The Narendra Modi government confronts a long list of IOUs that the US is now encashing.
America’s President Donald Trump assumed office in 2017 after repeatedly decrying the Joint Comprehensive Programme of Action (JCPOA), otherwise known as the Iran nuclear deal, as “the worst deal ever negotiated”. This was the deal the P5+1 had signed with Iran and was a diplomatic high point of Barack Obama’s administration. While he took a year to act, it would have been foolhardy to imagine Mr Trump wouldn’t match his campaign rhetoric to his actions.
Confrontation with Iran was inherent to the rebalancing Mr Trump began with Gulf countries early in his term as Riyadh became his first destination abroad. Saudi Arabia and the United Arab Emirates were sulking since President Obama endorsed the JCPOA with Iran, realising its criticality to countering the Islamic State. Mr Trump’s reversal of that policy was now relegating Iran again to a pariah state, which President George W. Bush had once colourfully described as part of the “Axis of Evil”.
Delay in acting against Iran was perhaps due to the first lot of presidential advisers being circumspect in handling Iran, given the need to retain Iran’s cooperation against ISIS. Mr Trump’s outreach to North Korea to abandon its nuclear programme may also have been a factor. It would hardly generate confidence in US pledges if he was seen junking the nuclear deal negotiated by his predecessor. When the hawkish John Bolton joined as national security adviser in April 2018 and Mike Pompeo moved from the CIA to become secretary of state, the forces were aligned to pillory Iran. The US withdrew from the nuclear deal in May 2018. Sanctions were reimposed, although oil import waivers were given to select nations, which have now been allowed to lapse on May 2, 2019.
The next step was the listing as a terror outfit of the Iranian Revolutionary Guard Corps (IRGC), which constitutes the backbone of clerical rule. Its auxiliary force Baseej helps maintain civilian order at home. The Quds Force, another IRGC adjunct, conducts special operations abroad, by using allies, especially Shias. The aim was to either force Iran to surrender and accept a more stringent nuclear deal and a curtailed role in the region, or cause popular unrest within Iran to trigger regime change. These are unrealistic objectives as the more Iran is pushed, the greater its people will consolidate behind the current rulers. Iran would also move deeper into the strategic orbit of Russia and China.
The immediate target of financial sanctions is Iranian oil. Its export peaked after the sanctions were lifted following the JCPOA, at 2.8 million barrels per day, earning Iran $36 billion in 2016. Current exports may have fallen to one million barrels per day. China, despite its ongoing trade war with the US, is unlikely to abandon Iran or its oil. Iranian foreign minister Mohammad Javad Zarif is making a series of visits abroad to counter the US-created economic squeeze. He visited Iraq to bolster the Iranian presence in the oil and gas sectors, which the US cannot curtail as Iranian gas is critical to Iraqi power generation. Iraq also provides an avenue for clandestinely exporting Iranian oil, via Turkey or Syria.
Iranian President Hassan Rouhani is cornered between the US, seen as betraying his trust, and the hardliners at home. To bolster his position, he announced partial withdrawal from JCPOA by curbing exports of enriched uranium and heavy water produced beyond the nuclear deal limits. He has also given Europe 60 days to find a means to secure the export of Iranian oil despite US sanctions. The European Union has considered a barter-based US sanctions-proof system, which has been a non-starter so far.
The deployment of US warships on May 5 was another step in the ladder of escalation. Mr Pompeo had last year issued a charter of demands seeking literally the suspension of the Iranian nuclear programme and a pullback from Syria. The Economist warns that the “potential for miscalculation is large” as US and Iranian troops are within kilometres of each other in Iraq, Syria and the Gulf waters. The Saudis have alleged two of their oil tankers were damaged by alleged Iranian sabotage. This is reminiscent of the start of the tit-for-tat attack on vessels during the 1980s’ Iran-Iraq war, resulting in the mistaken shooting down of an Iranian civilian airliner by the US. This augurs poorly for Indian oil imports, the six million-plus Indian diaspora and Indian exports. Out of 17 million barrels transiting through the Straits of Hormuz every day, only 6.5 million can be exported via the Saudi and Emirati pipelines bypassing the choke point.
The visit of Iranian foreign minister Mohammad Javad Zarif to New Delhi in the middle of an acrimonious Indian election underscores the Iranian urgency over the US threat. The discussions were called “constructive”, although whether India would defy the US and import Iranian oil was left open till after the May 23 election results. India will decide on commercial considerations — the concessional price offered, energy security and mutual economic interests. The last relates to Iran buying more from India to balance the lopsided trade in Iran’s favour as indeed the operationalisation of Chabahar port, which the US has exempted from sanctions due to its usefulness in stabilising the Afghan economy.
On Mr Zarif’s itinerary are Russia, China, Turkmenistan and Iraq. India will need to subtly balance relations with the emerging camps. The US has not been chary of demanding that for helping India list Masood Azhar as a global terrorist, India must agree to isolate Iran. The US and its Gulf allies, the Saudis and Emiratis, have deported politically sensitive individuals named in corruption cases allegedly involving the Congress-led alliance. The UAE even conferred its highest civilian honour on Narendra Modi in the middle of the election, which is fairly unprecedented. Wing Commander Abhinandan Varthaman’s quick return defied past Pakistani conduct and seemed guided by the US and the Saudis. The Narendra Modi government confronts a long list of IOUs that the US is now encashing. But Iran’s significance for India goes beyond oil, that can be sourced from elsewhere. It balances Pakistan’s role in the region, particularly in Afghanistan, where Indian and Iranian interests largely converge. It also ensures vital connectivity for India towards Afghanistan and Central Asia.
The next government’s first challenge will be to rebalance relations between the US, Saudis, Emiratis and a resurgent Iran, its influence spread across its sixth-century BC footprint from the Mediterranean to the Indian Ocean.