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India-Iran Need To Fend Off USA

| 4/19/2012 9:00 PM Thursday


The US has been pressurising global economies to impose economic sanctions against Iran to counter its nuclear ambitions.Vivan Sharan offers insights into why it is necessary for countries like India and China to not succumb to US pressures on Iran.

The recently-concluded BRICS Leaders Summit at Delhi yielded comprehensive and progressive outcomes on a number of important issues. Besides being able to achieve consensus on significantly deepening the intra-BRICS cooperation agenda with emphasis on market based integration, it was for the first time that the BRICS leaders were also able to coherently express views on sensitive foreign policy issues, including on the Arab-Israeli conflict, the Syrian imbroglio and the contentious Iranian nuclear programme.

Through a declaration, the BRICS members have recognised Iran’s right to “peaceful uses on nuclear energy consistent with its international obligations”. The declaration has also unambiguously stated that the BRICS members do not support “plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism”. Thus, the BRICS position on Iran’s sovereign rights and the respect of international law is an unequivocal rejection of interventionist policies outside of the UN framework. It is interesting to briefly examine India’s motivations for adopting such a firm policy stance, given its simultaneous proximity to powers such as the US and the EU.

For decades, Iran has faced multiple sanction regimes for allegedly sponsoring terrorism and developing a nuclear programme with the intent to make nuclear weapons. The US has led such efforts, following a fairly predictable model of incrementally imposing unilateral sanctions each time Iran’s governance apparatus has been less than deft in handling its foreign policy priorities and messaging. This default model of response has been used by the US administration since the Islamic Revolution, which led to the overthrowing of the Shah of Iran, a close ally of the West.

Sanctions have been used by the US to achieve highly ambitious foreign policy goals, which history proves, are hard to achieve without simultaneously establishing economic and political synergies (South Korea) or the blatant use of force (Iraq). Repeatedly, studies have shown that sanction regimes cannot work in isolation of comprehensive strategies for engagement. Yet, there has been little or no will to explore alternatives and with the Jewish lobby at Capitol Hill, the policy hostility towards Iran will be hard to reverse.

The problem with imposing sanctions on a country which has the world’s third largest proven reserves of oil and the second largest conventional natural gas reserves is that the implications are felt globally. An important characteristic of the global oil market is that it is an integrated market. The price of oil is highly correlated throughout the world due to market arbitrage. This means that plurilateral initiatives by the US or the EU to curb Iran’s economic viability by imposing barriers on the free flow of trade and finance are, in effect, paid for by all net consumers of oil, including developing countries such as India.

Iran’s production capacity has also been more or less stagnant for many years at around four million barrels per day. The sanctions have prevented Iran from accessing technology to upgrade its oil infrastructure and increase the supply, which would theoretically ease the oil prices. This is a perverse and fundamentally flawed dynamic. Why should the developing world pay for the foreign policy interventions of the West? Why should India, a country with over 800 million poor and stark levels of energy poverty, subsidise American and European foreign policy and in turn, face insurmountable fiscal deficits year after year?

 

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