Recent reports coming out of New Delhi indicate that India does not intend to comply with the unilateral economic sanctions imposed upon Iran by the United States and the European Union.  In fact, the opposite may be true.  India may attempt to take advantage of new opportunities in Iran created by the sanctions imposed on oil sales and financial transactions by Western powers.

The Indian Commerce Secretary announced a few days ago, “We will be mounting a mission to Iran at the end of the month to promote our own exports. A huge delegation will be going.” While acknowledging that India was honoring the four rounds of sanctions imposed upon Iran by the United Nations, the Indian official made clear that India was not willing to go along with the American-European sanctions. He asked rhetorically, “Tell me why I should follow suit? Why shouldn’t I take up that business opportunity?”

At the same time, the state-run Hindustan Petroleum Corporation signed a deal to import three million tons of crude oil in 2012-13 from Iran, almost half of which will be paid for in Indian rupees. And according to The Hindu newspaper, India and Iran are negotiating a barter deal to trade Iranian oil for Indian goods in order to get around U.S. sanctions on Iran’s Central Bank.

Converging economic interests

Iran is India’s second largest source of crude and provides about 12 percent of India’s oil imports. Last month, India surpassed China to become the largest importer of crude from Iran. India perceives Iran to be an important economic partner and one that is crucial for India to meet its growing energy needs.  India also sees Iran as a lucrative foreign market for its manufactured goods and services.

Additionally, with Iran’s proven natural gas reserves amounting to about 15 percent of the world’s total reserves, India is interested in developing relations with Tehran both to import explore Iranian natural gas. In January 2005, the Indian government signed a $40 billion dollar gas deal with Iran that would guarantee India 7.5 million tons of liquefied natural gas over a 25-year period as well as allow India to develop two Iranian oil fields and a gas field. So far, none of these plans have come to fruition.

However, in early February 2012, Iran gave India's Oil and Natural Gas Corporation a one-month deadline to sign the contract for the development of Iran's offshore Farzad-B gas field in the Persian Gulf. New Delhi had been dragging its feet on this issue because American sanctions on Iran have complicated attempts at economic cooperation. The latest Iranian ultimatum is likely to help speed up the process.

For close to a decade now, India has also been discussing the possible construction of a transnational gas pipeline from Iran’s South Pars field to India via Pakistan. Agreement on this pipeline has been held up partially due to high costs and partially because of India’s reluctance to become dependent upon archrival Pakistan’s goodwill for the assured supply of even a part of its energy needs. The deteriorating security situation in the Baluchistan province of Pakistan through which the pipeline has to pass has added to Indian concerns about the tripartite pipeline deal. Nonetheless, negotiations on the issue continue and may eventually lead to a positive outcome despite American pressure on New Delhi to renege on the proposed arrangement.

Converging nuclear interests

In addition to these economic interests driving Indian-Iranian relations, there is also a convergence of strategic interests between New Delhi and Tehran.  Some of these strategic interests bear on the nuclear issue; others deal with broader regional considerations.

Few countries know better than India the travails of trying to acquire nuclear capability in the face of opposition from the international nuclear establishment. India suffered from sanctions on dual-use technology - a catch-all term that could cover harmless items essential for power generation and for civilian use of nuclear technology - for decades because it refused to sign the Nuclear Non-Proliferation Treaty and give up its autonomy of decision making in the nuclear sphere.

It was in the context of these sanctions that the Indian strategic community invented the term “nuclear apartheid” to describe the attempt by the five permanent members of the Security Council to preserve their monopoly on nuclear weapons and shut others (with the exception, however clandestine, of Israel) out of the prestigious nuclear club.

India was too proud, too large, too self-sufficient in technological terms, and, above all, situated in what New Delhi perceived to be a threatening security environment to give up the quest for the nuclear bomb. It succeeded in making a de facto entry into the exclusive club following its nuclear tests of 1998. India did so despite the best efforts of the United States and China, in particular, both to prevent it from acquiring nuclear weapons capability and, after the 1998 tests, to bar it from becoming a legitimate member of the nuclear club.

New Delhi is highly skeptical of Western allegations that Tehran is close to acquiring weapons capability. In any case, India does not feel threatened by Iran’s acquisition of rudimentary nuclear weapons capability, which most Indian strategic analysts believe is for deterrent and defensive rather than offensive purposes.

Furthermore, India believes that given its past experience, it is in a better position than most countries to understand Iran’s current painful dilemma of choosing between security and economic growth. This explains the instinctive sympathy that India’s political and intellectual elites feel toward their Iranian counterparts now faced with much the same predicament that New Delhi countenanced for three decades from 1970 to 2000.

It is true that India voted against Iran in the International Atomic Energy Agency Governing Body meetings in September 2005 and February 2006. The latter vote was on the crucial resolution referring the matter of Iran’s nuclear program to the U.N. Security Council, thus opening the way for the imposition of sanctions on Tehran for not cooperating adequately with the international nuclear watchdog.

This vote temporarily chilled relations between India and Iran but both countries had the political wisdom soon to insulate the nuclear issue from other aspects of their bilateral relations. India also voted in November 2009 at the IAEA in favor of censuring Iran for not informing the IAEA in a timely manner about its Qom nuclear facility. This vote also did not seem to have major negative repercussions on Indian-Iranian relations.

However, these votes, especially the first two, came after intense agonizing within the Indian government. Diplomatic cables made available by Wikileaks make clear that American diplomats in New Delhi were highly uncertain in 2005-06 that India would go along with the Western powers in censuring Iran given the opposition to such a move both from within the government, including parts of the bureaucracy, and the strategic community outside the government.

Both votes were followed by strong criticism of the government in the Indian media by respected journalists and public figures. These prominent Indians claimed the government had sacrificed the future of Indo-Iranian relations at the altar of a civilian nuclear deal then under negotiation between India and the United States.

A civilian nuclear agreement was signed in October 2008 and subsequently cleared by the Nuclear Suppliers Group. The deal gives India access to dual-use technology in return for placing 14 of its 22 nuclear reactors under IAEA supervision and agreeing to separate its military and civilian reactors.  While periodic hiccups keep occurring in the process of implementing the so-called “123 agreement”, the major hurdle seems to be crossed from the Indian perspective, thus restoring some of the autonomy that India has always cherished in the sphere of international nuclear politics. India’s current policy toward Iran may be an early sign that it no longer needs to coordinate its policy on nuclear issues with the United States.

Converging geopolitical interests

India-Iran relations are, however, not solely a function either of economic compatibility or of nuclear politics or a combination of the two. They are also driven by a convergence of strategic interests in and around the region referred to as southwest Asia. This region includes Afghanistan, Pakistan and the Persian Gulf in addition to India and Iran.

Indian and Iranian interests converge in particular in Afghanistan. Tehran and New Delhi were the two principal supporters of the Northern Alliance when it was engaged in conflict with the Taliban regime in Afghanistan prior to the latter’s overthrow in 2001. Both looked upon the Taliban as anathema, seeing them as surrogates of Pakistan and creations of Pakistan’s military intelligence.

While India’s concern regarding the Taliban was primarily Pakistan-centered, Shia Iran’s animus toward them was ideological and sectarian as well. Moreover, Tehran saw the Taliban as an instrument of Saudi Arabia’s anti-Iranian strategy in the region even if Pakistan was used as the conduit by the Saudis to prop up the viscerally anti-Shia regime in Kabul.

Both India and Iran extended aid and succor to the Northern Alliance and were relieved when the American-led invasion, which used the Northern Alliance as its spearhead, toppled the Taliban regime and expelled al Qaeda from Afghanistan.

The current state of uncertainty in Afghanistan with the impending withdrawal of NATO forces from that country and the simultaneous rise once again of the Taliban supported by elements within the Pakistani military highlights for both capitals the importance of Indian-Iranian strategic cooperation in Afghanistan.

Although Iran-Pakistan relations appear smooth superficially, Tehran harbors deep distrust of Islamabad because it perceives the latter to be a surrogate both for Saudi Arabia and for the United States - Iran’s two chief antagonists in the region and beyond.

India, on the other hand, is seen by Tehran as a benign power with ambitions that do not collide with those of Iran. In fact, it is seen as a potential partner for the construction of a durable security structure in southwest Asia that would exclude foreign powers, especially the United States, as well as keep Saudi and Pakistani “mischief making” capabilities in check. This seems to be the principal reason why Iran has turned a blind eye toward New Delhi’s growing defense relations with Israel. Similar considerations have led Tehran to insulate Indian-Iranian relations from India’s burgeoning economic relations with the Gulf Cooperation Council countries, particularly Saudi Arabia, which is the largest supplier of crude to India.

In short, India-Iran relations are multi-dimensional and of considerable strategic and economic value to both countries. New Delhi and Tehran also have similar ambitions to be recognized as pre-eminent, if not predominant, powers in their respective regions – South Asia in the case of India and the Persian Gulf in the case of Iran.

Furthermore, they are cognizant of the fact that while occasional differences and even conflicts of interest may arise in their future relations, there are no major clashes of interests visible on the horizon. In contrast, there are enough common interests, both economic and strategic, that are likely to bind the two countries together and help them reach their shared goal of regional pre-eminence in the two contiguous but clearly demarcated regions of South Asia and the Persian Gulf. India’s refusal to go along with sanctions imposed on Iran by the United States and Europe highlights New Delhi’s recognition of Iran’s importance to India over the long term.

Mohammed Ayoob is University Distinguished Professor of International Relations at Michigan State University and Adjunct Scholar at the Institute for Social Policy and Understanding.

This article was published by CNN on February 21, 2012. Read it here.