What can be Biden’s Policy towards India-Iran relations?

Published by Simran Saini on

After battling Covid-19 and Chinese aggression, India entered 2021 with a colossal challenge of strengthening ties and building new ones with its neighbours, US, EU and the Middle East. Presently, the outcome of the US presidential election is one of the most significant issues for India. The incoming Biden administration is expected to impact the way Us-India relationship advances. Interestingly, it will also define the trajectory of India-Iran relations.

Fostered by economic, cultural and strategic ties, bilateral relations between India and Iran have always been strong. They look up to each other as key actors in maintaining the stability in the region. But in the past few years, India found itself in the middle of the muddle between two nations- Iran and the US.

Chabahar Port in Iran is India’s key transport and trade corridor to Afghanistan and Central Asia. India invested heavily in this project, with its first phase being managed by an Indian company. But the alienation of ties between India and Iran over the past few years resulted in India slowing down the work on the project. This can be attributed to several factors: harsher economic sanctions by the US, technical and bureaucratic issues on both sides and apprehensions on part of the private sector to invest in Iran. Despite Chabahar’s exemption from the US sanctions and India’s continued commitment towards the project, New Delhi’s progress in realising port’s full potential has not been encouraging.

Even when the US agreed to keep Chabahar port out of the purview of the sanctions list, the announcement of sanctions led to fear among investors who pulled their money out of the project leading to a scarcity of funds for the Indian side. Therefore, it is necessary that a new Iran-US equation gets defined, thereby bringing this strategic tie back on track.

The United States walked out of Iran nuclear deal in 2018. Economic sanctions imposed by the US kept away Iran from international banking and global oil trade. As per Iran’s claims, these sanctions, threatening economic cooperation, caused $250 billion in economic losses since 2018. Also, they have severely limited India’s sourcing of cheap crude oil from Iran.

If Biden doesn’t take steps for improving its relations with Iran, India might have to continue importing from other Middle East countries. In case tensions escalate, this would also raise costs associated with security such as insurance cover for oil tankers. An economy like India, which needs a regular supply of cheap oil to boost its oil-thirsty economy, a normalisation of US-Iran relationship and lifting of sanctions would be more than useful.

Sanction waivers allowed Iran to continue exporting a million barrels of oil per day until 2019. Until 2020, there were no sanctions on non-oil companies and the financial sector. According to IMF, now Iran has only a few dollars of remaining forex reserves, therefore, the peak impact is yet to be seen.

Signed by Obama and repudiated by Trump, the deal could be salvaged by the incoming Biden administration. Biden, in the past, has expressed willingness to return to the deal. He played a key role in securing the deal when he was the vice president and has affirmed concrete diplomatic objectives concerning Iran. But how will this happen? Who will move first? And how? This continues to be a million-dollar question as Biden’s team is yet divided on the Iran issue.

India needs to be cautious because of its economic interests. High oil prices might force it to cut down spending in other areas. Moreover, India currently receives whopping $70 billion in remittances from Indian nationals in West Asia. In case of a stringent Biden policy, India stands to lose out about $40 billion in remittances.

After Biden takes up formally, he’ll have only a sliver of time to jump-start the process before the political calendar hits Iran in June and threatens to derail potential diplomacy over the nuclear deal. A normal Iran-India relation would inevitably mean the US going back to full compliance, normalising Iran’s economic relations with the rest of the world and ceasing creation of outrageous demands.

Though Biden is expected to be averse to the use of military force and favours withdrawal of troops indicating a lower probability of escalation in tensions, there is a lot at stake for India. The US has the time and economic leverage on its side. It would be able to resist the pressure of acting in haste. But India can’t be expected to have a turnaround from its direct bilateral relations with the US.

It would never go out of its way as it is still working on deepening its strategic and defence ties with the US. As one of his first acts on foreign policy, Biden does want to renew diplomacy with Iran and re-enter the nuclear deal. But US-Iran diplomacy might still get haunted by mutual wariness, pushing India to the middle of escalating hostilities between these two nations. Somehow India has to try to keep up with both the US and Iran.

Written By- Simran Saini

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