Trump tightens sanctions on Iran’s oil exports—How India will respond

By Tanvi Madan

The Trump administration’s decision not to extend waivers from Iran sanctions will not be welcome in New Delhi. India imports over three-quarters of the oil it consumes, and Iran has long featured in the list of its top sources. Washington had previously issued it a waiver, and, since sanctions had gone into effect, India had decreased its imports from Iran.

As a U.S. strategic partner, whose cooperation the Trump administration has sought for its Free and Open Indo-Pacific strategy, India had hoped to get another waiver—even if that required further import reductions on its part. The administration’s decision will therefore irk Delhi, particularly since Washington has also imposed sanctions on another of India’s top suppliers, Venezuela. 

Indian public- and private-sector refiners will likely find other sources—the Indian government has indicated that it has been planning for this eventuality. Among those alternatives might be Saudi Arabia and the United Arab Emirates, whose relations with India have deepened in recent years; they might also include the United States, a relatively new source of imports for India.

But this step comes at an inopportune time for the Modi government, which is seeking re-election and will likely face opposition accusations that it has caved to American pressure. For that reason, and to maintain relations with Iran, it will likely seek to continue to import some quantity of oil from Iran using the rupee payment mechanism it had developed (even though it might upset the United States). Moreover, New Delhi has other concerns about this U.S. step: the potential impact on oil prices, and on India’s development and use of the Iranian port of Chabahar to facilitate alternate connectivity with/for Afghanistan.

These issues will be on the agenda this week as Principal Deputy Assistant Secretary of State Alice Wells visits India, where Indian officials will be hoping to convince their American counterparts to revisit the decision. 

Three broader concerns should also be kept in mind.

First, the Iran and Venezuela sanctions problems have come at a time when other irritants in the U.S.-India relationship have come to the fore. There are trade frictions, with the administration’s announcement that it intends to withdraw India’s benefits under the Generalized System of Preferences because of continuing concerns about Indian trade and investment policies. The 60-day deadline for a final decision on this step falls in early May, though it can be deferred until after the Indian election results are due on May 23. Moreover, Washington is unhappy with India’s defense deals with Russia, despite U.S. sanctions—not just for the S-400 system, but also a number of others. Defense deals with the United States, meanwhile, are still being negotiated or have stalled. India, in turn, is concerned about the Afghan peace talks and what Washington might cede to the Taliban—and to Pakistan for bringing them to the table.

Second, this step is counterproductive to the goals outlined in the administration’s National Security Strategy, giving India common cause with China and Russia. 

Third, these developments will reinforce the very Indian instinct that American policymakers dislike: the quest for strategic autonomy, which is in no small part based on a sense that the Unites States is not a reliable partner and will not be mindful of Indian interests. Two competing instincts are constantly at play in Indian foreign policymaking: the need for alignment and the desire for autonomy. This step on Iran sanctions waivers will fuel the latter. A frustrated Delhi will see it as one more unilateral U.S. decision that hinders or harms its interests, and constrains its choices. Even though India is not their primary target, it has become collateral damage to certain U.S. actions. These include the administration’s steel and aluminum tariffs, its withdrawal from the Paris climate change agreement, its intended drawdown or withdrawal from Afghanistan, as well as the sanctions on Iran, Russia and Venezuela. These steps furthermore strengthen the voices—and hands—of those in the Indian establishment who urge caution in furthering the partnership with the United States. 

It’s nonetheless important not to exaggerate the impact of the Trump administration’s move. For one, India has its own differences with Iran. Tehran, which had once been on the same page as Delhi on the Afghan Taliban, has changed tack and seems more aligned with Pakistan (Pakistani Prime Minister Imran Khan is indeed in Iran right now, eliciting a set of Khamenei tweets that won’t win him any friends in India). In addition, New Delhi does have that alternate supply options today that it did not before. Finally, the United States continues to be useful to India for a number of reasons, particularly Delhi’s external and internal balancing strategy vis-à-vis China. India might worry about Washington circumscribing its autonomy, but it has even greater concerns about a rising, assertive China doing so.  

from International Affairs https://brook.gs/2ZvAu9S