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April 27, 2012

Iran is to India as Pakistan is to the U.S.

NEW DELHI—Tourists flying into this ancient city are sometimes surprised to find their descent re-routed at the last minute by the presence of an 86-foot bronze statue that sits at the end of a runway. The giant icon depicts none other than Lord Shiva, one of Hinduism’s most popular and powerful gods. Known alternatively as the destroyer and the creator, family man and hermit, teacher and warrior, kind herdsman and wrathful avenger—Shiva is, like India itself, a perfect symbol of contradictions.

This is a country that has a middle class larger than the entire population of the United States—and yet, despite ongoing controversy over India’s poverty numbers, at least 350 million Indians live on about 50 cents a day. Its population includes roughly 160 million Muslims—and yet, it is the world’s second largest importer of Israeli weapons. And while U.S. Secretary of State Hillary Clinton said last year that the relationship between the U.S. and India will shape the 21st Century—this “true friend” of the U.S. imports more oil from America’s sworn enemy, Iran, than any other nation.

It is the issue of oil that has put India’s unique friendship with the U.S., Iran and Israel under an intense spotlight. Under a new U.S. law designed to use oil to pressure Iran into ending a nuclear program that Israel and the West believe is dangerous, countries that do not significantly reduce their imports of Iranian oil by June 28 can be denied access to the U.S. financial system. India, which imports roughly 10 percent of its oil from Iran, denounced the strong-armed tactics and announced that it would not abide by the sanctions. Since then, Delhi has devised creative new financing vehicles independent of Western banks to help Indian refineries continue to engage Tehran.

“The mood in the U.S. is turning into:  you are either for us or against us,” the Indian Foreign Secretary, H.E. Ranjan Mathai, told me in his office. “The problem is that the U.S. has made rules which complicate normal life. Some people have to do their own calculations and we have to do ours.”

No country in history has ever faced the epic human challenge of managing a country of 1.2 billion people, where at least one in three rural residents and one in five urban dwellers live in abject poverty. Supplying the energy needs of an economy expected to grow from $4.5 trillion in 2012 to $86 trillion in terms of purchasing power parity by 2050—at a time when half a billion Indians live without electricity, instead relying on petroleum-based kerosene for light, heat and cooking—is daunting itself. Complicating matters is that many of India’s refineries are designed only to process the type of light crude oil Iran sells, and retrofitting takes time and costs a fortune.

“We have to be pragmatic about it,” a senior government official says to me. “Our policy is to seek energy from all possible sources including Africa, Venezuela and Indonesia. But 70 percent of India’s oil comes from the Gulf—Saudi Arabia and Iran. Energy is a factor of daily life and there would be chaos if Iran shut us off.”

India is new to these kinds of loyalty litmus tests. In the six decades since it gained its independence from Britain, New Delhi has famously pursued a policy of strategic neutrality. Jawaharlal Nehru, India’s first prime minister, even co-founded the Non-Aligned Movement during the Cold War, made up of states not formally aligned with any great power (even though, in practice, India leaned heavily toward the Soviet Union after the U.S. started to arm India’s enemy, Pakistan,  in 1954 to contain communism).

But for a country that aspires to great power status, which actively seeks a permanent seat on the United Nations Security Council, the Iranian oil crisis is India’s first great test of the 21st Century:  can a true world leader be non-aligned in a globalized world?  Is it really possible to be a “true friend” to two sworn enemies?

“This can’t be a test of our friendship,” the former Indian Ambassador to the United States, Lalit Mansingh, has said. “Washington must realize that we are in a neighborhood where Iran is a factor.”

“Iran has a border with at least 12 countries which the U.S., China and India can’t ignore,” says a top Indian official.  “The geographic reality is that Iran is a land power on the other side of Pakistan, and (because Pakistan has not allowed open trade between Afghanistan and India) it is our only land access to Afghanistan and West Asia—which we use to support goods to Kabul. The whole northern shore of the Persian Gulf is also Iran. We don’t look at Iran as either/or, but from an economic and political view.  It has an importance, full stop—on energy, geographic reality, and as a Gulf power.”

While India works with Iran, some say, partnership should not be confused with friendship.

“India doesn’t like the Iranian regime or Iran, and it’s a political headache,” the former Indian Foreign Secretary, Kanwal Sibal, tells me. “We talk a lot about civilizational connections, but it’s nonsense. Iran has never been a friend of India, ever. The only thing the relationship rests on is energy.”  Indian political analyst Subhash Agrawal adds, “If we could find a substitute for energy, we would walk away from them. India doesn’t want to be with Iran, but who is there to give us oil?  We would never choose to have a relationship with this type of unstable and reactionary regime.”

As the June 28th deadline quickly approaches, what should the U.S. do?  First, the White House should publicly affirm its wider support and friendship with India. Second, it should recognize that India has already reduced its imports from Iran from 16.4 percent in 2008 to 10.3 percent today, and grant India a waiver—as it has to 10 other countries, including Japan—to give it more time to meet further reductions. Third, the U.S. should help India secure financing and expertise to retrofit its refineries to enable them to process more than just Iranian oil.

In many ways, Iran is to India as Pakistan is to the United States:  an uneasy marriage with an unstable partner that is borne of necessity more than affection, which New Delhi—like Washington—would give up in a heartbeat if there was any real alternative. Legend has it that Lord Shiva was never more powerful than when he was dancing. Time will tell if the same may be said of India.