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US-Iran conflict and its challenges for India


US- Iran rising hostilities

Introduction

US withdrawal from the Joint Comprehensive Plan of Action (JCPOA), its unilateral sanctions on Iran and the retaliation through dialogue between the countries have led to a heightened sense of conflict in the Persian Gulf. The Iran nuclear agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA), is a landmark agreement between Iran and five permanent members of the UN Security Council (China, France, Russia, the UK, and the United States) and Germany—collectively known as the P5+1, in July 2015. According to terms set by the agreement, Iran agreed to stop its nuclear program and open its facilities to considerable international inspections in exchange for a billion dollar’s worth of sanctions relief. After retreating from the brink of war, the administration in the United States and Iran may well be assessing what they have gained and lost in a conflict that has been waged almost since the CIA overthrew the Mohammed Mossadeq democracy in Iran.


Ever since the Donald Trump administration withdrew from the Iran nuclear treaty and imposed crushing economic sanctions on Iran’s economy in May 2018, kicking off a cycle of increasing retaliation, both countries have suffered significant losses with respect to major issues at stake in their rivalry.

While both of the countries have made gains, they have been modest in comparison, claimed victories have often had the effect of harming a country without bringing ostensible and concrete gains. The result has been “lose-lose,” revealed by Dalia Dassa Kaye, who directs a Middle East policy centre at RAND Corporation, a non-partisan research group. The US has seen more misfortune than developments in its intentions to increase limits on Iran’s nuclear prowess, end Iran’s employment of armed proxies, and greatest of all, alter the Middle Eastern power balance to Iran’s disadvantage.

Iran prospered relatively better with its ambition of securing influence in the region, as well as saving itself from the international diplomatic opening and the consolation from economic sanctions that the nuclear deal had granted it until Trump withdrew.

The nature of sanctions implemented by the US is a two-pronged approach strategy, i.e. Primary and Secondary. Primary sanctions include factors such as the nature of asset freezing, imposing trade embargos, and a restriction on US citizens and companies from engaging with Iran. The secondary sanctions objective is to place an embargo on third-party countries, their citizens and companies, for engaging with sanctioned countries. These sanctions are extra-territorial in nature and question legitimacy, international law principles, and the concept of sovereignty. Unilateral and Secondary pressing measures often refer to economic measures taken by one State to drive a change in policy of another State.

The most widely used forms of economic pressure are trade sanctions in the form of embargoes sometimes, even boycotts, and the interruption of financial and investment flows between countries. While embargoes are often observed as trade sanctions aimed at preventing exports to a target country, boycotts are measures seeking to refuse imports from a target country.

The imposition of sanctions led eight countries including India, China, Japan and South Korea requesting the US to grant a waiver to continue buying oil from Iran in November 2018. The US complied and granted waivers for a six month period, which expired in early May 2019. Post the expiration of the waiver period, a country or company importing crude oil from Iran would acquire penalties from the US.


The backdrop of US- Iran tension


U.S.-Iran relations have been mostly strained, dating back to the 1979 Islamic Revolution in Iran, the U.S. official reports have repeatedly identified Iran’s interest in aiding militant armed contingents in the Middle East region and it posed a prominent threat to U.S. interests and allies. Striving to coerce Iran’s nuclear program took supersede in U.S. policy after 2002 as that program developed. The US also has sought to foil Iran’s purchase of new conventional ammunition and advancement of ballistic missiles.


In May 2018, the Trump administration withdrew the United States from the 2015 nuclear agreement for containing the Uranium usage (Joint Comprehensive Plan of Action, AKA- JCPOA), claiming that the entente did not address the wide range of U.S. scrutiny about Iran’s behaviour and would not permanently prohibit Iran from developing a nuclear weapon. Senior officials explain administration policy as the implementation of ‘maximum pressure’ on Iran’s economy to primarily pressure it to rethink the JCPOA to address the extensive range of U.S. concerns on issues and secondly, refuse Iran the revenue to continue to advance their strategic capabilities. Administrative officials deny that the policy is intended to stoke economic unrest in Iran. Since the Administration has pursued the policy of ‘maximum pressure’, bilateral relations have gotten tense and escalated significantly. The key events that lead to such a heightened conflict are:


On April 8, 2019, the Trump administration declared that the US would officially designate the Iran Revolutionary Guard Corps (IRGC), i.e Tehran’s most powerful military establishment, as a foreign terrorist organization (FTO). The move is unusual, marking the first time that the US designated a part of another government as a terror group. Iran responds by declaring the US a “state sponsor of terrorism.”


Since May 2, 2019, the Administration put an end to a U.S. economic sanctions exception for any country to purchase Iranian oil and put an embargo on any kind of dealings, aiming to drive Iran’s oil exports to zero.


As of May 2019, the Administration has terminated five out of the seven waivers under the Iran Freedom and Counter-Proliferation Act (IFCA), waivers which permit the countries to help Iran, provided that it is within the limits set by the JCPOA.


On May 24, 2019, The Administration informed Congress of direct foreign military sales and export licenses for immediate commercial sales of defence articles, such as training, equipment, and ammunition with a market value of more than $8 billion.


US-Iran heightened conflict, navigating the trajectory of events


1979-1981- Iran Hostage crisis

Iranian students attack the US embassy based in Tehran and take dozens of Americans and make it a hostage situation. They demand the Shah, who had been admitted into the US for cancer treatment, be deported to Iran to stand trial for alleged crimes against the Iranian people. After 444 days, Iran releases the Americans in exchange for state assets being unfrozen minutes after President Ronald Reagan is sworn into office. During the crisis, the US cut its bilateral relations with Iran.


1980- Iran- Iraq war

The acrimony between the two countries is only heightened when the US backs Iraq in its conquest of neighbouring Iran, prodding an eight-year regional war. Qasem Soleimani, who has joined the Iran Revolutionary Guard Corps by this time, fights in the war.


1984- The US proclaim Iran a sponsor of terrorism

Under Ronald Reagan’s administration, the US declares the Islamic Republic a “state sponsor of terrorism.” Decades later, this designation by the US remains unchanged.


1988- The US shoots down an Iranian plane

While American and Iranian ships are exchanging fire in the Persian Gulf, the US mistakes a civilian airliner for a fighter jet and shoots down flight 655. Though the US says the attack is an accident and “by mistake”, Iranians see it as intentional.


2002- George Bush announced Iran part of an ‘Axis of Evil’

After the 9/11 attacks, Iran covertly helps the US in its war against the Taliban, a mutual enemy. But in a State of the Union address, President George Bush declares Iran as part of an “Axis of Evil”. The speech induces anger in Iran, thus heightening conflict


2003- Iran nuclear threat

As the US voices concerns that Iran is attempting to develop and store nuclear weapons, Scrutiny from the International Atomic Energy Agency finds traces of highly-enriched uranium at a nuclear plant in Iran. Tehran agrees to cease production of enriched uranium and allow stricter inspections on-premises, but this is short-lived. President Mahmoud Ahmadinejad would come to the office a few years later and restart Iran’s production of enriched uranium, leading to years of international sanctions against the country.


2010- Stuxnet Worm attack on Iran Nuclear Facilities

The Stuxnet Worm first emerged in 2010. Stuxnet was a 500-kilobyte computer worm that permeated through numerous computer systems. Fifteen Iranian facilities were attacked and infiltrated by the Stuxnet worm. It is believed that this attack started by a worker's USB drive. Scrutineers from the International Atomic Energy Agency visited the Natanz facility and noted that a strange number of uranium enrichment centrifuges were breaking. Several experts indicate that the Stuxnet worm attack on the Iranian facilities was a joint operation between the US and Israel. Edward Snowden, an NSA whistleblower, said that so was the case in 2013.

2013- Iran nuclear deal is signed

After years of dialogue and negotiations with Obama’s administration, six nations and Tehran enter into a landmark agreement which is a turning point that slows Iran’s nuclear development program in exchange for eliminating some sanctions that caused the country’s economy to slow down. It’s a huge breakthrough for the US and Iran, which have long been clashing.


2017- Trump sworn into office

A week after swearing in, President Donald Trump signs an executive order banning immigrants and nationals from seven Muslim-majority nations, including Iran, from entering the US for 90 days. Iran responds to the ban by calling it “an obvious insult to the Islamic world” and retaliates by carrying out a ballistic missile test. These raise concerns about the future of the Iran nuclear deal.


2018- Trump withdraws from the Iran deal

Trump fulfilled his campaign objective and announced he is withdrawing the US from the Iran nuclear deal, which he viewed as “one-sided” and that Iran was using the money to develop their nuclear weapons. Critics warned the move could lead Iran to restart its atomic program and start more conflict in the Middle East

2019- April: US designates IRGC a terrorist organization

Trump announces that the US will formally designate the Iran Revolutionary Guard Corps, Tehran’s most powerful military institution, as an official terrorist organization headed by Hossein Salami. The move was unprecedented, marking the first time that the US had designated a part of another government as a terror group. Iran responds by designating the US a “state sponsor of terrorism.”

2019- June: Trump blames Iran for attacks in the Gulf

Conflicts further heighten after attacks on oil tankers in the Persian Gulf and oil facilities in Saudi Arabia, as well as the downing of a US drone, which Washington and its allies blame on Iran.


2019- December: the US strikes facilities in Iraq and Syria

US forces initiate airstrikes on facilities in Iraq and Syria, which the Pentagon asserts are linked to pro-Iranian commandos responsible for attacking US personnel in Iraq.


2020- January: The US kills Soleimani, and Iran responds

Trump issued an order to commit an airstrike in Iraq to kill Iran’s top general, Qasem Soleimani, a move far too provocative. Citizens of Iran flood the streets to mourn him. Iran is furious which ultimately led to firing missiles at Iraqi bases that house American troops. To this, Trump responds by inflicting more sanctions on the country.



India-Iran bilateral relations


India and Iran have had strong bilateral relations owing to their cultural and historical links. During his visit to Iran in May 2016, Prime Minister Narendra Modi and President Rouhani had agreed to strengthen the relationship tracing back to archival links and geographical proximity. India- Iran relations are of importance for India strategically due to Iran's Chabahar port, which plays an integral role in India's trade connectivity with Afghanistan, Central Asia, and Europe. India is the second-largest importer of crude oil from Iran and its needs to strategically effectuate a plan to ensure that there is no shortage in supply. While this may seem like an adequate response, such a quick-fix solution may not be economical since the prices will inevitably increase due to a lack of supply from Iran. The immediate repercussion of the sanctions on India is that it can no longer use US dollars for transaction purposes with Iran.


In December 2018, India and Iran agreed to resuscitate its 2012 Rupee-Rial payment mechanism which receives payments in Indian rupee, and half of the payments would be used to import goods from India. The transaction was supervised by the UCO Bank. The National Iran Company has been spared from "withholding tax", which is made on the profit of a foreign company in India.


The same sentiments were reflected when President Rouhani visited New Delhi in February 2018. The core of the relationship lies in bilateral trade, crude oil imports from Iran and cooperation in the development and operations of the Chabahar Port. As shown in the table given below, Iran is one of India’s major trading partners and accounts for nearly two per cent of its foreign trade.

Source- Directorate General of Foreign Trade, Ministry of Commerce and Industry, GOI


Energy is the integral constituent of bilateral trade and Iran plays a crucial role in India’s energy security. Iran has been one of the top suppliers of crude oil to India for decades, except during the international sanctions period from 2011-15. BP Statistical Review of World Energy 2018, revealed that India’s dependence on crude oil imports to meet its domestic consumption is at an extremely high of 95 per cent. Furthermore, India also acquires natural gas from Iran, hence India relies on energy imports from Iran which account for 80-85 per cent of its overall imports from Iran.


The third important factor in bilateral relations is India’s role in the development and operationalisation of the Chabahar Port, which is of great strategic importance. India considers the port as connectivity for its trade with Afghanistan and Central Asia and Central Europe and Eurasia. India, Iran and Afghanistan are the signatory countries in the trilateral agreement during the visit of Prime Minister Narendra Modi to Tehran in 2016 to develop the port as a vital transit and transport corridor. India also entered into an agreement with Iran for committing investments worth US$ 85 million for the development of the port.


Impact of Sanctions on India and trade imports

The US has refused to renew the Significant Reductions Exceptions (SREs) issued for eight countries including India. For India, it will either have to stop importing oil from Iran or revive the rupee payment mechanism as was done in the past.


However, during the pre-JCPOA sanctions period, the Obama administration had given waivers to India on oil imports from Iran. Whereas under the Trump administration, the likelihood for such a waiver is bleak to allow the continued import of Iranian oil. Iranian Foreign Minister, Javad Zarif, visited New Delhi on May 14, 2019, and discussed various bilateral and regional issues with the External Affairs Minister. The visit is significant in the backdrop of Iran’s diplomatic push to maintain and convince its important commercial partners to continue doing trading with Iran. Iran also decided to suspend some of its projects and trades under the JCPOA and the 60-day timeline given to Germany, France, Britain, Russia and China for “restoring oil”.


Besides crude oil imports, India is not directly affected by US sanctions on Iran through Indian companies involved in the Iranian iron & steel and mining sectors will be affected due to US economic sanctions on these sectors. The Chabahar Port also does not come under US sanctions and hence Indian investments and involvement will continue to develop the project. Nonetheless, due to sanctions on the iron & steel sector and individuals and companies associated with Islamic Revolutionary Guard Corps (IRGC), projects related to infrastructure development such as the Chabahar-Zahedan railway and gas pipeline, could be affected.


Conclusion


“Those that fail to learn from history are doomed to repeat it.”. While perhaps an overused phrase, (Winston Churchill) is an essential lesson in diplomacy. The United States government must remember not only recent events, like the failure of the Grand Bargain but ancient history, like the vast Persian Empire. Iran has a long, respected history, creating a solid collective identity and culture. The nineteenth and twentieth centuries bound a profound anti-imperialist sentiment into the Iranian identity, and the United States cannot forget the actions it has taken to disrespect the values of a sovereign nation. The primary reason for the success of the negotiation, despite the lack of trust between both countries, primarily due to the efforts of the Obama administration in making reforms to the passive aggressiveness of previous presidents. The JCPOA is not destined for success despite negotiations, to say the least.


As for India, finding an alternative supplier at competitive terms quickly for India will be highly challenging. The Organization of the Petroleum Exporting Countries (OPEC), which accounts for about 40% of global production, is facing supply cuts and the US administration has also imposed sanctions on Venezuela’s state-owned oil firm ‘Petrуleos de Venezuela’. High oil prices would heavily increase, indicating India would have to spend much more on oil, which would lessen the concentration on integral areas such as affordable housing, healthcare and infrastructure and development. Such an increasing rise in crude oil will also undesirably affect India’s energy supply, resulting in an increase in India’s exports and lower foreign exchange reserves.


Simultaneously, however, India relies heavily on Iran for energy security. If the USA and Iran cannot lessen the magnitude of the conflict and war becomes a stark reality, India will face severe disadvantages to growth, progress and relations.


The Abraham Accords have also shown a significant contribution, as Israel has played a key role in convincing the international community that Iran's nuclear program is not an innocent civilian project but has military intentions. When it released Iran's nuclear archive in 2018, Israel proved to the world that Iran had an elaborate plan at least in the past to obtain a nuclear bomb, based on a directive issued by the highest echelons of the Iranian regime.


Over the years, Israel has shared its intelligence and assessments on Iran's clandestine actions with the world. It has played a key role in exposing prohibited facilities, such as the underground Fordo enrichment plant in 2009, and the evidence has led the International Atomic Energy Agency to demand explanations from Iran about past suspicious activities in possible military dimensions in undeclared nuclear facilities.


Israel has had a huge impact and role to play in the international sanctions and pressure system posed against the Iranian regime. For instance, it was due to Israeli prompting that the U.S. administration first imposed secondary sanctions on Iran back in the mid-1990s (under the Iran Libya Sanction Act). In the early 2010s, by indicating to take military action against Iran's nuclear infrastructure, Israel pushed the United States to present a credible military threat to Tehran and to clearly undertake to prevent its nuclearization and to impose stricter sanctions against it




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