Indian Decade

China Drives India Iran Ties

Fear of losing leverage to China is encouraging creative thinking by India over Iran sanctions.

Fearful that China would occupy any space in Iran vacated by India if it adheres to UN and US sanctions, Delhi is determined to engage ‘creatively’ with Iran in a way that won’t anger Washington.
While India’s national security advisor, Shiv Shankar Menon, is expected to press the United States to protect Indian entities from sanctions using an exemption clause available to President Barack Obama, Delhi will simultaneously work on other ideas for engaging in trade with Iran.
One possibility is to advise Indian enterprises venturing into Iran to join Russian, Chinese or Kuwaiti consortiums to make it harder for them to be hit individually with sanctions. They could also be advised to create new corporate identities with no exposure in the United States or European Union. A rupee-rial arrangement is also being proposed to protect Indian banks from sanctions.
Against the troubling backdrop of the Af-Pak crisis, India sees the need to engage politically with regional interests like Iran and wishes to deny China any advantage by quitting the country over sanctions. In addition, India needs Iranian oil and gas and is also keen to export petroleum products to that country.

A Ministry of External Affairs paper titled ‘International Sanctions on Iran and Way Forward for India-Iran Relations’ argues that ‘Political engagement with Iran, while of great importance, may not be sufficient to ensure that our interests are protected. Economic engagement with Iran is also necessary and would help us in promoting our energy security, connectivity and opening of new markets, and to underpin our political objectives.’
Interestingly, the same paper observes that China was ‘taking a conscious decision to step into the vacuum created by the exit of western and other companies,’ which would give it additional leverage in Iran.