US Heavy-Handedness Forges Russia-Iran-India Ties
By Conor Gallagher
India already rebuffed US pressure to cut ties with Russia. Now it appears ready to at least partially ignore US sanctions on Iran. Back in 2017, India got roughly 11 percent of its oil from Iran, and the two countries were steadily increasing economic ties. Then the Trump administration slapped sanctions back on Iran, and New Delhi caved to US pressure to halt oil imports and other cooperation. That could soon change. According to The Cradle:
Faced with a burgeoning demand for oil and gas amid the global energy crisis and recent oil cuts by the OPEC+, India now looks poised to resume oil imports from Iran, defying US sanctions, The Cradle learned from sources in Tehran and New Delhi.
Interestingly, India’s petroleum minister Hardeep Puri hinted at it during his visit to Washington in October, saying New Delhi will buy oil from wherever it has to. Russia, as we know, is already shipping oil to India, despite strong US pressures.
It remains to be seen if India goes through with the plan, especially considering Washington’s warning shot in September when the US sanctioned Mumbai-based Tibalaji Petrochem Private Limited for shipping Iranian petrochemical products to China (reportedly the first Indian company sanctioned by the US for dealing with Iran).
US sanctions on Iran’s oil exports deprive India of cheap Iranian oil, forcing it to look elsewhere, including buying more expensive US energy exports. India is now the largest oil export destination for the US.
Still, New Delhi likely isn’t in a big rush, as it has already emerged as a big winner from the US proxy war against Russia in Ukraine as India is indispensable to both the US and Russia. Washington needs New Delhi to help control China’s rise and Moscow needs it as an outlet due to western sanctions.
For months now India has been getting Russian oil at a discount and selling some to the EU at substantial profits. According to Michael Tran, global energy strategist at RBC Capital Markets:
India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months.
Indian-Russian integration is likely to accelerate despite US pressure and Ukraine throwing fits. Fuelled by a surge in import of oil and fertilizers, India’s bilateral trade with Russia has soared to an all-time high of $18.2 billion over the April-August period of this financial year, according to the latest data available with the Department of Commerce. That makes Russia India’s seventh biggest trading partner — up from its 25th position last year. The US, China, UAE, Saudi Arabia, Iraq, and Indonesia remain ahead of Russia.
The increased trade with Russia is a primary driver bringing New Delhi and Tehran closer together – largely a result of US efforts to sever Europe from Russia. According to Reuters, at the end of November Moscow sent India a list of more than 500 products it wants India exporting to Russia, “including parts for cars, aircraft and trains.” The report added:
Indian imports from Russia have grown nearly five times to $29 billion between Feb. 24 and Nov. 20 compared with $6 billion in the same period a year ago. Exports, meanwhile, have fallen to $1.9 billion from $2.4 billion, the source said. India is hoping to boost its exports to nearly $10 billion over coming months with Russia’s list of requests, according to the government source.
And with all the increased trade, New Delhi and Moscow are looking for more efficient supply lines. India, Iran, and Russia have also spent the past twenty years developing the International North-South Transport Corridor to increase trade between the countries, but it’s taking on increased importance now with the western sanctions on Moscow. From The LoadStar:
RZD Logistics, a subsidiary of Russian railway monopoly RZD, has begun regular container train services from Moscow to Iran to serve growing trade with India by transloading.
This is aimed at maximizing use of the alternative International North South Transport Corridor (INSTC), a Central Asia cross-border multimodal freight network helping the two strategic partners work around supply chain challenges created by western sanctions on Russia.
The inland-ocean leg involves an estimated transit time of 35 days, compared with about 40 with previous traditional shipping, according to industry sources.
©Peter Hermes Furian
India and Iran are now focusing on connectivity projects like the Chabahar Port, which links with the International North-South Transport Corridor. Full realization of the corridor will require India overcoming fear of US sanctions, however. Again from The Cradle:
Importantly, in recent years, Chabahar Port in Iran’s southeastern Sistan-Baluchestan province has emerged as a key area of cooperation between Tehran and New Delhi, which will provide India access to Afghanistan and Central Asia through Iran, ending its reliance on arch-rival Pakistan.
Rezaul Hasan Laskar, the foreign affairs editor at Hindustan Times, says the strategic port has “become more important following its growing use” but that “it needs to be connected to Iran’s railway network.”
While the first section of the Zahedan-Chabahar railway line is nearing completion, official sources in Tehran said the agreement between the two sides to construct the 628-kilometer (390 miles) railway line had faced “serious impediments” due to New Delhi’s reluctance to start work fearing US sanctions.
Elsewhere, Washington is hyperventilating over Russia offering Iran “an unprecedented level of military and technical support that is transforming their relationship into a full-fledged defense partnership.” And Russia, Kazakhstan, and Uzbekistan are discussing the creation of a “trilateral gas union” that may include the construction of new pipelines to export Russian gas to the markets of India and Pakistan. Alexey Grivach, Deputy General Director of Russia’s National Energy Security Fund, told TASS:
It concerns bringing Russian gas to new promising markets in the context of Europe’s declared refusal to import it. The idea involves both the use of existing infrastructure in the region and the construction of a new one. The main target markets here could be China in the east and Pakistan with India in the south.
Such a pipeline bringing Russian gas to India via Iran has long been discussed, but once again, US efforts to isolate Russia and Iran are expediting their integration. Patrick Lawrence writes of such developments at Consortium News:
It marks another step, a considerable one, in the construction of the diplomatic, political, and economic infrastructure that will — I don’t consider this a daring prediction — define the 21st century. We witness the new world order many of us anticipate as it is being built. … Further out, this is part of a long-in-the-making project that will connect Russia, Iran, and India by sea, road, rail, and, eventually, a very significant Iran–to–India gas pipeline.
India’s refusal to sever economic ties with Russia has allowed Moscow not to become too reliant on China and hedge its bets – especially considering the increasing western pressure on Beijing and its desired detente with the US. For example, China is reportedly restricting chip sales outside the country, including to Russia. Kommersant reports:
Although Russian companies do not depend on supply of Chinese processors significantly, in case of a hypothetical blocking of ‘parallel imports,’ they hoped to switch to Loongson solutions. The best [Loongson CPUs] are used by the Chinese military-industry complex, this is the main reason why they are not available to foreign markets.
While the reported new restrictions don’t solely target Russia, Moscow’s inclusion is notable due to the two countries’ strategic partnership. This could be Beijing reacting to the chip-making machine restrictions put in place on China by the US, Japan, and the Netherlands – the three countries that dominate the chip machine market. Or it could be part of the possible detente between Washington and Beijing, with Secretary of State Anthony Blinken set to visit China early next year to advance talks on “a degree of predictability and stability.”
Of course, Beijing knows that the US is not agreement-capable, but has India’s rapid ascendance aided by the Ukraine conflict helped to change China’s calculations? We shall see. New Delhi has announced its goal to replace China as the world’s factory and is reportedly one of the biggest supporters of efforts to isolate China:
There are also reasons for New Delhi to proceed cautiously: https://twitter.com/RnaudBertrand/status/1596854974000300032?ref_src=twsrc^tfw|twcamp^tweetembed|twterm^1596854974000300032|twgr^0167aa919b402817420c892ecbe1706fc97e99bc|twcon^s1_c10&ref_url=https://www.nakedcapitalism.com/2022/12/us-heavy-handedness-forges-russia-iran-india-alliance.html