(This is a reprint from NewsBred).
United States wants India to cut down its oil imports from Iran which stands as its third biggest supplier after Iraq and Saudi Arabia. President Donald Trump has followed his pre-election promise with withdrawal from the 2015 Joint Comprehensive Plan for Action (JCPOA) which had enabled China, Russia, France, Germany UK, European Union and the US itself to dilute the economic sanctions against Tehran. Now the sanctions are back in place with the deadline of November 6, 2018 and the world is in turmoil, no less India.
The Trump administration has chosen a new way to browbeat the countries which don’t fall in line. Last August, it introduced CAATSA (Countering America’s Adversaries Through Sanctions Act) to scare those away from trade relations with “hostile” countries such as Russia, North Korea and Iran. International banks and companies which defy the sanctions would bear the brunt. Less oil imports from Iran would hike up the prices and import bills, not just of India but of many around the world. It would hit both inflation and Indian rupee. Since US dominates the re-insurance and payment gateways, bypassing them is difficult.
India’s dilemma is apparent. Before 2005, it paid $12-14 billion annually to oil bills by Iran. But signing the 2005 Indo-US Nuclear Civil Deal, gave New Delhi’s leash in US hands. India voted against Iran in the IAEA General Conference in September the very year; dithered on the Iran-Pakistan-India Pipeline and sounded the death knell of Turkmenistan-Pakistan-India (TAPI) gas pipeline project. By 2014, India had reduced the Iranian oil imports to $4 billion annually.
The US treasury methodically shut down the banking options for India who then began paying Turkey by cash which then converted it to gold bars and sent it across to Tehran. India was in no position to pay oil bills in US dollars. India did try the balancing act: while Reserve Bank of India (RBI) ceased dealing with Tehran-based Asian Clearing Union in 2010, it came to an understanding with Iran to pay half of its bill in Indian rupees in 2012.
But once the JCPOA came into being, India-Iran trade relations grew back to 2012 days. India also decided to pay out $6.5 billion it owed to Iran, held up due to sanctions. Modi government renewed the stalled Chahbahar port project. Its’ ministers made a beeline to Tehran with promises of oil and infrastructural projects. Iran obliged on its part by granting Oil and Natural Gas Commission (ONGC) the gas fields of Farzad B for exploration. The air of optimism only grew better when Iranian president Hassan Rouhani visited New Delhi this February with his oil minister Bijan Zanganeh. India pledged it would double its oil imports from Iran in 2018-2019. Iran, on its part, promised to cut down the freight by $1 per barrel. India pledged to increase import by 500,000 barrels a day.
But now comes the fresh US imposition. Even though foreign minister Sushma Swaraj has reiterated India would only abide by the mandates sanctioned by the United Nations (UN), it’s easier said than done. India and US have a booming trade of $140 billion which could take a grave hit, as well as around $31 billion of bilateral trade surplus advantage India has. Chahbahar port project, which could save millions in trade and increase Afghanistan’s tilt towards India, stands to lose steam. Besides, it just would give a bigger fillip to China to snug closer to Iran, shutting the doors on India.
India would be encouraged by the stand of UK, France, Germany who have expressed “regret and concern over Trump’s disruptive action. The Modi government meanwhile has started to flex its own muscles: in reaction to US postponing the 2+2 dialogue, India has declined US’ offer to host Defence Minister Nirmala Sitharaman. India also seems steadfast in increasing its military deals with Russia which faces similar offensive sanctions from United States.
The one fall-out of all this, including trade barriers ratcheted up by both US and India, is Modi government swinging back appreciably into the China-Russia zone. India has this strategic advantage where countries are looking to wow India rather than the other way around. However, India-US relations for the moment are several notches down than they have ever been since Trump came to power.
For its commercial and political implications, the Chabahar Port deal with Iran marks the finest achievement yet of Narendra Modi’s global engagements.
The commercial implications are obvious—India was hemmed in by Pakistan’s intransigence to refuse direct trade between India and Afghanistan and China’s One Belt One Road (OBOR) vision had the potential to clamp manacles on India’s ankles.
In one stroke, India has freed itself from the curfew and it could now entertain visions of trade and infrastructure links with Middle East and Central Asia and still further with Russia and Europe.
Let’s take up the bare details before we look at the wider implications and how Pakistan, China and United States, the other key players in the region, would react to it—Afghanistan, as we know from the history of Hindu Kush in the colonial times, is a prized land. So far it was its geographical location but now is the promise of immense mineral wealth which, according to Geological Survey of United States, could be worth as much as $1 trillion, due to its iron, copper, cobalt, gold and lithium potential.
Afghanistan, unfortunately, has always attracted predators who couldn’t care less about the welfare of Afghan people; who could go to any length to destabilize it in order to retain a degree of control over the cursed land. United States, on one pretext or another, stays put in the name of eliminating terrorism while, as everybody knows, promoting the same in cohort with Saudi Arabia, and not long ago, Pakistan.
The birth of modern terrorism occurred in the wake of Soviet Union’s departure from Afghanistan as United States planted mujahideens, with Pakistan and Saudi Arabia providing men, resources and ground support. The country was soon in chaos, split between war lords of one camp or other, and the lure of illicit heroin trade, which by a conservative estimate is second only to oil and gas in volume, has kept them involved. They aren’t going to leave the country in our lifetimes.
Afghanistan thus has every reason to distrust Pakistan—after all its bête noire Osama bin Laden and Mullah Mohammad Omar were traced there—and by inference United States. It sure receives significant infrastructural aid from China but so tied are the fortunes of the Middle Kingdom with Pakistan that Kabul can’t ignore the political implications.
India has diligently nurtured its ties with Afghanistan. Since 2001, it has provided Afghanistan with $2 billion development assistance. In December last year, Modi inaugurated Afghan parliament built on India’s aid of 90 million dollars. It has contributed $300 million on Salma dam and hydroelectric power plant at Herat which Modi is expected to inaugurate next month. In 2009, India had built a 217-km highway costing $100 million that links Zaranj with Delaram, located on Afghanistan-Iran border. From there, the local road connects to Chabahar.
India has always worried over its energy supply, most of which emanates from the Middle East. It receives 57 percent of its crude oil from the Middle East which would only increase manifolds in the coming years. Saudi Arabia is its biggest supplier but knowing the close equation between the Arab kingdom and Pakistan, India has always been keen to get Iran on its side. The latter, for this very reason—after all the Middle East conundrum is largely a tussle between Sunni Saudi Arabia and Shia Iran for dominance in Muslim world—seeks a natural affinity with India. Both nations have close cultural and historical ties. Persian was the official language of the Mughal Empire in the 16th century.
Chabahar is located on the Gulf of Oman, just 80km away from Gwadar which is the cornerstone of China’s pivot to Pakistan. Chabahar is just 299km east of world’s most critical passageway for oil tankers, the Strait of Hormuz.
Iran urgently wants this port to work as 85 percent of its seaborne traffic is managed by its Bandar Abbas port in the Strait of Hormuz. However, this port can only handle 100,000-metric ton ships. Large ships first offload at the Jebel Ali port in the United Arab Emirates en route to Iran. In contrast, Chabhar is a deep-water port and could process large ships. Chabahar would also allow both India and Iran to access large parts of Africa, Asia, Arabia and Australasia.
India has so far committed $500 million on the Chabahar project. It’s also assisting the 500-km rail link between Chabahar-Zahedan-Zaranj. The free trade zone of Chabahar could also encourage investment by its industries in urea, smelter and aluminium etc. In 2012, India had already used the port to transport a 100,000 metric ton shipment of wheat to Afghanistan.
According to the JV plans, India will develop two berths in Chabahar, one to handle container traffic and the other a multi-purpose cargo terminal. The MoU includes the sea-land access route to Afghanistan. India has plans to build a road-railroad network from Chabahar to Milak in Iran which in turn would link up the Indian-built 223-km Zaranj-Delaram road in Afghanistan.
India has also allayed worries on Iran’s part over its pending $6.5 billion payment. It has begun the process of payment in Euros, as requested by Turkey’s Halkbank. A cash-strapped Iran urgently needs investment and repayment of dues.
It’s a win-win all situation for all three nations. Both India and Iran are surrounded by hostile powers; both need avenues to grow. Afghanistan would finally be able to access the Indian Ocean.
Don’t expect United States to sit and watch this alignment of India-Afghanistan-Iran to take shape. Already we hear of encroachment of Islamic State (IS) in Afghanistan. US could again find a reason to impose sanctions on Iran. India too remains handicapped by its financial and regulatory hurdles.
But such is the opportunity in front of India, Afghanistan and Iran that one expects Chabahar Port to be a reality soon enough. There sure would be hurdles and interventions, but the three must stand together for their own good.
The Indo-US agreement on sharing military logistics to counter China’s assertiveness in Indian Ocean could have wider ramifications. The two can use each other’s land, air and naval bases for supplies and repair. A piece on the essentials of this conflict:
India and China have been engaged in a Cold War since the beginning of 2015.
New Delhi feels a certain hegemony over Indian Ocean. China, which views it as vital to its survival as a trade route, won’t let it happen. The trade deficit between the two doesn’t help the cause. Both are wary of each other. It’s a real bad news for the future of BRICS and Shanghai Cooperation Organisation (SCO)—much to the delight of western powers.
India has made a few moves in recent past which shows its anxiety. Modi visited Seychelles, Mauritius and Sri Lanka in March last year but ignored China-friendly Maldives as an apparent snub. Also a conference of “Indian Ocean: Renewing the Maritime Trade and Civilisational Linkages” was held in Bhubaneswar. India wants its own Cotton Route to challenge China’s New Silk Road. The Grand Prize of East Africa doesn’t lessen their friction.
China has its own “String of Pearls” strategy. The Gwadar port in Pakistan; naval bases in Myanmar, intelligence facility in Bay of Bengal, a canal-in-construct across the Kra Isthmus in Thailand, a military tie-up with Cambodia and building military bases in the South China Sea. The “String of Pearls” is meant to secure the sea lanes from the Middle East to the South China Sea for its energy and security concerns.
With the Strait of Malacca enabling almost 80 percent of passage to China’s energy needs, it has looked to build its naval power at choke points along the sea routes from the Persian Gulf to the South China Sea.
A look at the two Asian powers’ position vis-à-vis critical nations/islands strewn across the Indian Ocean:
This Southeast Asian state was close to China for two decades. But in 2012, it began a “pro-democratization” process—most likely under US pressure—and is now seen close to India. The two together plan to extend Myanmar-Thailand Highway into a trilateral deal.
India’s “Cotton Road” strategy is meant to counter China’s One Belt, One Road (OBOR) plan. India wishes to integrate with its ASEAN counterparts and block china from dominating these states.
In a surprise result last year, the pro-China leadership in Sri Lanka, under Rajapksa was ousted and pro-India Sirisena came to power. The first thing Sirisena did was to suspend China’s $1.4 billion investment in port infrastructure.
With Sri Lanka back under India’s influence, for the moment, the link between Maldives and Myanmar for China has been “cut,” so to speak.
Pakistan has decisively moved into China’s arms and there’s no going back on it. The $46 billion Pakistan-China Economic Corridor is well and truly underway. From an Indian perspective, it’s a bad news.
In order to counter China-Pakistan alliance, Indian prime minister Narendra Modi went to Bangladesh and paved way for resolving the 40-year old border disagreement. It can also have a vital impact on India’s control of its northeast region. India can also now directly use Bangladesh’s ports, instead of relying on vulnerable Siliguri Corridor. Till Modi visited Bangladesh, the latter had been cuddling up to China.
Nepal has been a clear loss to India. New Delhi reacted badly to Nepal’s new federative constitution, as did the pro-India Madhesi ethnic group that occupies the Terai border. Subsequent riots and Indian trucks refusing to cross the border into Nepal worsened the situation. Kathmandu sees the hand of New Delhi in this unrest.
China moved in swiftly, providing 1.3 million litres of petrol and signing a deal to fill in Nepal’s demand in the face of India’s monopoly. In one swift action, Nepal has pivoted itself on China’s axis. China surely eyes the control of strategic Karnali and Koshi rivers that sustains 200 million Indians who live at the southern border.
The ouster of former head Nauseed and his Maldivian Democratic Party is a big blow to India’s plans for this little island nation. The current president Yameen is well-disposed towards China which gives it a proxy control on this island chain. There have been multiple attempts on Yameen’s life and India has found itself drawn into the scandal.
Does Europe have a future?
The very question signifies a collective entity and in that sense, the answer is an emphatic NO.
The presumption that it also includes Russia and its borderlands—strictly Ukraine, Belarus, Moldova, Georgia, Armenia, Azerbaijan—was already a NO before the question was asked.
Physically, Russia and its borderlands are part of Europe but never considered such by Western Europe or for that matter United States. The subservient mass media ensured it remained the “other” Europe.
Know your Europe, folks.
But this official Europe—defined as a unit by European Union (EU) and Euro—is finished. You could have a chance to offer a formal digital condolence in years to come though within your heart you know its dead.
This seed of destruction was sown in the hubris following the demise of Soviet Union in the 1990s. Both US and Europe wanted to run the world. Their democracy, institutions, trade rules, all stood vindicated. This model needed replicating. They thus sowed the wind and are now reaping the whirlwind.
This urge for prototypes led to the creation of European Union. Originally six countries had come together to produce and market steel and coal. But the Maastricht Treaty (1992) led to an overreach which now has 28 members in its fold. The creation of a single currency Euro followed before the 90s were out. The idea was to create a supranational entity with the vision of a political union somewhere in future.
This was the original mistake. European Union had been formed to ride over nationalism. But its new Eastern members had just been out of the Soviet Union umbrella. They wanted more of nationalism. Any decision could become victim of a single veto. Any progress was thus stalled from its very inception.
The EU bosses also hadn’t factored in the mood of citizens who could hold their governments in a bind. More than two-thirds of EU citizens were found by PEW Research Centre to distrust EU. Nearly 70 percent Europeans believed their voices didn’t count in EU.
Tigers and sheeps have an existential issue inside a wall. They never live in harmony, but for in Disney. Germany’s GDP is hundreds of times bigger than that of a Malta. Sweden and Latvia are no match. The hierarchy—and thus the distrust—became obvious. The notion of equality was shown the first door.
The creation of Euro was an original sin. It’s basis was the vision of a future political union–It wasn’t an economic decision by far. All the bosses wanted was a solid integration of history’s “bad boy” Germany into the fold. They also wanted to match dollar. But without political cohesion, it was a no-go from the start.
Ironically, the clever-by-half bosses felt a crisis could actually help forge the political union. They actually welcomed such a situation. Common banking and fiscal policies were thought to usher in a supra-central bank. They just believed a crisis would throw up a solution but had no idea what it could be.
Then came the 2008 financial meltdown. It’s been over seven years now. The deck is still on fire and attempt to douse it by papering over the Euro hasn’t worked. While they worked on saving the boat, a storm raged in not too far-away horizon of Middle East by way of wars and terrorism. Arab Springs, China, Russia, Syria all chipped away at the base. European capitals became unsafe, refugees came flooding in, paranoid and xenophobia bared its fangs.
The paralysis further eroded the confidence in Europe’s future. Germany first welcomed and then withdrew from the refugee problem. Hungary only wanted Christians. Fellow EU members (Croatia vs Hungary for instance) chirped away at each other.
This official Europe had further shot itself in foot on Ukraine. They offered moon to Ukraine but didn’t want to make allowance for Russia’s insecurity at its border. Ukraine almost has now turned into a failed state. As Henry Kissinger famously said: “both(East and West) want to make it an outpost for themselves—whereas it should’ve been a bridge”—or words similar to that effect.
Citizens again were in a disconnect on Ukraine. While Russia was drummed up as a threat, the polls showed that only 4 out of 10 Germans conformed to the viewpoint. And here’s the interesting bit: More than half in Germany, France and Italy believe NATO shouldn’t use weapons against Russia to defend other nations. As Stephen P Malt famously said: “It’s not a message you want to hear if you are an Estonian.”
Simply put, EU wants a European first and a French later. The public view is diametrically opposite. Schengen Visa, an admirable move, is in tatters. The demographic implosion is at hand. Europe’s population is declining at an alarming rate. So is the staggering 25 percent unemployment on average in Eastern and Southern Europe.
If another round of Greek crisis erupts in future—which it would given the austerity regime imposed on it—then all hell would break loose. If Greece quits, EU and Euro could unravel rather quickly. Europe, as it is, is rather uneasy at United States’ “Pivot to Asia.” Not to forget their preoccupation with Syria and Middle East. Their big daddy United State is unhappy on its own part given how eager France and Germany are to sell military hardware to Beijing. The track record of NATO—with its debris in Afghanistan, Iraq, Libya—hasn’t boosted the morale either.
The biggest challenge above all is Europeans’ complete distrust of their current rulers. There are no bright leaders like Europe had in Konrad Adenauer and Charles de Gaulle when Europe was trying to stand on its feet after World War II. The rise of far right parties like National Front of Marine le Pen in France could reach a critical mass.
Yes, Europe has an outstanding ability to reconstruct itself. But to do so, it self-destructs itself regularly.