Iran Nuclear Deal: Indian Opportunity

Much to the chagrin of seasoned American politicians and its Middle East ally Saudi Arabia, sanctions were lifted on Iran on implementation day, Jan 16^th in a ceremony at Vienna. The long standing Vienna talks included the permanent five plus Germany and the EU agreed on the final Iran Nuclear deal frame work or Joint Comprehensive Plan of Action (JCPOA) was signed in July 2015. Iran set a stage for dismantling its nuclear program, in exchange for decreased economic sanctions. It shipped out 98% of stockpile, 25,000 pounds of low- enriched Uranium (used to make Plutonium) to Russia on 25th December 2015, removed two-thirds of centrifuges and deactivated heavy water reactor at Arak on Jan 11^th. Iran has agreed not to build heavy- water reactors for the next 15 years and would enrich upto 3.67% of Uranium. Initial inspections by the UN nuclear watch dog International Atomic Energy Agency (IAEA) certified Iran has fulfilled its commitments and recommended lifting of sanctions. At the time of signing pact, it was predicted that Iran might take at least nine months to concede to conditions ear marked under first stage of agreement. With Iran headed for parliamentary elections on 26^th February Iranian authorities displayed astounding alacrity for the suspension of international sanctions and for the economic benefits to roll in.

As started swiftly sailing towards a rosy end, capture of 10 American sailors by IRGC who unintentionally waded into Iranian waters threatened to inflame tensions. Prompt release of sailors the following day ensured a hassle-free implementation day. In a conciliatory move, both countries swapped prisoners marking a new dawn.

The entire saga of Iranian nuclear deal was met with stringent opposition from the US congress. In his state-of-the-Union address Obama hailed the Iranian Nuclear Accord as an outcome of “smarter approach” based on “patient and disciplined strategy”, despite divergent views hitting the newsstands. In return for suspension of sanctions Iran was expected to ratify an Additional Protocol of its safeguards to be approved by its Parliament (Majilis) allowing the officials of IAEA to access the plausible sites of nuclear facilities other than those notified by Tehran. Iranian President Hassan Rohani and his US educated foreign minister Mohammad Javad Zarif were keen on voluntarily renouncing nuclear ambitions in exchange for unrestrained global financial engagement to give a major fillip to its ailing economy. But Islamic hardliners like Ali Khamenei wary of threats to Iran from nuclear power countries stiffly opposed such a move.  With an eye on winning popular mandate, Rohani intends to trumpet his astute diplomatic skills that enabled annulment of nuclear sanctions that can facilitate rapid economic progress. He will urge the electorate to vote back moderates to power and weaken the Islamic hardliners.  The West still has its own doubts about the transparency of Iran’s nuclear revelations with US still believing existence of a parallel clandestine military nuclear program. But with international community reserving the right to conduct periodically raid, such undue fears can be transgressed for time being.

Meanwhile, IRGC in October 2015, to thwart nuclear deal test fired precision-guided ballistic missile capable of delivering nuclear war inviting fresh round of sanctions from US over Iran’s missile program. While the objectives of the deal have been successfully enforced as of now, adherence to the conditions on long term would depend on new American President.

Several Iranian nationalists largely contend the new dawn for Iran envisaged by the West. They argue that despite Iran conforming to the regulations under Iranian Nuclear Accord, US wouldn’t hesitate to cast aspersions on Iran as an aggressive Islamic Republic and an axis of evil. The group questioned US bigotry in being hand in glove with Israel, the principle destabilizer of Middle East, a non-signatory of NPT (Nuclear non-proliferation Treaty), and currently in possession of sophisticated arsenal but forcing Iran to forgo its nuclear options. They lashed at the partisan policy of US in subjecting Iran to the tyranny of sanctions while Saudi Arabia, the hub of Wahhabism was scot-free. Incidentally ever since imposition of UN nuclear sanctions in 2006 and subsequent economic isolation of Iran, Islamic fundamentalism manifest in form of IS unleashed reign of terror in Middle East and other parts of the World.

Brief US-Iranian History

Iran shares a huge border with Russia and acted pivot for the US Middle East foreign policy till 1979. In 1953 CIA with MI-16 organized a coup, Operation Ajax, to overthrow democratically elected Prime Minister Mohammed Mossadeq who wanted to nationalize the Anglo-Iranian oil Company (AIOC). Post-coup US remained Iran’s one of closet ally by extending emergency financial aid till the fall of pro-American Shah of Iran era in 1979. Shah was replaced by anti-American Ayatollah Ruhalloh Khomeini, who described US as the Great Satan for allowing the Shah of Iran to enter US.  Angered student revolutionaries held 52 American diplomats hostage for 444 days in US embassy at Tehran. Thus hostilities between the countries escalated. In fact US under Atoms for Peace program provided assistance to Iran for development of nuclear technology. Iran signed NPT in 1968 and ratified as non-nuclear state in 1970. Following the Iranian Revolution in 1979, US broke away with Iran. In 1980’s Iran sought Pakistan’s help to rebuild its nuclear program.

Implementation day marked the end of 36 yearlong economic isolation of Iran. US first imposed sanctions on Iran in 1979 when hostages were held in US embassy in Tehran and blocked Iranian assets worth $12 billion in US overseas banks and imposed embargoes on trade. Assets were released and sanctions on trade were lifted following Algiers accord in 1981. US extended logistical military support to Iraq in Iran-Iraq wars and pursued sanctions against Iran while it removed Saddam Hussein’s government from the US list of State Sponsors of Terror in 1984. US government authorized sale of poisonous chemicals and deadly viruses to Iraq. In 1987 US levied trade embargo on charges of abetting international terrorism through Shiite Islamic Organization, Hezbollah and “non-belligerent shipping in Persian Gulf”. US organized Operation Praying Mantis on Iran in 1988. In 1995 US imposed a ban on involvement in Petroleum development in Iran and extended to all trade and investment activities in 1997. In 2010, US passed Comprehensive Iran Sanctions, Accountability and Divestment Act under which food stuffs, carpets and any Iranian goods and services worth more than $100 couldn’t be imported. In 2011, sanctions were further tightened and extended to financial and technological support to Iranian companies. In 2006 UN imposed sanctions in response to the proliferation of nuclear and ballistic missile programs banning export or procurement of arms and related material from Iran. EU in 2012, announced ban on import of Iranian crude oil & petroleum products and froze assets of Iranian Central Bank in EU.

In 2003, prior to Iraq war and later in 2007 President Ahamadinejad of Iran proposed a grand bargain to resolve outstanding issues between both the countries. But US dismissed it as a ploy and publicity stunt. US contended that Iran was aiding the Iraqi insurgents with weapons and explosives and that Iran’s Quds force is training the Shiite Militants.

Consequences

Iran has been reeling under the burden of sanctions imposed by UN, EU and US. As of now only US nuclear sanctions are lifted but sanctions pertaining to abetting terrorism and human rights abuses remain. The most potential of the sanctions include restrictions on doing business with the Islamic Revolutionary Guards Corps (IRGC) that control major part of Iranian economy. Now Iran’s oil, gas and banking sectors can resume international operations. This essentially implies that Iranian Oil revenues which were frozen in the international banks might be released. Though the real numbers are not yet clear, initial estimates indicate that $100 billion might be pumped into Iranian economy, US Treasury indicates it is $50 billion and Iranian estimates puts it around $29 billion.

With lifting of nuclear sanctions Iranian economic growth is expected to surge to 5% from 3% and world markets will now have one more million barrels oil per day plunging the oil prices further. Sources indicate that Iran plans to offer discounts on oil prices triggering a price war with Saudi Arabia. Iran’s revenue from oil exports can increase by $10 billion and it can save $15 billion annually in cheaper trade. Interestingly, while Asian and European companies can trade with Iran, US firms and American nationals are barred. Incidentally limited cooperation between US and Iran has started in 2015 to fight IS. Iran is only country in the Middle East that vehemently condones Islamic State. Despite the rising clamor of paradoxes, Iran unlike its neighbors endowed with robust political system offers a ray of hope where hardline theocrats have few takers. US by toppling the Saddam Hussein’s regime in Iraq not only destabilized Middle East and rendered Saudi Arabia powerless since Iraq was lost to Shiite rule, but expedited aggressive rise of IS. Presently, Middle East is whacky with Saudi Arabia snapping diplomatic relations with Iran. Saudi Arabia threatened by resurgent Iran constituted a regional alliance against terrorism roping in Sunni States. Amidst tragic consequences, Iran emerged as a strategic winner earning international acceptance, through voluntary abdication of military nuclear options.

A new regional dynamic is envisioned with President Xi Jingping scheduled to travel to Saudi Arabia, Egypt and Iran next week. Pakistan Prime Minister Nawaz Sharif accompanied by Army Chief Raheel Sharif paid an impromptu visit to Riyadh and Tehran to balance its relations between immediate neighbor and financial benefactor. Clearly Iran is now regarded as a key player in the Middle East geopolitics.

Indian Opportunity

Iran being reinstated into the realm of Middle East regional framework, Modi government must seize every opportunity to rejuvenate diplomatic and commercial ties. Iran is India’s largest supplier of crude oil. India maintained trade relations with Iran despite the economic sanctions and with lifting of curbs, it is going to be a mixed for India on trade front. India followed a rupee based payment system to evade US sanctions that banned Iran from making purchases in dollars. India bought crude oil from Iran by depositing the payment in Indian banks and Iran expended the same money to buy commodities from Indian markets. With restrictions lifted, Iran’s choices are not constrained. While Indian companies can invest in Iranian infrastructure projects which are in need of a major revamp they have to compete with foreign firms. The proposed India-Iran oil pipeline can now be a reality. India owes $6.5 billion to Iran which is frozen for some years, can now be remitted and infused into commercial projects. Iran has the second largest gas reserves. India can collaborate with Iran in enhancing its refining capacity.

Iran is of immense strategic significance to India and a gateway to Central Asia. NDA I evinced great interest in Iran’s Chabahar port, 70 km away Gwadar port of Pakistan with a strategic potential of enhancing India’s maritime presence in Arabian Sea and Straits of Hormuz. With Islamabad blocking India’s access to Afghanistan, Iran and Central Asia through its territory, India is looking for an alternate link that bypasses Pakistan. India has already invested in construction of Delaram-Zaranj road link in Afghanistan that can extend to northern Iran. Building robust network of rail and road connections linking Chabahar port in Iran can augur India’s connectivity to land-locked Afghanistan and Central Asia. With Modi government pitching for popularization of the International North South Transport Corridor (INSTC) for strengthening commercial ties with Central Asia, Russia and Iran India is now keen on investing in infrastructure development of Chabahar port. India needs Iran’s cooperation in controlling volatile Baluchistan movement. Indeed with West largely endorsing the nuclear program of Iran, it may even consider shifting base from Pakistan to Iran. Beyond the rhetoric of soft diplomacy and oil ties India has to deftly maneuver its relations with countries in the Middle East with Israel is bitterly opposing India partnership with Iran. India can ill afford to ignore Saudi Arabia, largest supplier of oil and its allies, for Modi is keen on tapping sovereign wealth fund of Gulf countries.

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