Vol. XLIII No. 19 May 12, 2019

India Should Not Participate in US Economic War on Iran

B Arjun

IN yet another attempt to destroy a sovereign nation, undermine its economic well-being, the Trump administration has tightened sanctions on Iran.  Under the so-called isolationist Trump, the American empire has become more ruthless, expecting sovereign nations to disregard their own economic well-being and obey imperial instructions. 

By targeting Iran, the US wants to manipulate global oil supplies and the prices. Today Iran’s contribution to global oil market is in the range of 1 to 1.2 per cent. America is expecting Saudi Arabia and the UAE to fill the gap by pumping more oil from its wells, ostensibly to prevent surge in oil prices. But both the West Asian nations are reluctant to deplete their oil reserves.

This blackmailing is an American way of conducting international relations. Not just the US allies in the middle east are being forced to harm their own economies to cater to Trump’s whims and fancies, but US friends all across the world are being bullied to honour Trump’s lopsided policies. 

Along with the sanctions on Iran, a diktat was also sent to India, China, Turkey, Japan and South Korea, Taiwan, Italy and Greece to halt oil imports from Iran within six months. Client states like Taiwan, Italy and Greece immediately halted all transactions with Iran. The other five countries were expected to gradually decrease their oil imports from Iran and reduce it to zero by May 2, 2019, the date on which the ‘waiver’ expired.

All countries and their financial institutions are expected to snap their links with the transactions-chain connected to Iranian oil or face severe economic penalties. US power can make nations genuflect in front of its diktat because it has a vice-like grip over the power elites in most of the countries. It works through diplomatic, business, political and NGO channels to ensure that all fall in line to push the US agenda. Once the US foreign policy directions are announced, the elite networks in various capitals of the world get activated. They work overtime with the help of media companies and PR agencies to create a favourable opinion in their respective countries, both within and outside the government to justify why sanctions are important to curtail Iran’s nuclear ambitions and why it won’t make a difference to their countries if they imported oil from Saudi Arabia instead of Iran. Data is fudged to substantiate these claims, to sell the idea that Iran is a rogue country.

The US not only controls the global elite but it also controls the levers of international commercial, banking and financial networks. The US navy with its colossal presence in the maritime commons can interdict ships carrying cargo in and out of Iran. However, since war has not been officially declared, the US navy can only achieve limited results because the traffic passing through the Straits of Hormuz is large. US navy does not have the capacity to check each and every merchant ship passing through international waters.

However, the US has a more secure line available to disconnect Iranian banks from the international banking network. The US can effectively browbeat global ports and shipping companies to stop underwriting vessels carrying Iranian exports and imports.  The US has threatened the Belgium-based Society for Worldwide Interbank Financial Telecommunications (SWIFT) financial messaging service, (founded in 1973 that connects more than 11,000 institutions in over 200 countries) to block Iranian financial institutions and banks from the international chain.

However, as the US empire crumbles, its power to control all networks is reducing. Recently the three European countries most involved in the 2015 Iran nuclear deal, UK, France and Germany along with Russia, China and Iran launched INSTEX (Instrument in Support of Trade Exchanges) to bypass unilateral US trade sanctions on Iran. To begin with, INSTEX, headquartered in France, will ensure that trade in medicine, and food to Iran doesn’t stop. The EU has done this to ensure that it keeps getting medicine supplies uninterrupted. “In 2017, the export of drugs from Europe to Iran totalled $884m compared with $194m from China and $52m from India.” The US is crossing the red lines drawn by international norms and practices far too often and the world needs to develop an effective counterweight to it.

When Russia feared being cut off from the global financial networks at the insistence of USA, due its involvement in Crimea and Ukraine, it started developing its own financial messaging service, an alternative to SWIFT.  Russia and Iran are discussing the establishment of an independent payments system linking the two nations. According to an Iranian official, the new blockchain based currency could prove a useful tool as the country seeks to help its financial institutions operate effectively without access to the "dollar, as well as the SWIFT system."

On the other hand, China is also not willing to kow-tow to the US termination of the sanctions waiver because Iran is a key investor in China’s Belt and Road Initiative as well as a key energy partner. Besides, building robust financial networks, China is building a new land route with Iran. In May 2016, the first freight train moved from China to Iran, bringing goods from China’s eastern Zhejiang province and making the journey through Kazakhstan and Turkmenistan in 14 days – compared with around 45 days by sea to            Tehran. Turkey has also rejected the “unilateral sanctions and impositions on how to conduct relations with neighbours.”

However, the Indian stand on the withdrawal of ‘waiver’ by the US is one of capitulation. It has maintained that it would be able to offset the reduction in Iranian exports, despite its official stand that it only recognises sanctions by the United Nations. India is now deeply entrenched into the US military network and will see its strategic choices reducing. Now, India cannot stand up and protect its interests vis-a-vis Iran, the third-largest supplier of crude oil, behind Iraq and Saudi Arabia. India’s huge investments in the Chabahar port, located in the Indian Ocean in the Sistan and Baluchistan province of Iran, was expected as a gateway to golden opportunities for trade by India, Iran and Afghanistan with central Asian countries. However, with limited trade from Iran, the Chabahar is likely to be a ‘ghost-port’, hurting India’s strategic and economic issues. India has already started importing oil and gas from the US, the new entrant into the oil-import market. India has displayed its aversion to new trade-routes being built by China under its BRI scheme. At the recently concluded forum, the two main countries that were not represented were America and India. 

India may stop its oil imports from Iran but it is to be understood that challenge to US hegemony around the world is growing. America’s indulgence in Iran is likely to prove detrimental to its empire. Iran is likely to do to America what Afghanistan did to the Soviet Union.