zero by then. That will not happen. Iran is one of India’s largest crude oil suppliers. It allows long credit periods and accepts payment in rupees.
India has already reduced its imports from Iran to appease Washington but bringing them down to zero is impossible. Senior US officials understand this but Trump has a blind spot over Iran. If he doesn’t give India a waiver under the Joint Comprehensive Plan of Action (JCPOA), US sanctions on India could become a reality under the federal law Countering America’s Adversaries Through Sanctions Act (CAATSA).
An additional source of friction in India-US relations is New Delhi’s decision to buy the S-400 air defence system from Russia. This too could invite sanctions under CAATSA. Is Washington prepared to compromise its evolving strategic partnership with India over Iranian oil and Russian arms? Probably not, despite Trump’s manic animosity against particularly Iran.
India has an ace up its sleeve: China. Beijing is embroiled in a damaging trade war with the US. As the balancing pivot between the US and China in the Indo-Pacific, Washington cannot alienate India beyond a point. It has been quick to note China’s recent overtures towards India. Beijing too needs India in its corner as it braces for a long drawn-out trade and geopolitical battle with the US.
Significantly, India and China launched a joint programme on October 15 to train Afghan diplomats, brushing aside Pakistan’s opposition to closer India-China cooperation in Afghanistan. Referring to the new entente cordiale, Chinese Foreign Minister Wang Yi said: “China and India are active supporters of the Afghan peace process.” India’s External Affairs Minister Sushma Swaraj added: “I am very happy that we are charting a new course in partnership with China.”
Washington recently called India a “very valuable ally”. But Trump has for months been upset with India’s high tariff regime. He continuously picks on the 100 per cent duty India levies on Harley-Davidson motorcycles. The number of Harleys sold in India is infinitesimal. The finance ministry’s mule-headed bureaucrats erred badly in imposing such a steep duty on Harleys when the revenue implications are negligible. For Trump though, the Harley-Davidson issue goes beyond revenue. It is symbolic because Harleys are iconic to his deep South conservative base. Any tax levies on them that are perceived as discriminatory – and a 100 per cent duty is extortionate to US conservative eyes – touches a raw nerve.
Beyond symbolism lies a real dilemma for Indian policymakers: how to balance the competing interests of an evolving India-US strategic partnership against complex regional relationships with China, Russia, Iran and Saudi Arabia. Prime Minister Narendra Modi has invested considerable political capital in the Middle East, especially in Saudi Arabia and the United Arab Emirates (UAE). The US-Saudi axis has been a powerful force against Iran but recent events could seriously undermine that alliance.
The assassination of Washington Post columnist Jamal Khashoggi in Saudi Arabia’s consulate in Istanbul by a 15-man Saudi hit squad has roiled relations between the US and Saudi Arabia. Washington is incensed but has few options to act against Saudi Arabia. As Trump said after Khashoggi’s murder, the US recently signed a deal to sell Riyadh arms worth $110 billion. Cancelling that deal would mean job losses in the US – a Trump red line.
The Khashoggi assassination by the Saudi state has however inflamed opinion across the world. Finance ministers, major corporations and media organisations around the world pulled out of a key global conference, Future Investment Initiative, held from October 23-25 in Saudi Arabia and dubbed “Davos in the Desert”. Virgin Group chief Richard Branson has halted discussions to invest billions of dollars in his space technology company in Saudi Arabia. Others have been more circumspect: Saudi Arabia is the world’s second largest buyer of defence equipment.
Despite mounting evidence to the contrary, the Saudis insist Khashoggi’s assassination was a “rogue” operation. Top security officials have been arrested to shield Crown Prince Mohammed bin Salman. While condemning the assassination, the US has been careful to not blame the crown prince directly. Saudi Arabia is simply too rich and geostrategically too important for the West to alienate. It has long acted with impunity, underscored by its early support of al-Qaeda and ISIS, its blockade of Qatar and its war against Yemen that has created one of the world’s biggest humanitarian crises.
While the US sanctions Iran, it perversely arms Saudi Arabia. Washington cannot abandon Saudi Arabia because it fears Russia, already dominant in Syria, will play an even larger role in the Middle East. Following the boycott of Qatar by a group of Saudi-led Gulf nations, Turkey and Iran have grown closer. The US is therefore faced with the prospect of an alliance of convenience between Turkey, Iran, Syria and Iraq underpinned by Russian military power. If China, which has largely kept out of Middle East affairs, joins this Russia-led axis, the US will need Saudi Arabia and the Gulf nations, where it has large naval and air force bases, to balance power equations in a fraught geopolitical environment.
The Trump administration is meanwhile weighing sanctions on India if New Delhi does not bring oil imports from Iran down to zero. India has made it clear it cannot and will not. The Pentagon and the Senate are inclined to grant India a waiver under JCPOA on imports of Iranian oil after November 5. But India’s acquisition of advanced Russian defence equipment like the S-400 remains a sticking point.
The US can’t afford to antagonise India which is an integral part of Washington’s strategy to contain China’s expanding influence in the Pacific and the Indian Ocean. For India, the dilemma over Iranian oil and Russian arms might therefore still have a happy ending.