Round The World

New Delhi, 25 May 2018

Dropping Iran N Deal

FALLOUT FOR INDIA

By Dr. D.K. Giri

Prof, International Relations, JMI

Donald Trump’s decision to pull out of the Nuclear Deal with Iran would have serious implications for the entire world. Although many saw it coming, as Trump had made a commitment during his election campaign, to withdraw from the nuclear agreement. European signatories like French President Emmanuel Macron and British Foreign Minister Boris Johnson dashed to the US to dissuade President Trump. But he was adamant and has withdrawn, the European efforts ending in smoke.

Trump was quite dismissive of the nuclear agreement with Iran. He had said, “This was a horrible one-sided deal that should have never ever been made. It did not bring calm, it did not bring peace and it never would.” He and his administration were not sure that the deal was strong and tight enough to prevent Iran from making a bomb. They had other apprehensions about Iran's intent and seriousness on the deal.

The US decision left many world leaders angry, despondent, alarmed, and frustrated. It drew a chorus of opposition from the European traders who were party to the agreement and had lobbied with US not to pull out of it. It may be recalled that after over two years of grueling negotiations, the nuclear deal was struck between Iran and seven others: The P5+ Germany and European Union in 2015. Hectic efforts by EU to save the deal even with compromising on “Sunset Clauses” did not save it.

Following the announcement to withdraw, the US declared that it will re-impose newer and stricter sanctions including against the Central Bank of Iran. Under the new financial sanction regime, EU companies will have 90 to 180 days to wind up the operations in Iran, or they run the risk of technical problems with American Banking System. A French businessman was telling me that in the prevention sanction system, the French company, BNP Paribas was obligated to pay the American Bank $9 billion against their transactions in Iran.

The second important fallout is sanction on oil which will force European and Asian countries to reduce their imports from Iran, there are serious security implications. A nuclear-armed Iran can be a potentially destabilising factor in the Middle East. The reactionary rightist forces will be encouraged in Iran, anti-American backlash will grow and spread beyond Iran. So far President Mohammad Hossein Rahmani's reaction has been subdued. Iran's arch enemies in the Middle East, Israel and Saudi Arabia seem to be cheered with US’s decision. Prime Minister of Israel, Benjamin Netanyahu praised the American move as a historical move and sign of courageous leadership.

The Europeans who were the other main stakeholders of the nuclear deal were disapproving of America’s decision, vowed to carry out the agreement. They were of the firm opinion that isolating Iran would have harsh repercussions on Middle East situation and President Macron, German Chancellor Angela Merkal and British Prime Minister Theresa May pointed out the UNSC resolution endorsing the nuclear deal remained the International legal framework for the resolution of disputes. Withdrawal of America would amount to violation of the Security Council. European countries, long-term allies of USA are falling out on the nuclear deal with considerable consequences for both.

What is India’s reaction to US withdrawal from the Joint Comprehensive Plan of Action (JCPOA), known as the Iran nuclear deal? What could be the consequence for India? Iran and India have had sustainable bilateral transactions. New Delhi was watching with trepidation, the negotiations between US and Iran, and was dreading a war. The nuclear deal had precluded the possibility of war, putting India at ease. But US going back on the deal has reviewed India's security and economic concerns with Iran.

To start with, New Delhi, in the line of its balancing stance, said that “All parties should engage constructively to address and resolve issues that have arisen with respect to JCPOA.” Since statements are almost vacuous as US has already declared to withdraw. India could not have said otherwise, given its relations with Iran. New Delhi and Tehran seem to have calculated the risks of a US withdrawal and had decided to “immunise” their bilateralism from any external factors.

There are three major areas that are likely to be severely affected; one is 9- million- strong Indian expatriate population. It will be stupendous task for India to rehabilitate such a large number in case of a mass exodus. India has had bitter experiences in the area whenever there has been a conflagration of conflicts in the Middle East. The second is in the area of India’s procurement.  Iran is the third largest oil supplier to it. Oil prices are already rising in India and when the sanctions begin to bite, it could find it hard to offset the Iranian supply of oil. Although Americans have assured that the oil supply from the Middle East will not be disrupted, the oil- importing countries like India could not count on such assurances.

The third concern is about the Chabahar port. It was planned to make the port operational in 2018, but the sanctions by the US may delay the time line and overall operation of the project.  New Delhi could make a case for continuing with Chabahar port which gives alternative access for India to Afghanistan, and Central Asia and Russia as Pakistan denies land connectivity between India and Afghanistan.

New Delhi has been nudged by US to engage in rebuilding of Afghanistan. Chabahar port fits into the logistics of India’s several projects in Afghanistan. If New Delhi fails to operationalise the port, China might step in, which will be a double blow to India. Also the fallout of US withdrawal will test the “Strategic Partnership” between US and India.

So far, under Trump administration US-India relations have been largely transactional. US, has been, decidedly tough on Pakistan while nudging India to be pro-active in Indo-Pacific region, particularly South China Sea, to obviously counter China. Through revival of “Quad” comprising India-US-Japan-Australia, another security alliance brings US and India closer to each other. Both countries’ relation with Russia has also been put in perspective in their bilateralism. India-Israel’s new found partnership should help build India and US relations. But all this would be tested hard in the aftermath of Iran nuclear deal.

New Delhi and Tehran would like to continue their friendly ties by insulating them from the impending sanctions. How far would they succeed is a matter of their diplomatic skills. Iran would need India as it gets gradually isolated and likewise India would need Iran for its economic and strategic interest. New Delhi has substantial interest in the Middle East, and having Iran, a rich and militarily strong country on its side would be of immense help. Many observers would suggest that New Delhi and Teheran could weigh the options like Rupee-Rial trade, opening Iranian banks in India, and vice-versa to facilitate movement of money and income. Such a move will insulate them from the dollar market-regime.

All in all, India will have to do a tight-rope walking to maintain the balance between Iran and US, eventually it may have to pick a side. It will also have to invest time and resources to talk to many other countries in Europe and elsewhere to neutralize the fallout from the break-down of the Agreement. New Delhi has quite a few burdens to carry. It better be prepared.---INFA

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