India’s dependence on external sources of energy has vastly complicated its foreign policy. Of late, one of the biggest flashpoints has been relations with Iran, which was India’s second-biggest supplier of crude oil. As the relationship between Iran and the West broke down following concerns over Iran’s nuclear programme, concerns began to be expressed that India and China would “undermine” Western sanctions on Iranian oil. The biggest achievement of US Secretary of State Hillary Clinton’s trip to India seems to have been that this issue can no longer be seen as an irritant on Capitol Hill — where voices had been raised in anger at what was seen as a “betrayal”. Indeed, the dependence of some Indian refineries on Iranian oil seems to have been decreased. It appears reasonable now to suppose that a cut of about 10 to 20 per cent in overall volumes should be enough to convince the US that India is willing to undergo some pain in the interests of the two countries’ long-term relationship.
Yet it is also clear that, even if Saudi Arabia and Iraq claim to be able and ready to make up any decrease in Indian oil imports thanks to Iran sanctions, India has no intention of cutting back on the trade relationship with Iran completely. Even as Ms Clinton was speaking in New Delhi, across town a 56-member Iranian trade delegation was meeting Indian officials and business groups. The Iranians were trying to work out easier ways to settle payments — currently managed from the Indian end by UCO Bank, given that sanctions have closed off most other avenues; the Indians were looking to sell the Iranians pharmaceuticals and agricultural products, exempted from pre-existing United Nations sanctions. The message to the United States could not have been more explicit: India is willing to tighten its imports of oil from Iran, but swinging into line behind the US in an effort to apply maximal economic pressure on the Teheran regime is not on India’s agenda.
Why might both sides be comfortable with this solution, as seemed to be the case given Ms Clinton’s trouble-free visit? Part of the reason may be that the sanctions have worked to the extent that almost half of the oil trade is now being conducted in rupees. This forces Iran to buy Indian goods, which is not something India will object to; and the United States is satisfied that the rupees are not being spent on nuclear or dual-use technology. For India, maintaining links with Iran is a matter not just of economics and energy security, but its long-term commitment to engagement with all major players in the Gulf area, as External Affairs Minister S M Krishna spelled out at his joint press conference with Ms Clinton. Nor can India’s civilisational links with Iran be forgotten, or its central importance as an alternative route to India’s allies in Afghanistan. Ms Clinton made her case for Iran’s rulers as dangerous and in need of isolation clearly. India made its case for continued engagement equally firmly. After that came the quiet compromise — the very stuff of diplomacy.