By Alex Vatanka and Aparna Pande
The Iran factor could have been a spoiler as the third India-US strategic dialogue was held this week held in Washington D.C. The US granted India a last-minute waiver, exempting it from possible sanctions for its continued trade with Tehran. Still, while the issue of Iran was never going to dominate the US-India agenda, New Delhi will very likely continue to resist American pressure to make a turnaround on its policy toward Iran. Given its regional and economic goals, an India that prioritizes its ties with the US still cannot afford to ditch Iran entirely.
India's ties with Iran range from the sentimental to realpolitik. For some in the Indian policy elite, ties with Iran demonstrate that New Delhi is not a minion of the United States. By repeating a message of close historical and civilizational ties between India and Iran, this group effectively pushes a line that is make-believe and not an argument rooted in hard facts.
This is not to say that India's ties with Iran do not have domestic drivers or foreign policy implications. After Indonesia and Pakistan, India has the world's largest Muslim population and within that one of the largest Shia populations. This has an impact on domestic politics in India, especially for the ruling Congress party, which has always looked to the Muslim vote for electoral success. Meanwhile, as the world's fourth largest oil importer, India continues to be dependent on supply from Tehran, albeit with a noticeable decrease in its Iranian imports due to American pressures.
Iran is also critical for New Delhi as an access point to Afghanistan, as Pakistan does not allow India transit via the land route. India is providing over USD$2 billion in aid to Afghanistan, which is mainly in the reconstruction and development fields, including major infrastructure projects jointly with Iran and designed to rival Chinese-Pakistani plans.
Most importantly, India and Iran also share a similar vision for the future of Afghanistan: a desire to prevent the fundamentalist Sunni Taliban to ever again rule in Kabul. In fact, as the US military prepares to leave Afghanistan by 2014, it is very plausible that Iran and India will once again augment their joint efforts as they did in the 1990s to boost the prospects of their Afghan allies among the Tajik and Shia Hazara of Afghanistan. Iran's role is not just one of a geographic conduit for Indian influence into Afghanistan, but rests on the fact that Tehran retains a distinct ability to mobilize the non-Pashtun anti-Taliban forces in that country.
Parting ways too
However, India and Iran have also had major differences over the decades. During the era of the Shah, Tehran and Islamabad were very close, to the extent that Iran was a key financial and military backer of Pakistan in its 1965 and 1971 wars with India. To India's chagrin, Iran has always sided with Pakistan on the issue of Kashmir and often raised the issue in international forums.
With respect to Iran's nuclear program, India has insisted that as a signatory to the NPT, it is incumbent upon Tehran to abide by obligations. From a strategic viewpoint, India does not want to see another nuclear armed power in its neighborhood and it has therefore voted in favor of sanctions against Iran. But this policy has also generated a moral dilemma for India, as it has argued the world should not be divided between 'nuclear haves' and 'nuclear have-nots.'
Meanwhile, Tehran has since 2005 anxiously watched and disapproved of India's strengthening of ties with both the US and Israel, and particularly Indian-Israeli cooperation in the military and intelligence fields.
Despite the shifts in relations, it is US pressure on India that has turned Iran into a pressing foreign policy question in New Delhi. This has in turn led to an Indian-Iranian juggling act, an arrangement that appears to be durable for now but one that without doubt benefits India the most.
With further US and EU sanctions coming into effect against Tehran from July, India and Iran have adopted a payment mechanism in Indian rupees to enable New Delhi pay for its oil imports and circumvent financial sanctions imposed on Tehran. Based on this agreement, 45% of India's oil imports from Iran will be paid by Indian goods such as pharmaceuticals and engineering products. Since the trade in none of these products is prohibited under UN sanctions, India hopes this will both boost Indian exports and partially solve the payment problem caused by financial sanctions on Tehran. This Indian stance has so far been enough to keep the US mollified. Iran is the economic loser in this barter arrangement but these days Tehran has to settle for whatever deals it can secure.
With further international sanctions looming over Iran, India has attempted to diversify its oil sources and is importing more oil from the Arab states of the Persian Gulf. But there is also an Indian reluctance to be too close to Saudi Arabia for fear of dependence on any one single source of oil. New Delhi is also anxious about closer economic ties with Riyadh leading to Saudi influence and radicalization of the Indian Muslim population, similar to what has occurred next door in Pakistan.
India's leaders have always believed that their relations with one country should not impact their ties with other countries. The hope in Tehran is that such sentiments still prevail in New Delhi. Such hopes were evident when the Iranian foreign minister Ali Akbar Salehi recently visited India to hand over an invitation for New Delhi to send a high-level delegation to the conference of the Non-Aligned Movement to be held in Tehran in August.
A high-level Indian attendance is symbolically important for Tehran that desperately wants to break its isolation. The Indian balancing act is nonetheless difficult to sustain. As India increasingly seeks to play a global role, its leaders are bound to recognize that all relationships are not equal.
Alex Vatanka is a scholar at Middle East Institute. Aparna Pande is a Research Fellow at Hudson Institute. Her book "Explaining Pakistan's Foreign Policy: Escaping India" was published in 2011.