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Iran deal spells good tidings for India

At a time when successful, negotiated outcomes to any intractable international dispute have become a rarity, the understanding reached between Iran and the E3+3 (France, Germany and the United Kingdom + China, the Russian Federation and the United States) is a remarkable achievement. A result of political resolve and deft negotiations, the nuclear deal is set to end over three-and-a-half decades of unremitting hostility between Iran and the U.S.

The announced framework restrains Iran’s nuclear programme; it does not eliminate it. It allows Iran access to nuclear energy for exclusively peaceful purposes and a comprehensive release from all sanctions. The spontaneous street celebrations across Iranian cities testified its people’s support for an agreement that will reconnect Iran with the world.

Key parameters

The details of the agreement currently being drafted will be spelt out by the end of June in the Joint Comprehensive Plan of Action (JCPOA). The framework outlines that limits will be placed on Iran’s enrichment capacity, level and stockpiles over the next 10 to 15 years. Iran will maintain no other enrichment facility except the one at Natanz, where it will use only its 6,104 first-generation centrifuges (less than a third of their existing number). Iran’s underground and fortified facility at Fordow, which the U.S. initially wanted to scrap and seal, will be converted into a nuclear physics and technology centre.

Iran was building a 40MW heavy water reactor in Arak, fuelled by natural uranium and estimated to produce nine kilogrammes of weapons-grade plutonium annually should Iran acquire reprocessing technology to separate plutonium from the spent fuel. The redesigned Arak plant will ensure it does not produce plutonium. There will be no reprocessing, and the spent fuel will be exported.

By providing the International Atomic Energy Agency (IAEA) enhanced access to its nuclear facilities, including full life cycle “cradle to coffin” monitoring of nuclear materials and components, Iran has established its bona fides about abjuring from the acquisition of nuclear weapons in the foreseeable future. In return, Iran shall have access to international cooperation for civilian nuclear energy, including the supply of power and research reactors.

Iran’s greatest immediate gain will be the simultaneous termination of the sanctions levied by the six Iran-specific Security Council resolutions as soon as it implements its commitments. Also slated to go are the additional sanctions imposed by the U.S., the European Union and some others, which had crippled Iran’s international market access and economy and disrupted its energy, shipping, transportation and financial sectors. If the Congress does not revoke these sanctions, U.S. President Barack Obama might use his waiver authority to free Iran of their effect.

Changing regional landscape

Iran has gained strategic space, even dominance, in its western periphery, over the last dozen years as the unintended beneficiary of the U.S. intervention in Iraq. With its abundant natural and human resources freed from the burdens of sanctions, Iran’s economy will be unfettered and its potential unlocked. As a consequence, Iran will become more self-assured in its interactions with the world.

With mutual enemy images slowly fading — many in the U.S. had regarded Iran as the core of the “axis of evil” and the clergy in Iran had branded the U.S. as “The Great Satan” — the reconfigured U.S.-Iran ties will inevitably restructure the security architecture of the Gulf and the West Asian region. The U.S. will lean on Iran to seek its cooperation in contending with a host of challenges in Iran’s contiguity, primarily the combat against Daesh in Iraq and Syria, the war in Yemen, and the struggle to establish peace and stabilisation of Afghanistan.

Iran’s geostrategic location makes it an intrinsic part of India’s security and economic space. A stronger and more globally integrated Iran will be an asset for India. India had rightly disregarded the “Statement of Policy” attached to the 2006 Hyde Act enjoining India “to sanction and contain Iran” for its efforts to acquire nuclear weapons. Despite critics of India within the U.S. establishment using this as a litmus test for India-U.S. relations, India rejected sanctions not mandated by the Security Council.

Implications for India

Iran shares its borders with Afghanistan and Pakistan, which contain Islamist terrorist groups that act against both India and Iran. These include the Jundullah, the Lashkar-e-Taiba, and the Haqqani network, in turn associated with the al-Qaeda, the Taliban, and even the Pakistan Army. India and Iran, therefore, have a consonance of interests in supporting the stabilisation of Afghanistan. The history of their association goes back to the support they together extended to Commander Ahmad Shah Massoud when he was combating the Taliban. Like India, Iran is constructively invested in Afghanistan and can play a much more significant role there as it gains strength in the post-sanctions period.

India and Iran are poised to ink an inter-governmental agreement on the Chabahar port, where India is investing, in the first phase, a modest amount of $85 million to equip two of its existing berths for container and multipurpose cargo shipments meant for Afghanistan. India’s footprint in Chabahar will initially be light and its investment can be stepped up as its cargo potential increases.

For decades, India has been exploring connectivity options for Afghanistan, Central Asia, and Russia by the overland route through Iran. Due to lack of a better available option, Indian exporters have begun using the dedicated Chinese facility for exports to Central Asia at the Lianyungang port — this is connected by what China calls its “uninterrupted rail link” to Almaty, along the alignment of the “New Eurasian Land Bridge”, part of its “One Belt One Road” initiative. Iran’s Bandar Abbas port, conceived as the hub for the International North-South Transport Corridor (INSTC), remains, nevertheless, the shortest and most economical route from India to Central Asia, Russia and Europe.

India, Iran and Russia originally signed the INSTC Convention in December 2000, and nine more countries have since joined it. Dry runs conducted last July from the Nhava Sheva port in Maharashtra on two trade routes, one to Astrakhan in Russia, via Bandar Abbas and Amirabad, and another to Baku in Azerbaijan, via Bandar Abbas and Astara, show that these can reduce shipment costs by $2,500 per 15 tons of cargo. India must seize the opportunity to operationalise the INSTC by working with Iran and other interested stakeholders.

Energy security

As the country holding the world’s fourth largest oil and the second largest natural gas reserves, Iran complements India, currently the world’s fourth-largest consumer and net importer of petroleum products. Iran slipped from the second to the seventh largest source of crude oil imports to India between 2008-09 (21.81 million metric tons) and 2012-13 (13.14 million metric tons). With indigenous production flat at less than a million barrels per day (bbl/d), India’s oil demand is expected to more than double from its present levels to 8.2 bbl/d by 2040. McKinsey predicts that by 2030, India will have a primary energy import dependence of 51 per cent, compared to one and 20 per cent for the U.S. and China.

As India’s most proximate oil exporting country, Iran’s role in India’s energy security remains important. The oversupply and lower prices of oil and gas make India equally valuable to Iran as an assured, long-term buyer. India could take a fresh look at the prospects of a gas pipeline or liquefied natural gas (LNG) imports from Iran, as also investing in downstream projects for petrochemicals and gas-based urea plants in Iran. Indian firms need to be more nimble-footed to deal with Western competitors rushing to Iran, as also with Iranian partners adept at driving a hard bargain.

India-Iran defence cooperation could be given greater content through a Joint Working Group on defence. This was never set up, though envisioned under a forward-looking India-Iran defence memorandum of understanding (MoU) concluded in 2001. Besides ongoing training and port calls, India could extend its support for hydrography and more intense naval interactions. The established tradition of exchanges between the National Security Councils and Advisors of the two sides could prove useful in this context.

A congruence of regional interests does not by itself translate into upgraded strategic relations between India and Iran. It will require patience and persistence — traits possessed by Iranian negotiators in ample measure.

Curiously, the key challenge to India will be similar to that which confronts the U.S. and other global and regional powers — how to nurture a relationship with a resurgent Iran, without adversely affecting ties with the Arab-Gulf countries led by Saudi Arabia, and Israel. “The trick,” says a senior Indian official, “is to balance on a three-legged stool — with different sized legs”.

India has important equities in Arab-Gulf countries. Collectively, they are home to almost seven million Indians, the largest source of India’s imports, including energy supplies, its second largest export destination, and a growing source of remittances and investments. India will have to demonstrate its diplomatic dexterity in managing this difficult balancing act as it rebuilds its relations with Iran.

(Jayant Prasad, a former diplomat, is currently a Visiting Fellow at the Research and Information System for Developing Countries, New Delhi, Non-Resident Fellow at the Center for the Advanced Study of India, University of Pennsylvania, and Advisor at the Delhi Policy Group.)


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