As Prime Minister Manmohan Singh heads to Tehran next week to represent India at the Non-Aligned Movement (NAM) Summit, all eyes will be focussed on the fine line he will walk between protecting India’s energy interests with Iran and Delhi’s all-important political-strategic relationship with the US.
Last week, the Indian ship, the MT Omvati Prem, carrying 85,000 tonnes of crude oil from Iran for the Mangalore Refinery and Petrochemicals Ltd refinery, left Iranian shores. This is the first such Indian ship to leave Iran since the introduction of European Union sanctions this July. The ship’s cargo was backed by Mercator Ltd, a private Indian insurance company.
The ship is expected to arrive in India later this week. Although the $100-million insurance — $50 million in hull and machinery insurance from New India Assurance Co and $50 million in protection and indemnity insurance from United India Insurance — is one-tenth of the cover Indian companies usually received from European insurers before the sanctions were introduced, it shows the extent New Delhi is willing to go to protect its oil relationship with Iran.
India, say government officials, will be guided by ground reality: Though Delhi has reduced its oil dependency on Iran in the last six months — from 12 per cent to 10-11 per cent annually, by sourcing additional crude from Saudi Arabia, put into place a rupee-rial mechanism where up to 45 per cent of its Iranian crude purchases can be bought in rupees in exchange for wheat, rice and medicines that are not sanctioned by the UN — shutting off the Iran tap will only put the economy into a tailspin.
India’s oil purchases from Iran have dropped to about $11 billion annually, even as IAEA figures say that worldwide consumption of Iranian crude came down to 1 million barrels in July compared with 1.74 million barrels the month before.
However, Delhi is keenly aware that the Iranian leadership, led by Supreme Leader Ali Khamenei and the Iranian president, Mahmoud Ahmadinejad, will use the NAM rostrum to garner support against its chief adversaries, the US and Israel.
Officials say the Prime Minister will have no option but to hear out the Iranian leadership, especially as it cannot ignore Tehran’s role in the expanding civil war in Syria and in the larger Gulf and West Asia.
With Russia and China blocking all UN resolutions on Syria unless Iran is present in the discussions, alongside an informal Saudi Arabia-Turkey-Qatar alliance that wants the pro-Shia Alawite Assad regime to step down, the possibility of a Shia-Sunni conflict flaring in the heart of the Muslim world has only increased.
With the world’s second largest Muslim population as its citizens — of which nearly six million work in mostly Sunni countries in the Gulf and Saudi Arabia — India is unwilling to take sides. Saudi Arabia’s growing importance as an oil substitute for Iran is only matched by the fact that more than half of those six million Indians work in that country.
Meanwhile, despite US pressure to disengage from Iran and shift its oil needs to its Saudi ally, India seems unwilling to put all its eggs into the Saudi basket. Apart from oil, Iran’s Chabahar port will increasingly play a key role in accessing the Afghanistan market, especially as Pakistan is unlikely to open up its territory for Indian trucks to cross overland to its western neighbour.
In his bilateral talks with Ahmadinejad and Khamenei on the margins of the NAM summit, therefore, Manmohan Singh is likely to focus on the continuing importance of the energy relationship as well as on Iran providing the key missing link to India’s ambitious foray into Afghan space.
India seems concerned, however, that the NAM outcome document will be used as an America-bashing exercise. A senior officials’ meeting on the eve of the summit next week will give Delhi a real sense of where it can intervene and to what extent.
As for America itself, officials say India has explained its Iran interest to the US administration on several occasions and been received with considerable understanding.
“The US also wants a friendly nation to maintain links with the Iranians, especially on Afghanistan. Remember that the former US envoy on Afghanistan-Pakistan Richard Holbrooke had reached out to the Iranians before his death,” an official said.
Government officials pointed out that the “Americans realise that pushing India too hard on Iran might end up pushing India the wrong way”. The US demarche to India in late 2001 — in the wake of the September 11 incidents — not to open consulates in southern Afghanistan in deference to Pakistan’s sensitivities only persuaded India that it must open missions in Jalalabad, Kandahar and Herat.
As for the Indian ships carrying Iranian crude last week, the Indian move comes in the wake of Japan offering $7.6 billion per tanker in government-backed insurance to ships carrying Iranian crude to Japan. Officials say India is clearly not alone in pursuing its Iran interest.