A widespread concern among sanctions supporters is that the Indians will join the Chinese and Russians and simply take advantage of the additional constraints Western governments have imposed on their companies’ dealings with Iran to expand their own business with Iran at others’ expense. This substitution relieves pressure on Tehran to make concessions regarding its nuclear issue to escape international sanctions.
This “backfilling” of businesses withdrawing from Iran also makes it more difficult to secure additional foreign support for sanctions since their opponents constantly argue that the measures were simply enhancing the international competitiveness of those foreign companies whose governments declined to adopt or enforce sanctions.
This problem has proven especially strong in the case of the supplementary sanctions adopted by the United States and other Western governments that try to augment the more limited sanctions adopted by the United Nations. China, Russia, and other governments challenge the legitimacy of these supplementary sanctions since they are adopted without their approval but are then applied to their national businesses doing business with Iran.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
In addition to Indian investors in Iran simply “backfilling” for the departing Western firms, U.S. officials worry that Indian dealers will circumvent trade sanctions by expanding their use of intermediaries to sell gasoline and other sanctioned products to Iran. Chinese traders, for example, often conduct more unofficial commerce with Iran than the total volume of officially recorded Iran-China transactions.
But Indians are turning these arguments around by pointing out that those Chinese traders and investors will simply fill any business opportunities foregone by India. They also subtly remind Americans that, in contesting Chinese influence in Iran, New Delhi is helping serve its role of tacit balancer of Beijing in southern Eurasia.
There’s no easy answer to these dilemmas. A long-term solution will require a change in Iran’s nuclear policies and possibly its regime, or an alternative arrangement in which India has found alternative energy sources outside the Middle East – or alternative sources of energy, perhaps in renewable fuels or more likely in nuclear power.
In the interim, the U.S. government has broadly decided not to press Indians to end all trade with Iran. Perhaps with an eye on taking advantage of this state of affairs, a 56-member Iranian trade delegation, led by the head of Iran’s chamber of commerce, is visiting New Delhi to continue Iranian efforts to purchase more Indian goods and services. Iranians are becoming desperate to use their enormous and growing rupee surplus, which now amounts to billions of dollars.
U.S. officials have downplayed their presence, since Indians are only going to sell them consumer and industrial goods such as cars, machinery, and food that won’t directly contribute to India’s nuclear and military programs. They also know that many Indians will simply decide they dare not risk dealing with Iran since they might inadvertently fall afoul of U.S. sanctions despite the best efforts of their government to keep them safe.