CAUGHT BETWEEN FRIENDS

(INDIA IN ALLIANCE WITH

IRAN AND UNITED STATES)

OUTCOME OF THIS ASSIGNMENT IS IMPACT

OF SOCIO- ECONOMIC ENVIRONMENT ON
INDIA IN ALLIANCE IRAN AND UNITED
STATES.

SUBMITTED BY:
ROHIT JAMES (31)
NITISH HANSDA (32)

PRIYANKA (33)
India–Iran relations

India–Iran relations refer to the bilateral relations between the countries

India and Iran. Independent India and Iran established diplomatic
relations on 15 March 1950. During much of the Cold War period, relations
between the Republic of India and the erstwhile Imperial State of
Iran suffered due to their different political interests—non-aligned India
fostered strong military links with the Soviet Union, while Iran enjoyed
close ties with the United States. Following the 1979 revolution, relations
between Iran and India strengthened momentarily. However, Iran's
continued support for Pakistan and India's close relations with Iraq during
the Iran–Iraq War impeded further development of Indo–Iranian ties. In
the 1990s, India and Iran supported the Northern Alliance in Afghanistan
against the Taliban regime. They continue to collaborate in supporting the
broad-based anti-Taliban government led by Ashraf Ghani and backed by
the United States. The two countries signed a defense cooperation
agreement in December 2002.
From the economic perspective, Iran is the second largest supplier of crude
oil to India, supplying more than 425,000 barrels of oil per day, and
consequently India is one of the largest foreign investors in Iran's oil and
gas industry. In 2011, the US$12 billion annual oil trade between India and
Iran was halted due to extensive economic sanctions against Iran, forcing
the Indian oil ministry to pay off the debt through a banking system
through Turkey.
From the geopolitical perspective, even though the two countries share
some common strategic interests, India and Iran differ significantly on key
foreign policy issues. India has expressed strong opposition against Iran's
nuclear programme and whilst both nations continue to oppose the
Taliban, India supports the presence of NATO forces in Afghanistan unlike
Iran.
According to a BBC World Service Poll conducted at the end of 2005, 71%
of Iranians viewed India's influence positively, with 21% viewing it
negatively, the most favourable rating of India for any country in the world.
Also, due to Iran being on good terms with both India and Pakistan, Iran
has offered to serve as a mediator between the two.
Recent Times India And Iran Bilateral Ties
 Oil And Gas Agreement
 Main Outcome of India Iran Relation is – Chabahar Port
Agreement between India And Iran
 India, Afghanistan and Iran signed a trilateral trade treaty for
developing the port project and beyond.
 In 2015, India liberalized its visa policy for Iran and struck it off
the prior referral category (PRC) of countries.
 There was a MoU on provision of services by Indian Railways,
including financing $1.6 billion, for Chabahar-Zahedan railway
line.
 India will invest in setting up industries from aluminum to urea
plants in Chabahar.

Why India needs Iran

 India and Iran Are Now a very good partner.
 Mainly India Need Iran for Energy Security.
 Iran is Big Supplier Of crude Oil to India.
 But Now Iran is a Strategic Partner for India. Since 1990 For
India Iran Importance Has Increased.

India Need For Iran To Reduce Influence Of

Pakistan In West Asia
 Pakistan is Big Supporter of Terrorism or Supplier of Terrorist In
India .
 India Want to Increase Its Influence on Afghanistan Also want to
Marginalize Pakistan Influence over West Asia.
 Iran Relations With India Will help India In Accessing
Afghanistan And Central Asia .
India–United States relations
India–United States relations, also known as Indian–American relations or Indo–
American relations, refers to the international relations between the Republic of
India and the United States of America.

1.Political Relations

The frequency of high-level visits and exchanges between India and the U.S. has gone up
significantly of late. Prime Minister Modi visited the U.S. on 26-30 September 2014; he held
meetings with President Obama, members of the U.S. Congress and political leaders,
including from various States and cities in the U.S., and interacted with members of
President Obama's Cabinet. He also reached out to the captains of the U.S. commerce and
industry, the American civil society and think tanks, and the Indian-American community. A
Vision Statement and a Joint Statement were issued during the visit. The visit was followed
by President Obama's visit to India on 25-27 January 2015 as the Chief Guest at India's
Republic Day. During the visit, the two sides issued a Delhi Declaration of Friendship and
adopted a Joint Strategic Vision for Asia-Pacific and the Indian Ocean Region. Both sides
elevated the Strategic Dialogue between their Foreign Ministers to Strategic and Commercial
Dialogue of Foreign and Commerce Ministers. Prime Minister Modi again visited the U.S. on
23-28 September 2015, during which he held a bilateral meeting with President Obama,
interacted with leaders of business, media, academia, the provincial leaders and the Indian
community, including during his travel to the Silicon Valley. In 2016, Prime Minister visited
the U.S. for the multilateral Nuclear Security Summit hosted by President Obama in
Washington D.C. on 31 March-1 April. This was soon followed by an official working visit
by Prime Minister on 6-8 June, during which he held bilateral discussions with President
Obama, and also addressed a Joint Session of the U.S. Congress. Prime Minister Modi was
the sixth Indian Prime Minister to address the U.S. Congress. There is frequent interaction
between the leadership of the two countries, including telephone calls and meetings on the
sidelines of international summits. President Trump and Prime Minister Modi have spoken
thrice over phone since the former’s election in November 2016. A hotline has been
established between the Prime Minister's Office and the U.S. White House.

2. Trade and Economic:

India-US bilateral trade in goods and services increased from $104 billion in 2014 to
$114 billion in 2016. Two-way merchandise trade stood at $66.7 billion. Of this, India’s
exports of goods to the US were valued at $46 billion and India’s imports of goods from
US were valued at $21.7 billion. India-US trade in services stood at $47.2 billion. Of this,
India’s exports of services to the US were valued at $26.8 billion and India’s imports of
services from US were valued at $20.3 billion. Both countries have made a commitment
to facilitate actions necessary for increasing the bilateral trade to $500 billion. The
bilateral merchandise trade is showing an encouraging growth trajectory in 2017.
During the first three months, bilateral merchandise trade stood at $17.2 billion as
compared to $16.2 billion during the corresponding period in 2016. Of this, India’s
exports to the US were $11.4 billion and India’s imports from the US were $5.8 billion.
The trade deficit during Jan-Mar 2017 also declined from $6.4 billion in 2016 to $5.6
billion in Jan-Mar 2017. During Prime Minister's visit to the U.S. in September 2014,
the two sides set a target to increase bilateral trade in goods & services to $500 billion.
In June 2016, PM Modi and President Obama pledged to explore new opportunities to
break down barriers to the movement of goods and services, and support deeper
integration into global supply chains, thereby creating jobs and generating prosperity in
both economies.

3. Defense Cooperation

Defense relationship has emerged as a major pillar of India-U.S. strategic partnership

with the signing of ‘New Framework for India-U.S. Aggregate worth of defense
acquisition from U.S. Defense has crossed over US$ 13 billion. India and the United
States have launched a Defense Technology and Trade Initiative (DTTI) aimed at
simplifying technology transfer policies and exploring possibilities of co-development
and co-production to invest the defense relationship with strategic value. The DTTI
Working Group and its Task Force will expeditiously evaluate and decide on unique
projects and technologies which would have a transformative impact on bilateral
defense relations and enhance India's defense industry and military capabilities. During
President Obama's visit in January 2015, the two sides agreed to start cooperation on 4
DTTI pathfinder projects and 2 pathfinder initiatives, which are currently at various
stages of execution. During RM's visit in December 2015, the two sides also identified
opportunities for bilateral cooperation in production and design of jet engine
components. During Secretary Carter's visit in April 2014, two more G-2-G DTTI
projects were added to the list. The DTTI meeting in Delhi in July 2016 decided to
broaden its agenda by setting up five new Joint Working Groups on: Naval Systems; Air
Systems, Intelligence, Surveillance and Reconnaissance; Chemical and Biological
Protection; and Other Systems. During the visit of Prime Minister to the U.S. in June
2016, the U.S. recognized India as a "Major Defense Partner", which commits the U.S. to
facilitate technology sharing with India to a level commensurate with that of its closest
allies and partners, and industry collaboration for defense co-production and co-
development.

4. Counter-terrorism and internal security:

Cooperation in counter-terrorism has seen considerable progress with intelligence

sharing, information exchange, operational cooperation, counter-terrorism technology
and equipment. India-U.S. Counter-Terrorism Cooperation Initiative was signed in
2010 to expand collaboration on counter-terrorism, information sharing and capacity
building. A Homeland Security Dialogue was announced during President Obama's visit
to India in November 2010 to further deepen operational cooperation, counter-
terrorism technology transfers and capacity building. Two rounds of this Dialogue have
been held, in May 2011 and May 2013, with six Sub-Groups steering cooperation in
specific areas. In December 2013, India-U.S Police Chief Conference on homeland
security was organized in New Delhi. Police Commissioners from India's top four
metropolis paid a study visit to the U.S. to learn the practices of megacities policing in
the U.S. in November 2015. The two sides have agreed on a joint work plan to counter
the threat of Improvised Explosives Device (IED). In order to further enhance the
counter terrorism cooperation between India and the U.S., an arrangement was
concluded in June 2016 to facilitate exchange of terrorist screening information through
the designated contact points. India-U.S. Joint Working Group on Counter-Terrorism
held its 14th meeting in July 2016 in Washington DC.

5. Science & Technology (S&T)

The India-U.S. S&T cooperation has been steadily growing under the framework of
U.S.-India Science and Technology Cooperation Agreement signed in October 2005.
There is an Indo-U.S. Science & Technology Joint Commission, co-chaired by the
Science Advisor to U.S. President and Indian Minister of S&T. Collaboration between
the Ministry of Earth Sciences and U.S. National Oceanographic and Atmospheric
Administration has been strengthened under the 2008 MOU on Earth Observations and
Earth Sciences. A "monsoon desk" has been established at the U.S. National Centers for
Environmental Prediction. India's contribution of $250 million towards Thirty-Meter
Telescope Project in Hawaii and Indian Initiative in Gravitational Observations
(IndiGO) with U.S. LIGO Laboratory are examples of joint collaboration to create world-
class research facilities.

6. Education

Cooperation in education sector has been made an integral part of the strategic
partnership between the two countries. India is learning from the U.S. experience in
community colleges in order to meet our demands for skill-development. It has been
agreed to collaborate with U.S. institutions in the area of Technology Enabled Learning
and Massive Open On-line Courses (MOOCs) to extend the reach of education in India.
Under the Global Initiative of Academic Networks (GIAN) launched by India, upto 1000
American academics will be invited and hosted each year to teach in Indian universities
at their convenience. The two sides are also collaborating to establish a new Indian
Institute of Technology in Ahmedabad.

7. Space:

A bilateral Joint Working Group on Civil Space Cooperation provides a forum for
discussion on joint activities in space, including (i) exchange of scientists; (ii) OCM2,
INSAT3D collaboration; (iii) Cooperation on Mars mission; (iv) nano-satellites; (v)
carbon /ecosystem monitoring and modeling; (vi) feasibility of collaboration in radio
occultation: (vii) Earth Science Cooperation: (viii) international space station; (ix)
global navigation satellite systems; (x) L&S band SAR; (xi) space exploration
cooperation; (xii) space debris mediation.

8. Health Sector: Under the 2010 U.S.-India Health Initiative, four working
groups have been organized in the areas of Non-Communicable Diseases, Infectious
Diseases, Strengthening Health Systems and Services, and Maternal and Child Health.
Iran–United States relations

1953: Overthrow of Mossadeq

US and British intelligence agencies orchestrate a coup to oust Iran's democratically

elected Prime Minister, Mohammad Mossadeq. The secular leader had sought to
nationalise Iran's oil industry.

1979: Iranian revolution

The US-backed Shah of Iran, Mohammed Reza Pahlevi, is forced to leave the country on
16 January following months of demonstrations and strikes against his rule by secular
and religious opponents.

Two weeks later, Islamic religious leader Ayatollah Khomeini returns from exile.
Following a referendum, the Islamic Republic of Iran is proclaimed on 1 April.

1979-81: US Embassy hostage crisis

The US embassy in Tehran is seized by protesters in November 1979 and American

hostages are held inside for 444 days. The final 52 hostages are freed in January 1981,
the day of US President Ronald Reagan's inauguration.
Another six Americans who had escaped the embassy are smuggled out of Iran by a
team posing as film-makers, in events dramatized in the 2012 Oscar-winning film Argo.

1985-86: Iran-Contra scandal

The US secretly ships weapons to Iran, allegedly in exchange for Tehran's help in
freeing US hostages held by Hezbollah militants in Lebanon.

The profits are illegally channelled to rebels in Nicaragua, creating a political crisis for
Reagan.

1988: Iranian passenger plane shot down

The American warship USS Vincennes shoots down an Iran Air flight in the Gulf on 3
July, killing all 290 people on board. The US says the Airbus A300 was mistaken for a
fighter jet.

Most of the victims are Iranian pilgrims on their way to Mecca.

2002: 'Axis of evil'

In his State of the Union address, President George Bush denounces Iran as part of an "axis
of evil" with Iraq and North Korea. The speech causes outrage in Iran.

2000s: Nuclear fears and sanctions

In 2002 an Iranian opposition group reveals that Iran is developing nuclear facilities
including a uranium enrichment plant.

The US accuses Iran of a clandestine nuclear weapons programme, which Iran denies.
A decade of diplomatic activity and intermittent Iranian engagement with the UN's
nuclear watchdog follows.

But several rounds of sanctions are imposed by the UN, the US and the EU against
ultra-conservative president Mahmoud Ahmadinejad's government. This causes Iran's
currency to lose two-thirds of its value in two years.

2013-2016: Closer ties, and a nuclear deal

In September 2013, a month after Iran's new moderate president Hassan Rouhani takes
office, he and US President Barack Obama speak by phone - the first such top-level
conversation in more than 30 years.
Then in 2015, after a flurry of diplomatic activity, Iran agrees a long-term deal on its nuclear
programme with a group of world powers known as the P5+1 - the US, UK, France,
China, Russia and Germany.

Under the accord, Iran agrees to limit its sensitive nuclear activities and allow in
international inspectors in return for the lifting of crippling economic sanctions.

2019: Tension in the Gulf

In May 2018, US President Donald Trump abandons the nuclear deal, before reinstating
sanctions against Iran and countries that trade with it.

Relations between the US and Iran worsen. The US sends an aircraft carrier strike
group and B-52 bombers to the Gulf because of what it calls "troubling and escalatory
indications" related to Iran.

Then, in May and June 2019, explosions hit six oil tankers in the Gulf of Oman, and the
US accuses Iran.
 The Impact of US- Iran tussle on India
Iran recently announced that it would begin enriching uranium above a concentration of
3.67% permitted under the nuclear deal, known as the Joint Comprehensive Plan of
Action (JCPOA), reached by Iran and the P5+1 (China, France, Germany, Russia, the
United Kingdom, and the United States).
The downward spiral in U.S.-Iran relations started with US decision to withdraw from
the JCPOA against the advice of the U.S.’s European allies France, Germany, and the
U.K. that are parties to the deal. The US administration followed it up with the re-
imposition of stringent economic sanctions against Iran that were being gradually
dismantled following the 2015 nuclear deal. These included sanctions against foreign
companies doing business with Iran and against countries buying Iranian oil.
Economic Consequences of US-Iran tussle:

1. Sliding towards a deep recession: Iran's economy was badly affected for
several years by sanctions imposed by the international community over the
country's nuclear programme.The reinstatement of US sanctions last year -
particularly those imposed on the energy, shipping and financial sectors in
November - caused foreign investment to dry up and hit oil exports.The sanctions
bar US companies from trading with Iran, but also with foreign firms or countries
that are dealing with Iran.As a result Iran's GDP contracted by 3.9% in 2018,
according to estimates from the International Monetary Fund (IMF).
2. Oil exports have more than halved: At the start of 2018, Iran's crude oil
production reached 3.8 million barrels per day (bpd), according to data gathered
by the Organization of the Petroleum Exporting Countries (Opec). The country
was exporting about 2.3 million bpd.Most of the oil was bought by eight countries
or territories that were granted six-month waivers by the US when sanctions on
the Iranian energy sector took effect - China, India, Japan, South Korea, Taiwan,
Turkey, Greece and Italy.By March 2019, Iran's oil exports had fallen to 1.1 million
bpd on average, according to the consulting firm SVB Energy International.
Taiwan, Greece and Italy had halted imports altogether, while the two biggest
buyers - China and India - had reduced them by 39% and 47% respectively.
3. The value of the rial has plummeted: Iranian currency has lost almost 60%
of its value against the US dollar on the unofficial market since the US sanctions
were reinstated, according to foreign exchange websites.The rial's slide has been
attributed to Iran's economic problems and a high demand for foreign currency
among ordinary Iranians who have seen the value of their savings eroded and
worried that the situation will get worse.Iran's currency problems have also led to
shortages of imported goods and products that are made with raw materials from
abroad, most notably babies' nappies.
4. Living costs have risen dramatically: IMF estimates that inflation soared to
31% in 2018 and predicts that it could reach 37% or more this year if oil exports
continue to fall.The plunging value of the rial has affected not only the prices of
imported goods but also of locally produced staples. In the past 12 months, the
cost of red meat and poultry has increased by 57%, milk, cheese and eggs by 37%,
 and vegetables by 47%, according to the Statistical Centre of Iran. The poor have
also been hit hard by almost 20% increases in the costs of housing and medical
services in the past year.
5. Companies exiting: Many foreign companies have announced their intention to
exit the Iranian market or forego new investments, unwilling to risk losing access
to the U.S. market and exclusion from the dollar-based financial system. The
International Monetary Fund (IMF) forecasts the Iranian economy will contract
by 1.5 percent this year and another 3.6 percent in 2019, a sharp reversal
from April when it forecasted 4 percent growth for both years.Unemployment is
also rising, especially among younger workers.

Impact of Sanctions on India:

1. US has refused to renew the exemptions issued for eight countries including India.
This means that Indian companies will either have to stop buying oil from Iran or
resort to a Rupee payment mechanism as was done in the past.
2. Other than the oil sector, India is not directly affected by US sanctions on Iran
though Indian companies involved in the Iranian automobile, iron & steel and
mining sectors will be affected due to additional US sanctions on these sectors.
3. The Chabahar Port also does not come under US sanctions and hence Indian
investments and involvement in it will not be affected. Nonetheless, due to
sanctions on the iron & steel sector, certain infrastructure development projects
such as the Chabahar-Zahedan railway and gas pipeline, part of Iran’s plan to
develop Chabahar as a transit hub between Central Asia and the world, could be
affected.

India’s Challenges:
It might not be difficult for India to meet the shortfall in crude oil imports due to US
sanctions on Iran.

1. While US shale production is expected to grow rapidly, the higher flows from
countries such as Nigeria, Libya and Iraq have already offset losses from the
decline in Iranian exports. Moreover, countries such as Saudi Arabia, the United
Arab Emirates (UAE) and the US have publicly announced their willingness to
help meet the shortfall in crude oil that India might face due to sanctions on Iran.
2. Then there are countries such as Iraq, Kazakhstan, Nigeria, Angola, Mexico, etc.
which are among the top ten sources of oil for India and have the capacity to
increase production and exports in case of a rise in demand.Therefore managing
the economic aspect of continued flow of oil to India might not be difficult.
3. The bigger challenge is the political aspect of managing relations with the US and
Iran. On the one hand, if India were to stop sourcing oil from Iran, it will affect
bilateral relations. On the other hand, if India were to continue to buy Iranian oil,
say by sidestepping US sanctions, it is likely to impact the strategic relationship
with the US.
 CONCLUSION
Given this scenario, India has two options:
 One is to resort to buying Iranian oil through one or more
informal arrangements including: devising a Rupee payment
mechanism to overcome the sanctions; joining hands with
the EU, Russia and China; teaming up with a Shanghai
Cooperation Organisation (SCO) initiative to defy US
sanctions. If India were to undertake such a move, its
multifaceted relations with the US will be hampered.
 The second and more plausible option is to continue
negotiating with the US to either secure a formal waiver or to
have an informal understanding to buy Iranian oil. In the
meanwhile, India can offer to Iran to enhance its
investments in the Chabahar Port development project as
well as consider initiating other developmental and
connectivity projects to strengthen linkages to Afghanistan,
the Caucasus and Central Asia. This will help India not
openly defy the US or subvert its policy towards Iran but
also at the same time ensure that its relationship with Iran is
not completely derailed and it is also able to pursue an
independent foreign policy.

The bottom line is that while India can wait for the easing of US-
Iran tensions to resume buying oil from Iran, it is unlikely to
undermine its relationship with the US to please Tehran.