Uncertainty Over the Iran Nuclear Deal is Bad News for India

Trump’s threatening note on the Iran nuclear deal could spell trouble for India including delay in Chabahar project.

4 min read

Trump’s threatening note on Iran nuclear deal could spell trouble for India including delay in Chabahar project.

We now know that President Trump cannot live with the ignominy of certifying every few months that Iran is complying with the provisions of the Iran Nuclear Deal which was signed in July 2015 by the Big 5+1 and Iran. Yet, he is not prepared to go all the way and take a call on pulling US out of the deal.

If international deals of such strategic importance had to be signed and rescinded on the whims and perceptions of individual leaders and their electorates, the entire system would collapse; and collapsing it is, with North Korea under no one’s control and measures underway to ensure that Iran too would head the same way.

Also Read: Trump Hits Out at Iran Nuke Deal in Defiance of European Allies


Tampering with Nuclear Deal Fraught with Danger

Tampering with a carefully put together instrument such as this nuclear deal is fraught with danger. This deal was secured after much negotiation with safeguards under an international monitor.

If Iran reneges on the provisions and pursues an active nuclear military program, the powerful countries or at least a segment of them, would have the sanctity for taking whatever action they deem necessary, including military action.

Given the modern world’s capability of surveillance and provisions in the deal for physical monitoring, there seems only a remote possibility that Iran would continue to follow the nuclear military route.

The benefits which accrue to it in terms of the billions of dollars frozen in US accounts (not yet released) and the freedom to trade in oil (160 billion USD losses over the last many years), would probably offset any major strategic advantage it may perceive through a military nuclear program.

Also Read: Defying US Warnings, Iran Tests New Missile

Impact on India’s Ties with Iran

Delhi’s immediate response is that any change in the status of the deal does not affect India’s long-standing relationship with Iran. Conceptually that is true and is indeed an appropriate response because thus far the US strategy appears to be that of testing the waters and gauging international response.

However, if the deal is abrogated (it automatically falls through if the US pulls out) the implications for India will be manifold. If US imposes sanctions, complexities involved in India’s trade relationship with Iran would haunt both the countries.

During the previous phase of sanctions, ways were found to address this complexity through circuitous routes of payment, which was not enough to keep either side happy. India purchased Iranian oil with rupees by depositing the payment in an Indian state-run bank account. Iran used this to buy Indian goods, that included food, drugs and consumer products. This system will need to be refined once again which would depend on how stringent the sanctions regime would be.

President Trump’s obsession with isolating Iran could witness the return of a far more robust mechanism of monitoring and preventing breaches through alternatives ignored by previous administrations.

Also Read: What Hassan Rouhani’s Re-election as Iran’s President Really Means


Fate of Chabahar Project in Limbo

While India may have ramped up crude imports from Iran, it is primarily in the field of natural gas that the country’s energy relationship is significant. In the absence of progress on the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline India’s large-scale need for gas was likely to depend much more on Iran as it acquired more means of liquefying gas.

India was also negotiating the feasibility of a large urea plant in the vicinity of Iran’s Chabahar port exploiting the easy availability of gas.

The strategic impact will be most on the issue of Chabahar port although there may not have been the expected rate of progress in terms of ramping up its full exploitation by India.

For India it is the future route of access to Afghanistan, heart of Asia and potentially to make use of the North-South corridor of Russia for access right up to the Baltic States. During the last phase of sanctions even shipping routes had to be changed around the Gulf region due to different monitoring regimes.

So it is this unpredictability which will rear its ugly head, which is never good for any international business and trade; the last thing India needs at a time when its economy is in re-stabilisation mode is an increase in its oil bill.

Will India’s ‘Straddle Policy’ Work?

The blockade of Qatar by Saudi Arabia, Egypt, Bahrain and UAE adds to the complexity this time.

For India, which has an approximately 8 million strong diaspora in the Gulf region and receives 35 billion USD worth of remittances every year, any unpredictability doesn’t bode well strategically.

It could lead to a jump in oil prices as Iran is forced to cut back production; it could also lead to lowering of business volumes which is bad for the job market.

In view of the much improved Indo-US relationship, now on a strategic footing, India’s ‘straddle policy’ will be a challenging affair. Trump is more in the ‘with us or against us’ mode and there is little consistency in his policies, as witnessed in the last few days with a turnaround on Pakistan.

Although it may never happen, given the pressures within the Big 5+1, any development on the abrogation of the Iran Nuclear Deal is likely to impact India negatively more than many other nations; something we need to be prepared for.


(The writer, a former GOC of the army’s 15 Corps, is also former commander of the Uri-based Kala Pahar Brigade. He is now associated with Vivekanand International Foundation and Institute of Peace & Conflict Studies. He can be reached at @atahasnain53. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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