Indian Decade

India Walks U.S.-Iran Tightrope

India has a delicate balancing act with the United States and Iran. Can it look after its business interests?

For the next few days, Indian diplomats will be walking a rare if not unprecedented diplomatic tightrope as the country plays host to both U.S. Secretary of State Hillary Clinton and a 56-member Iranian trade delegation.

Clinton arrived in Kolkata on Sunday afternoon and was scheduled to hold talks with Prime Minister Manmohan Singh and United Progressive Alliance Chair Sonia Gandhi in New Delhi on Monday evening. Interestingly, Clinton was meeting Singh and Gandhi ahead of her meeting with External Affairs Minister S.M. Krishna, which is scheduled for Tuesday morning. (Generally, a visiting foreign minister meets first with his or her counterpart before calling on the prime minister).

Simultaneously, the Iranian delegation, led by president of the chamber of commerce Yahya Al Eshagh, arrived in the Indian capital for another round of talks over what New Delhi can sell to Tehran. The Iranian trade delegation’s objective is to find ways for India to circumvent tough U.S. sanctions that have been strangulating the Iranian economy. Along with petroleum manufacturers, the Iranian delegation includes members from the food, pharmaceuticals, machinery and steel industries.

It’s certainly an odd diplomatic situation for India, with its leadership engaged with representatives of two rival nations both wanting to deepen ties with India. 

With Iran, Indian industry is in a state of confusion, and Indian exporters want clarity on the latest tightening of U.S. sanctions that target third parties helping Iran evade sanctions by denying them access to the U.S. banking system. Many Indian exporters feel that there just isn’t yet clarity on whether or not bilateral trade with Iran falls under the Western sanctions.

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India is the world’s fifth largest oil importer, with some 80 percent of its total oil consumption coming from foreign sources. Iran is New Delhi’s second largest oil supplier after Saudi Arabia, with Iranian crude accounting for 12 percent of India’s total imports. At the same time, Indian imports of Iranian crude are steadily falling.

Clinton's three-day visit to “strategic” partner India reflects the depth of ties and level of comfort that exists between India and the U.S. It also demonstrates yet again the Obama administration’s policy of de-hyphenating India and Pakistan, as Clinton has arrived straight from Bangladesh and won’t be traveling on to Islamabad.

A senior official of India’s External Affairs Ministry pointed out Sunday that India and the U.S. have made considerable progress in a whole host of areas of bilateral cooperation including launching the first ever Infrastructure Debt Fund with the participation of ICICI and Citibank; the bilateral Open Government Platform; and on pushing for dialogue between NPCIL and Westinghouse. Defense and intelligence cooperation is on the rise and India and the United States frequently hold consultations on non-proliferation, disarmament and related issues.

Indo-U.S. bilateral trade exceeded $100 billion for the first time last year, and there are a number of ongoing initiatives in areas like renewable energy and energy efficiency. India and the U.S. have also agreed to establish a higher education dialogue, the official said. This will build on progress that was made on science, technology and innovation agreements during President Obama’s India visit in 2010.

It will be interesting to see if the two sides can continue to add meat to the rhetoric over India-U.S. ties.