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Friday, August 17, 2012

India trying to mend ties with Iran??



What happens when an irresistible force meets some old object which harbours notions of its own glory and grandiose and stubbornly refuses to move? The answer is Libya 2011. What happens when the seemingly irresistible force meets a more difficult object to move? The answer is Syria 2012 – a Syria supported by Iran. And lastly, what happens when a cautious player tries to balance its interests between the irresistible force and the formidable object? The answer is India of recent times. In this post, I focus on recent developments in the Middle East, especially over Iran and India’s response to the unfolding diplomatic ‘tensions’ over Iran. On the whole, recent developments suggest that the Indian Government might have decided to mend ties with Iran after having earlier curtailed business and political relations under US pressure.

The Big News: PM Manmohan Singh to visit Iran on August 28th
Yes, you read it right! Manmohan Singh is indeed visiting Iran on August 28th to attend the Non-Aligned Movement (NAM) summit. This would be the first trip by an Indian Prime Minister to Iran in over a decade after Atal Behari Vajpayee’s visit in 2001. Manmohan Singh’s visit to Iran comes in the backdrop of unrelenting US campaign to isolate Iran diplomatically for its alleged incompliance with international law. India has been a special target of the US Administration in its quest to seek complete diplomatic isolation of Iran.

Recap: US efforts to enlist India in its diplomatic confrontation with Iran
India has traditionally been an important buyer of oil from Iran (around 13% of Iran’s oil imports went to India, prior to the escalation of the current round of sanctions against Iran). India has always enunciated that it abides by United Nations Security Council (UNSC) resolutions, but does not feel compelled to heed to unilateral sanctions by the US or the European Union (EU). [Nevertheless, it remains a completely different matter as to how much justified or ‘legal’ are the current UNSC resolutions against Iran] Consequently, India initially refrained from reducing oil imports from Iran, as UNSC resolutions did not demand so.

USA was visibly surprised and incensed at India’s refusal to join US efforts to isolate Iran. Former Under Secretary of State for Political Affairs Nicholas Burns (who served in the Bush Administration) rebuked India’s inaction over Iran and criticized India’s decision to continue to import oil from Iran. [Refer to Burns’ article: http://thediplomat.com/2012/02/20/india-lets-u-s-down-on-iran/] Burns wrote that India’s refusal to join the US efforts was like a “slap in the face” for US by an ungrateful India, which had received the nuclear deal from the Bush Government. [Nevertheless, it must be pointed out that even by that time India had already displayed some sensitivity to American demands, especially when the Reserve Bank of India scrapped the long-standing ACU mechanism in December 2010, thereby jeopardising oil trade with Iran]

Next came US current Secy. of State Hillary Clinton’s visit to India in early May 2012. The trip began somewhat unusually, with Clinton landing in Kolkata (instead of New Delhi), in order to meet West Bengal’s new Chief Minister who had recently overthrown 34 years of Communist rule in the state. While the landing in Kolkata might have been a bit unusual, however her demands in New Delhi were very predictable – she wanted India to maintain distance from Iran and cut oil imports from the country. [Refer to BBC report “Clinton urges India to buy less oil from Iran” http://www.bbc.co.uk/news/world-south-asia-17980086]

Recap (cont.): India slowly begins to downgrade commercial ties with Iran
A week after Hillary Clinton left India, the Government announced in the Parliament that it would indeed reduce oil imports from Iran by 11% in the year 2012-13. [Refer to NDTV’s report http://www.ndtv.com/article/india/india-decides-to-cut-iran-crude-imports-by-11-per-cent-211134]

Thereafter, the Indian Government took a series of steps which indicated that India had finally given up on its efforts to preserve ties with Iran and seemed increasingly poised to join the Western campaign to isolate Iran. The European Union enforced new sanctions on July 1, 2012 and prohibit EU-area companies from insuring ships carrying Iranian oil. Consequently, Iran’s oil imports globally became endangered as most of the tanker insurance companies were European. In response, the Japanese Government quickly declared sovereign guarantee for ships importing oil from Iran to Japan in order to ensure steady supply of oil in the country (which happens to be an US ally with US military on its soil).

However, the Indian Government struggled to come up with a plan to ensure oil imports from Iran. At that time, the Indian Government refused to declare a Japan-style sovereign guarantee for ships carrying Iranian oil. Consequently, Indian shipping companies did not want to import crude oil from Iran. Subsequently, Iran offered to send oil to India through its own ships. However, India then banned Iranian ships from entering India waters, citing US sanctions. [Refer to The Hindu report “India bans U.S.-sanctioned Iranian ships from its waters” http://www.thehindu.com/news/national/article3692907.ece] Thus, the Indian Government was in effect saying that it would neither provide insurance to Indian ships importing oil from Iran, nor would it allow Iran to itself deliver oil to India. Meanwhile, the Shipping Corp. of India said that its joint-venture with the Islamic Republic of Iran Shipping Lines (IRISL) will end as US sanctions against IRISL hampered the JV’s ability to operate. [Refer to http://www.livemint.com/2012/07/26002859/Shipping-Corp-of-India-says-v.html]

Thus we saw a gradual but steady reduction in commercial ties with Iran. Many a times it seemed that the Indian Government itself was not interested in finding ways around US sanctions to ensure continued oil imports from Iran.

In the meantime, the Middle East witnessed an escalation in violence in Syria and increasing diplomatic isolation of Bashar Al Assad’s Government. This was a major blow to Iran as the Assad Government in Syria remained one of the last few allies that Iran had in the Middle East region. Meanwhile, Libya-style efforts were underway to overthrow Assad’s Government in Syria. Consequently, the NATO powers formed their “Friends of Syria Group” (FOSG) in February 2012, in a meeting in Istanbul. Saudi Arabia and Qatar are also amongst the seventy-odd FOSG countries, seeking to promote freedom and democracy in Syria. It is important to note that Iran was not invited to the FOSG despite being a large country in the neighbourhood. In fact, the US has steadfastly opposed any Iranian involvement in a possible diplomatic deal on Syria, and has instead termed Iran as part of the problem. Nevertheless, the UN envoy to Syria, Kofi Annan (who has subsequently resigned from his role) recognised Iran’s tremendous influence in Syria and repeatedly called for Iran to be part of any diplomatic solution on Iran. [Refer to “Syria Crisis Solution Must Include Iran, Kofi Annan Says” http://www.huffingtonpost.com/2012/07/10/syria-crisis-iran-kofi-annan_n_1661298.html] However, the US dismissed such suggestions.

Turnaround: India sends representative to Iran for meeting on Syria
Fighting continues to intensify in Syria, with reports suggesting that rebels are receiving material support from Gulf countries (mainly Saudi Arabia and Qatar) and the Government is in turn receiving support from Iran. In the midst of all this, Iran decided to host its own meeting on Syria. And it was then that India decided that it was time to show some independence in foreign policy. So India sent a mid-level diplomat Rajeev Shahare, joint secretary in the West Asia North Africa (WANA) division of the MEA, to Tehran. [Refer to http://articles.timesofindia.indiatimes.com/2012-08-10/india/33136165_1_iran-and-syria-syrian-crisis-syrian-government] The meeting was attended by thirty odd countries including Russia, China and Pakistan. Obviously, the Western powers and the Gulf monarchies were not invited and most likely they would have turned down any invitation.

It must be conceded that the meeting was not a grand meeting as most of the representatives of the thirty countries were below the Ministerial level. However, Iran’s ability to host such a meeting in the face of intense diplomatic and commercial boycott by the US and EU is in itself no small feat. Moreover, even the United Nations took note of Iran’s efforts to resolve the Syrian crisis. UN General Secretary Ban Ki Moon wrote “I thank the government of the Islamic Republic of Iran for hosting this consultative meeting on Syria at this critical stage.” [Refer to http://www.un.org/sg/statements/index.asp?nid=6235]

India followed up on its moral support to Iran’s diplomatic initiative by finally accepting Iran’s invitation to PM Manmohan Singh to attend the NAM summit on August 28th. It remains to be seen how far India’s new rapprochement with Iran goes. Nevertheless, one thing is clear, Iran is not yet diplomatically as isolated as Washington would have wanted.

Update: First oil tanker set to bring Iranian crude oil to India with Indian insurance cover
In a minor positive step towards ironing out of difficulties in Iran-India trade, India finally decided to provide little insurance ($50 million, compared to $1 billion what European insurers used to provide) to ships importing Iranian oil. [Refer to http://www.livemint.com/2012/08/12230020/Omvati-Prem-first-oil-tanker-t.html?atype=tp]