U.S. pressures India to alienate strategic partner Iran

When Hillary Clinton visited the Indian capital last week, the prickly subject of Iran was top of her agenda for talks with Prime Minister Manmohan Singh.

But even as the American Secretary of State was bluntly asking India to get onside with Western sanctions against Iran and its nuclear program, another set of meetings with Indian officials was in progress just down the road. That one was full of Iranian government delegates and business people, here to sign new trade deals.

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India is walking a precarious line these days, attempting to placate the U.S., with whom it has a rapidly growing trade and strategic relationship, while retaining close relations with Iran ? a regional friend that?s a source of badly-needed fuel, and more.

Ms. Clinton?s main focus was India?s purchase of Iranian oil. India is currently the number-two buyer of Iranian crude, which makes up 12 per cent of the energy need of this fuel-hungry nation. When the U.S. and European Union sanctions aimed at ending Iran?s nuclear program started to squeeze the international banking system, making it hard for India to pay for Iranian oil, the two countries worked out a scheme that lets India pay nearly half its bill in rupees ? which Iran then spends on Indian food and pharmaceutical imports.

?It?s a double win for New Delhi,? said Neil Padukone, a fellow with the Takshashila Institution, a think tank focused on Indian strategic issues.

Nevertheless India?s Deputy Oil Minister R. P. N. Singh told parliament on Tuesday that fuel imports from Iran will be reduced, to a total of 114 million barrels in the financial year ending next March, down from 128 million the previous year, saying bluntly that the country has to maintain its strategic relationship with the U.S.

It?s not clear that will be enough for the Americans, who sent another envoy here Tuesday to talk energy and Iran with senior officials. India wants a waiver to exempt it from sanctions; the U.S. has said it hasn?t cut back enough.

Anxious to feed an economy growing at about 6.5 per cent this year, and reliant on imports for 80 per cent of its energy needs, India insists it can?t afford to cut back much more than it already has. Its oil imports from Iran date back to the era of the Shah, and many major Indian refineries are outfitted specifically to process Iranian sweet, light crude; it is no small task to retrofit them.

That said, as the financial channels for trade are choked off, oil purchases from Iran will fall even further, predicted Gopalaswami Parthasarathy, a veteran diplomat and analyst of Indian foreign policy.

India?s main oil supplier is Saudi Arabia, and the Saudis have offered to bump up sales to India to cover a drop in supply from Iran ? the Saudis would also like to see India cut Iran off further, as part of the Sunni-Shiite struggle for dominance underway in the Middle East, noted Anwar Alam, director of the Centre for West Asian Studies at Jamia Milia Islamia University in Delhi.

?India has a vital stake in the Persian Gulf,? he said. ?It has six million workers there which constitute the largest remittances sent to India, and $120-billion in trade with [Gulf Cooperation Council] countries.?

Yet while oil is the most obvious tie between India and Iran at present, India has a number of other key strategic motives for maintaining this relationship.

The first is Afghanistan. India has a large and growing presence there: its public face an aid program (India is the largest individual donor to the Afghans), its private face a humming intelligence network aimed at checking the Pakistani influence and thwarting the export of Islamist fundamentalism.

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