India figured as Iran’s number one crude oil customer in January. That may be difficult to believe but it is indeed a statement of fact. Actually, India stepped up its imports of Iranian oil by 37.5 percent, which helped Iran offset a 50 percent cut in Chinese purchases resulting from a dispute in pricing. China now imports around 250000 barrels a day as against India’s 550000 barrels a day, according to a Wall Street Journal report.
Of course, what stands out is that New Delhi’s Iran policy is crystallising
. India will concentrate on its self-interests in a highly fluid regional security scenario without in the least being ideological about the winds of change blowing through that region. This is the message one gets. Indeed, the US-Iran standoff is primarily geopolitical and it doesn’t concern India, which is in any case not in the business of ‘regime change’.
In all probability, Washington too will eventually get to see the futility of this standoff and will move toward engaging Tehran. Despite the western rhetoric, the fact remains that sanctions against Iran failed to work through the past 30 years. Even a noted Iran-baiter like French president Nicolas Sarkozy is warning that a military strike against Iran serves no purpose
Now, coming back to India’s oil imports from Iran, Washington will continue to dissuade Delhi from trading with Tehran. The US state department spokesperson told reporters Tuesday that the talks with the visiting Indian foreign secretary in Washington included “how India might find alternative sources… This is a two-track policy, both to encourage countries to wean themselves from Iranian oil, but also to work with suppliers around the world to help countries find alternative sources of supply.”
However, what Washington overlooks is that India’s economic relationship with Iran as such is also at stake here. Without oil imports, India-Iran trade virtually packs up. Delhi’s robust efforts to work out a reliable payment mechanism for the trade with Iran underscores that it intends to not only sustain the present level of trade but do all it can to boost the trade by stepping up India’s exports to Iran. The government is mounting a “huge” business delegation to Iran in end-February to explore the opportunities for tapping those sectors
that are being vacated by the western countries following their embargo against Iran. It is a long-term approach that India is adopting, keeping in view the fact that Iran is a rich country potentially which offers a big market for India’s exports.
The new payment mechanism
— providing for 45% of Iranian oil to be settled for in Indian rupees — opens up interesting possibilities. Of course, Iran has the option to leave the money in the Indian state-owned UCO Bank at an interest rate of 4% or so. But to obviate currency risks, Iran may perhaps prefer to use the money to import from India or to use India as a trading hub to buy from third countries. Iran also can invest the money in Indian bonds or equities, which Delhi might welcome. In sum, the payment mechanism acts as a catalyst to build up the momentum of economic ties as well as broadening and deepening the partnership.