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Iran's strategic relevance for India

May 07, 2012 17:51 IST

Lingering tension and looming war clouds within the region pose grave threats to India's interests. It is therefore imperative for India to try and mediate between the US and Iran, says Alok Bansal.

United States Secretary of State Hillary Clinton's statement in Kolkata urging India to curtail its oil import from Iran signifies increasing pressure that India is likely to face on its dealings with Iran from the US in an election year.

It is not to undermine the threat to global peace that might emanate, should Iran decide to go in for nuclear weapons, but the US also needs to understand India's strategic compulsion and its critical dependence on Iran for its sustained growth and development. India and Iran have had long civilizational links, but that did not prevent Iran from providing material support to Pakistan, in its wars with India, both in 1965 and 1971.

However, Iran has a very significant geo-strategic location and links West Asia, Caucasus, Central Asia and South Asia with one another. Moreover, India's troubled relations with China and Pakistan have made Iran its only gateway to the vast resources and markets of Afghanistan and Central Asia.

It also provides India the shortest access to the energy resources of the Caspian basin and the Caucasus. Indian economic growth not only needs the vast markets of Eurasian land mass, but also its large untapped energy resources. It can also provide an overland route to the energy rich regions of West Asia.

India and Iran have had close cultural, linguistic and religious links for centuries. Indian culture, literature and architecture have been vastly influenced by Persian art and culture. Moreover, Iran is the largest Shia state in the world and the blatantly partisan western policies in Syria and Bahrain have forced the Shiites world over to look to Iran as their saviour.

This has ensured that despite large-scale ideological differences within the fold of Shia Islam, Iran has emerged as the undisputed leader of Shiites worldwide. Accordingly, over 25 million Shias in India look towards Iran for strategic direction. Cities like Lucknow and Hyderabad have significant Shia population and many of them have strong emotional bonds with Iran and visit Iranian cities for theological studies and pilgrimage. Even the tiny but economically powerful Zoroastrian community of India also looks at Iran with reverence, as it has its centres of pilgrimage there.

Iran with 10 per cent of global oil reserves is the fourth largest producer of oil globally and is the second largest oil exporter within the OPEC. More significantly, with 15 per cent of world's natural gas, it has the second largest gas reserves in the world after Russia. Although US pressure has ensured that Iran-Pak-India pipeline has not taken off and most of Iran's gas reserves remain undeveloped, India will find it difficult not to tap this vast source of energy available at such close quarters.

India has recently overtaken China and is the largest destination for Iranian oil exports. Iranian crude accounts for 13 per cent of India's oil needs and unfortunately for India, there is no cost effective viable substitute. More significantly, despite large reserves, Iran lacks refining capacity and this allows many Indian refineries to export petroleum products to Iran. In fact some of the private refineries are totally dependent on Iran for sustenance as marketing their products in India is not an economically viable option.

The other products that India has been exporting to Iran are chemicals, pharmaceuticals, iron and steel, synthetic yarn, tea and rice. The balance of trade is overwhelmingly in Iran's favour and it prevents India from bartering its goods with Iran, as US sanctions have made normal trade with Iran through global banking channels almost impossible. Although currently Iran is selling 45 per cent of its oil in Indian rupees, India will still find it difficult to pay for the rest.

Most critical vulnerability for India is Iran's ability to destabilise the Persian Gulf region and disrupt maritime access to the Gulf through the Strait of Hormuz. The region has 54 percent of global oil reserves and 40 percent of global gas reserves and any disruption of supplies from the region, would lead to the oil and gas prices skyrocketting, which could be catastrophic for a growing economy like India.

Some of India's largest trading partners are in this region. In 2010-11, Persian Gulf states received 18.59 per cent of India's exports and contributed to over a quarter of India's imports. More significantly, India is the largest destination for remittances and Indian economy is greatly dependent on the smooth flow and growing health of this pipeline. According to World Bank in 2011, India received $ 57.8 billion in remittances, which contributed to around three per cent of India's GDP and ensured healthy foreign exchange reserves; of this more than half came from GCC states. Any disturbance in the region can force this significant source of foreign exchange to disappear.

Even in the field of defence, India and Iran had good relations in the past and cooperated with the Northern Alliance in Afghanistan to counter the growing menace of Taliban. The two navies carried out joint exercises in 2003 and 2006 and collaboration to provide equipment for some common Soviet origin defence equipment like Mig 29 aircraft and kilo class submarines was considered. However, large-scale Indian defence exports to Iran have not fructified on account of US pressure.

It must however, be clear that notwithstanding, India's moral postulations on Nuclear Non-proliferation Treaty; Iran's nuclear weapons are not in anybody's interest and could even pose a threat to India's security at a future date. On the other hand India has significant stakes in maintaining good relations with Iran as well as in the maintenance of long term peace within the region.

Lingering tension and looming war clouds within the region pose grave threats to India's interests. It is therefore imperative for India to mediate between the US and Iran. It must impress upon Iran the need to avoid confrontation with the US, with Iran's Supreme Leader Ali Khamenei opposing the nuclear weapons on ideological grounds and terming them as evil; it should not be very difficult.

However, if Iran continues to be recalcitrant and conflict becomes inevitable, a short and swift operation will be far more preferable from India's point than the ongoing prolonged and debilitating tension that constantly saps India's economic growth.

Alok Bansal is New Delhi-based security analyst. The views expressed are his own.

Alok Bansal