The US withdrawal from the Iran nuclear deal will once again put India’s diplomatic skills to the test. Depending on the severity and scope of the sanctions likely to be imposed, it would impact India’s energy needs, connectivity plans for West and Central Asia as well as bilateral relationships with key nations that have been painstakingly nurtured over the past few years.
Iran is India’s third-largest supplier of crude oil after Saudi Arabia and Iraq. The third-largest oil consumer in the world, India imports nearly three-fourths of its oil, mostly from these three nations. And if the US sanctions impact global oil prices which are already headed north, it would have a major economic and hence political impact on India barely a year before general elections.
Some analysts have put a positive spin on this, arguing Delhi could leverage the sanctions to negotiate a better price for Iran’s oil, as it had done when the sanctions were in force before the nuclear deal came into effect in 2015. India had then persuaded the US that it would scale down imports from Iran instead of stopping them totally. During Iranian President Hassan Rouhani’s visit to India this February, the two sides had agreed to examine a rupee-rial arrangement which would allow India to pay for its oil in rupees.
Fresh US sanctions could also impact India’s plans to use Iran as an economic gateway to Afghanistan and resource-rich Central Asia through the port of Chabahar. India has already made substantial investments in building a road and rail network connecting Chabahar with Afghanistan, and recently, agreed to work jointly with China on infrastructure projects in Afghanistan as part of this project. Diplomatically, India’s attempts to maintain a sensitive balance between its ties with Israel, Saudi Arabia and the US on the one hand, and Iran and Russia on the other could get tougher. But given that the UK, France, Russia, Germany and China have decided to stick with the nuke deal means India would find other partners able and willing to work around US sanctions.