Last November, India’s senior foreign policy officials made their unhappiness known over Iranian Supreme Leader Ali Khamenei’s remarks about Kashmir being a ‘besieged’ region of the world. They not only called in the Iranian ambassador to express their displeasure, but for the first time carefully abstained from voting on a UN resolution condemning the state of human rights in Iran. (In the past, India had scrupulously voted with Iran to avoid giving offense to this important regional trading partner and tacit ally in Afghanistan).
This week, the Reserve Bank of India, India’s central bank, issued explicit guidelines indicating that Indian companies would no longer be allowed to use the Asian Clearing Union, a regional clearinghouse, for financial transactions with Iranian companies. This decision, in the language of international relations, constitutes a costly signal. It entails significant costs because India and Iran have gas and oil trade to the tune of $11 billion annually.
It’s also costly in other ways. The government will also pay significant political costs because the opposition in parliament — and especially the Communist parties — will now seize upon it as further evidence of the ruling United Progressive Alliance genuflecting before US pressure. There is, of course, no doubt that the Obama administration had long made it clear that it would prefer to see India distance itself from Iran and join the sanctions bandwagon.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
However, it’s not certain that American pressure alone contributed to this decision. Apart from Khamenei’s remark on Kashmir, the Indians have other reasons to express their displeasure with the Iranian regime.
India is on the verge of joining the UN Security Council after nearly a two decade hiatus, and choosing an option that entails significant economic and political costs is yet another way of signaling to the global community that it is prepared to bear new and painful burdens as it competes for an eventual permanent seat on the Council.