It’s not just about oil – there’s a complex interconnection of geopolitics and geoeconomics between the two countries…
Pay very close attention to what India’s External Affairs Minister, Sushma Swaraj, said after meeting with Iranian Foreign Minister Mohammad Javad Zarif earlier this week in New Delhi:
“Our foreign policy is not made under pressure from other countries … We recognize UN sanctions and not country-specific sanctions. We didn’t follow US sanctions on previous occasions either.”
After fellow BRICS members China and Russia, India left no margin for doubt. And there’s more; India will continue to buy oil from Iran – its third top supplier – and is willing to pay in rupees via state bank UCO, which is not exposed to the US. India bought 114% more oil from Iran during the financial year up to March 2018 than in the previous term.
India-US trade amounts to $115 billion a year. In comparison, India-Iran trade is only $13 billion a year. India may grow an impressive 7% in 2018 and has reached a GDP of $2.6 trillion, according to the IMF, ahead of France, Italy, Brazil and Russia. To keep growing, India badly needs energy.
So for New Delhi, buying Iranian energy is a matter of national security. Couple it with the obsession in bypassing Pakistan, and it’s clear this is all about a complex interconnection of geopolitics and geoeconomics.
The comprehensive India and Iran partnership revolves around energy, trade and investment connectivity corridors, banking, insurance, shipping and – crucially – the imminent possibility of doing everything using the rupee and the rial, bypassing the US dollar.
India-Iran already trade in euros – so that is step one in bypassing the long arm of the US Department of the Treasury. Both nations are still using SWIFT. Assuming the EU does not give in to the unilateral US violation of the Iranian nuclear deal, known as the JCPOA, India’s oil imports won’t be sanctioned.
If that’s the case, step two will be turbo-charging the already booming trade in rupees and rials to the energy front – facilitated by the fact Tehran has invested in upgrading and perfecting insurance for its fleet of tankers.