The world continues to react to the death of the Iran nuclear deal – and only sometimes are the reactions in Washington’s favor. Last week, China, never one to shy away from the opportunity to look like a global leader, said it would try to salvage the deal. Poland broke with the rest of Europe, saying it would side with the U.S. rather than keep the deal with Iran alive. And now, India, a country with which the U.S. has improved relations over recent years, is trying to work around sanctions. It’s not altogether surprising. Though India and the U.S. share some strategic interests in the Indo-Pacific region – namely, keeping China in check – their differences are too many for New Delhi to constantly walk in lockstep with Washington.
Taking a Beating
A case in point is Iran, which is one of India’s more overlooked strategic partners. India has several interests in maintaining a relationship with Iran, but the most notable of them is oil, which meets roughly 80 percent of India’s energy needs. Unsurprisingly, India is the third-largest oil importer in the world, and Iran is India’s third-largest supplier. It provided India with 640,000 barrels per day in April 2018 along, and if the trend holds, New Delhi will have bought $105 billion worth of oil from Iran by the end of the fiscal year. (Iran provided India roughly 480,000 bpd last fiscal year.) So important are energy ties to these two countries that in 2012 India and Iran established a special mechanism whereby Iran would accept payment in rupees and would offer oil in a sort of barter system when the countries trade.
When the price of oil rises, as it did when the U.S. withdrawal from the Iran deal was announced, India suffers. And though there is never a good time to pay more for something, the timing for India is especially bad. Some areas of the country are still struggling from last year’s economic slowdown, the result of economic reforms. On the whole, the economy has not yet fully recovered. Just this week, the government lowered its official growth rate estimate from 7.5 percent to 7.3 percent. Higher energy prices and the threat of energy shortages would be yet another blow to an economy that has recently taken a beating.
The government of Indian Prime Minister Narendra Modi is ill prepared to manage such a problem. Modi’s popularity has fallen. State parties are re-aligning with the Indian National Congress party and posing a formidable opposition to Modi’s Bharatiya Janata Party – enough to perform stronger in local elections. Modi and his party will only become more unpopular if they have to tell voters to expect energy shortages – or if high energy prices leave them with less money to spend in other areas.
Cooperation with Iran also provides India with opportunities to pursue its regional and security ambitions in ways cooperating with the U.S. can’t. After all, Washington isn’t jointly developing a port on Iran’s southeastern coast as India is. The Chabahar port, a major strategic interest for both India and Iran, has cut the cost and time of trade by about 33 percent. In time, the plan is to transform the port from a bilateral hub to a regional hub to facilitate more trade in the Greater Indian Ocean.
Perhaps most valuable is the fact that this port gives India access to trade with Central Asia, especially Afghanistan. Iran has infrastructure that links Chabahar with Herat, Kandahar, Kabul and Mazar-e Sharif in Afghanistan. Through this road network, India can now resume its lucrative trade with Afghanistan (Pakistan denied the transit of goods). In addition to helping India circumvent Pakistan, Iran also enables India to counter China’s investment and military presence in Pakistan’s Gwadar port.
The United States would prefer that India honor the sanctions it has levied on Iran, but it is simply in no position to compel India to do so. Washington cannot be a direct source of oil, nor can it grant access to Afghan markets. U.S.-Pakistan relations are tense, so Washington couldn’t help India work around Pakistan land closures even if it wanted to. The United States has asked India to assume a more active role in stabilizing Afghanistan, but India can hardly do that if its economy falters. (India said it would help where possible, just not militarily.)
A Little Leverage
This is all typical of the somewhat roguish foreign policy of India, which has never been one to simply do Washington’s bidding. During the Cold War, India was part of the Non-Aligned Movement, and though it has since warmed to the West, it still relies heavily on Russia for its defense needs. Which, apparently, are many. According to the Stockholm International Peace Research Institute, India is the single-largest arms importer in the world, spending more than $100 billion on new weapons and systems from 2008 to 2017, of which roughly 65 percent were imported. Of those, Russia supplied roughly 60 percent, while the U.S. supplied just 15 percent. More valuable for India is the willingness of Russian defense companies to engage in joint ventures and thus help India modernize its own defense industry.
All the while, India is enhancing defense ties with others. Modi is currently on a tour of Indonesia, Malaysia and Singapore, the early fruits of which attest to India’s ambition and ability to reach farther east. While in Indonesia, Modi agreed to increase defense and maritime cooperation, including the development of a special economic zone and deep-water port that may host Indian submarines and other warships on the Indonesian island of Sabang, near the mouth of the strategic Malacca Strait. (India also recently held its first ever joint naval exercises with Vietnam.) Such actions take place alongside India’s participation in the Quad, a loose coalition with Japan, the U.S. and Australia focused on laying the groundwork needed to contain Chinese assertiveness.
This, along with defense exports, gives the United States a little more leverage over India. The U.S. provides India with defense equipment like C-130 and C-17 cargo planes, a range of helicopters and light artillery. Also on the table for purchase are attack helicopters, Stinger missiles and Predator drones. To pressure India, the U.S. has raised the possibility that it would not sell it any more Predator drones if it buys the Russian S-400 missile defense system. Losing out on select weapons purchases could be tactically detrimental in a specific area, but it is hardly a deal breaker. After all, U.S. weapons are expensive, and Washington avoids the kind of technology transfers and joint ventures that India so desperately wants. As for the Quad, last week, the head of India’s navy said there would be no military dimension – a tacit confirmation that New Delhi questions the group’s reliability. (In fact, the Quad fell apart once already in 2009.)
The United States is still the world’s largest economy and military force, so it’s not as if India is interested in rebuking it entirely. But the fact that its interests diverge from Washington’s in so many areas means India will always be a reluctant ally.