India and China Oppose Iran Sanctions

February 10th, 2012
in econ_news

by Sanjeev Kulkarni

Econintersect: The Iran crisis seems to be reaching a flash point. Leaders from many countries from Iran itself to Israel, U.S., Euro Zone, China and iran-flagSMALLIndia are playing a diplomatic game of brinkmanship. It is a cynical game of who blinks first. The sanctions led by US against Iran have started pinching that country resulting in some military games posturing. But some U.S. trading partners, notably China and India, have given a thumbs-down to the Iranian sanctions. Is there a light at the end of the tunnel of this brinkmanship?

Follow up:

The drums of war seem to be thumping louder with each passing day. As per the Washington Post:

The prospect of conflict with Iran has eclipsed Afghanistan as the key national security issue with head-spinning speed. After years of bad blood and an international impasse over Iran’s disputed nuclear program, why does the threat of war seem so suddenly upon us?

The short answer is that Iran has used the years of deadlock over whether it was pursuing a bomb to get within roughly 12 months of being able to build one. Iran claims its nuclear program is not aimed at building a bomb, but it has refused to drop suspect elements of the program.

US public opinion is also becoming sharply divided on US handling of the Iran crises. As per Econintersect News post:

Fabius Maximus has a repost of an article from two days ago at In the piece Lofgren says the entire reaction to the decades of war mongering talk toward Iran may play out in the next six months. He likens the current situation to what happened in Europe in 1914 when war mongering then was aimed at a “Slavic threat” surrounding the “Germanic people.” When a Germanic (Austrian) Archduke was assassinated in Sarajevo the flame was lit. Lofgren recounts the historic parallels and says that election year posturing puts the U.S. at particular risk of making an ill-advised precipitous move as candidates and political parties try to out-macho each other. (Out-macho is a GEI News term characterizing what Lofgren describes, not a term he actually used.

Meanwhile the effects of sanctions have started pinching Iran.  Both China and India have been opposing the sanctions.  But, perhaps due to pressure / persuasion by mainly U.S., China and India both seem have started cutting down on trade with Iran.

As per a Reuters Report:

Traders in China said they would cut iron ore purchases from Iran, which are worth over $2 billion a year, because of sanctions that have forced payment defaults on Indian rice imports and prompted Ukrainian and European sellers to stop booking shipments of Ukrainian grain to the Middle East country. Iran's crude oil buyers, including China and Japan, are cutting purchases, reducing the OPEC producer's earnings from its major source of the foreign exchange it needs to pay for critical imports, such as food staples.

A Times of India report quotes New Jersey Senator Robert Menendez (D, NJ) in a strongly worded statement:

“For our sanctions to be effective, it's really crucial that all nations, particularly democratic nations like India, work together to confront Iran,'' Menendez said, urging Nancy Powell, the US ambassador-nominee to convey to New Delhi that this is a ''policy priority'' and the US will not hesitate to take appropriate action under its law to enforce the sanctions, a step that will hurt Indian companies if they continue trading with Iran.

The statement by Menendez has not gone well in India.  India's growth rate for current fiscal is estimated to have decelerated to 6.9 percent.  It is vulnerable to oil supply disruptions. Jaswant Singh, the only man ever to serve as India’s Foreign Minister, Finance Minister, and Defense Minister argues that India needs imaginative solutions to solve the complex problem it faces and solutions offered by US do not address the issues:

Solutions offered by organizations such as the US-India Business Council or USAID do not address the problem’s roots, and the crisis will most likely continue in 2012. It is imperative that India invest in its agriculture, not only for economic reasons, but also because it is central to the country’s culture.

To complicate matters Nuclear Energy is not being favored in India:

Another concern is nuclear power. In 2008, the United States and India agreed to a civil nuclear deal that would allow India to expand its nuclear-power capability. In 2010, India’s parliament passed the Civil Liability for Nuclear Damage Bill, a precondition for activating that agreement. But, following Japan’s Fukushima nuclear disaster in March 2011, safety concerns surrounding nuclear power are large and mounting. Local farmers, fishermen, and environmentalists have spent months protesting a planned six-reactor nuclear-power complex on the plains of Jaitapur, south of Mumbai. In April, the protests turned violent, leaving one man dead and dozens injured. India will certainly see more anti-nuclear clashes in 2012.

Nancy Powell is a career diplomat and has been more circumspect and is sensitive to the Indian compulsions of dependency on Iran oil.  As per The Times Of India:

"Powell has noted that Iran and India have a long tradition of trade across energy and other fields; but also noting twice that foreign secretary Mathai has indicated India's effort to diversify its energy sources and reduce Iranian oil imports to less than 10 per cent. She also pointed out that India had supported the US at the IAEA four times and it shared with Washington a desire to see a nonnuclear state in Iran."

But beyond the diplomatic saber rattling on Iran, there is realism on US-India ties. As per the same Times of India report:

Powell, a veteran foreign service nominee who Kerry described as ''one of our best'' agreed, describing India as ''leading security partner of the US in the 21st century.''

In another move, EU President Herman Van Rompuy has said that he would ask…

"…Indian leaders to apply their considerable leverage to Iran and help in convincing the Iranian leadership to give up their sensitive nuclear program and return to the negotiating table" as per a Reuters report.

The report further states that:

"New Delhi has, thus far, defied the mounting pressure from Washington and Brussels and is seeking alternative ways of paying for Iran's oil without violating the sanctions. New Delhi will send a delegation to Tehran this month to explore increasing India's exports to Iran and for making payments for oil imports in Indian rupees. Iran has agreed to accept rupees for 45 percent of New Delhi's $11 billion a year oil bill, sources told Reuters early this month."

India enjoys cordial relations and strong trade with both Israel and Iran. It imports 12 percent of its oil from Iran. India had launched spy satellite built by Israel in 2009 which Iran opposed. Israeli Heron and Searcher UAVs are used by Indian armed forces.

Traditionally India's foreign policies have been passive.  According to Daniel Markey, "India’s own foreign policy establishment hinders the country from achieving great-power status.”

Will India be able to cool tempers in the Iran imbroglio and make leaders climb down from the brinkmanship to saner negotiations?

In the meantime Reuters reports that Iran is turning to barter using oil to get food as normal currency exchange channels have been closed for them.


  • Ticking clock, rising Israeli fears and the price of gas push Iran to top of US worry list:  The Washington Post
  • Iran feels sanctions pinch as Asia traders cut ties: Reuters
  • EU asks India to pressure Iran over nuclear program: Reuters
  • India launches spy satellite to boost security: Reuters
  • Iran turns to barter for food as sanctions cripple imports:  Reuters

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