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Home > News > Columnists > Rajeev Srinivasan

Fumbling away our advantages

October 03, 2005

The recent efforts by Indian diplomats and negotiators to work with Iran and the US on both nuclear and energy issues have been nothing sort of disastrous.

Incompetence, fractiousness, ideological rigor mortis: by taking full advantage of all these, the Indian government has converted a potentially strong position into a pathetically weak one. India has snatched defeat from the jaws of victory, yet again.

The fundamental principle that the government fails to understand is 'buyer power', as articulated notably by competitiveness guru Michael Porter of Harvard University. An entity that is a major buyer of any item usually has tremendous influence over the sellers, especially if there are multiple sellers of a fungible commodity. Buyers with this sort of power are able to negotiate advantageous terms and conditions including pricing.

Iran vote: In national interest?

An example is General Electric: as a large buyer of almost everything, GE has been able to brutally negotiate down its costs. Just ask the Indian IT services companies about their experiences with GE's buyer power. In another recent example, Apple apparently contracted to buy 50 per cent of Samsung's flash memory production for its new iPod Nano, and as a result drove costs down dramatically.

From this point of view, India-Iran relationships take on a dramatic new perspective. Iran has a lot of natural gas that it would like to sell to somebody to keep its economy going. Given the increasingly tight near-embargo imposed by the US on Iran, more and more potential buyers are finding it prudent to stay away from Iran. The only two major buyers that Iran has are China and India. Both have signed very large, multi-billion dollar agreements with Iran for natural gas.

Now consider the situation if India were not in the picture. That means China would have such dramatic buyer power that they would bully Iran into highly disadvantageous terms. Therefore, it is important for Iran to retain India as a very large buyer. Thus, it is very unlikely that Iran would do something as stupid as cutting its nose off to spite its face by unilaterally cancelling the contract with India.

But this is exactly what the Marxists in India would like, because it would help their fatherland, China. A famous newspaper ran a story that declared, without identifying its sources, that Iran would cancel the contract. This is interesting because the recent revelations in the Mitrokhin Archives (see the scanned pages starting here, thanks to reader Randhir) suggest that the KGB planted stories in many Indian newspapers. This could well have been a story planted by the Chinese or by their proxies in India.

With considerable alacrity, Iran denied this story and said the Indo-Iran gas deal is still on track. Consider this is a signal: Iran is not about to abandon its long-term relationship with India which helps its long-term interests which are to contain Pakistani mischief in the region, as well as to fend off the Great Game indulged in by Russia, the US and China to control oil-rich Central Asian States. Therefore the Chicken Littles screaming that the sky was falling were shown to be wrong. Iran needs the India gas deal.

Iran, US: India's Catch 22

Another criticism was that India, as a leader of the Non-Aligned Movement, should have stood by Iran. This is ridiculous. The Non-Aligned Movement consists of banana republics, mostly vile dictatorships. They have not stood by India in India's time of need: remember the infamous vote on the Bangladesh war, when the UN General Assembly voted to censure India. It was overwhelming: something like 110 to 10, and almost the entire NAM banana-republic fraternity voted against India. I am pretty sure Iran did, too, as it has also done over the Kashmir issue. So exactly what does India owe Iran?

These 'reasons' why India should have voted for Iran are just so much hot air. On the contrary, there is a very good reason India should extricate itself from too close an embrace with Iran. This is that Iran is pushing hard for an Iran-Pakistan-India gas pipeline. I find it astonishing that nobody sees this is like the old proverb of paying good money to buy a dog that then bites you.

India would have to be totally insane to put itself at certain risk of blackmail a few years down the road. Besides, whatever India pays Pakistan by way of transit fees will be converted to AK-47s to kill Indians.

Liquefied Natural Gas shipped from an Iranian port to India, now that would be much more sensible: a few terminals developed all along the coast then be used to import LNG from other sources as well, for instance Myanmar. And LNG is viable now, in terms of cost, especially as compared to an easily-disrupted overland or underwater pipeline.

Why is Iran also plumping for the obviously non-viable pipeline that Pakistani terrorists, or the Pakistani army (the two of which are often indistinguishable) will almost certainly disrupt? Indians are doing it because of the insanity (or is that insaniyat?) of India-Pak bhai-bhai that seems to break out periodically in New Delhi, but why are Iranians falling prey to it, unless it also has to do with either idiocy or an 'understanding' with Pakistan? After all, they have never quite satisfactorily explained how closely they were allied with AQ Khan or what they have done with Khan-supplied gas centrifuges.

Therefore, I think India has no major reason to worry about Iran's sensitivities or hurt feelings. They will live. And they need India because of increasing international isolation, and as a customer.

But the fact of the matter is that India should not have upped the ante in the first place. What happens to Iran regarding the IAEA is not of life-and-death consequence to India, so India should have kept very quiet about the whole Iran-US spat. The Indian foreign minister should absolutely not have shot his mouth off in Iran offering them something to the effect of solidarity till death do us part. Which of course led to Tom Lantos and company dusting off their proliferation-mafia costumes and threatening to break India's knees.

Imagine if India had said nothing whatsoever about Iran and had quietly abstained from the IAEA proceedings. This would have avoided a nasty diplomatic gaffe and allowed India to carry on with more important things that are in its own national interests.

Part 2: Standing up to America

Comments welcome at my blog at http://rajeev2004.blogspot.com

Rajeev Srinivasan


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Number of User Comments: 21




Sub: Incompetent minister.

We have some deadwood ministers in our central cabinet. Natwar Singh is a prime example. He is such implusive, careless with word and still traped ...


Posted by Kailash Das





Sub: Two hoots to Iran

Dear Mr. Sreenivasan, I would love your comments on the article by Mr. Bhadrakumar which Rediff has kindly published and is available at http://www.rediff.com/news/2005/oct/03spec1.htm Regs... ...


Posted by Aby V Koshy





Sub: Undigestable logic on india voting to take Iran 's nuclear case tp IAEA

arguments put forth by Rajiv srinivasan may be good at any other time but here they look foolish and biased.He does'nt seem to be a ...


Posted by gajendra mohan bahuguna





Sub: journalists at their worst........

what are your views on this "neighbour" article -- http://in.rediff.com/news/2005/oct/03spec1.htm Do you guys actually open any old news article and write yours or do any ...


Posted by Prakash





Sub: What was that?

Thats stupid. Simply stupid. Its better not to write for the heck of writing without knowing the facts and figures correctly. And Kotler or Porter ...


Posted by Ranjan




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