Trump’s sanctions on Iran may be a boon for Afghanistan’s transit trade through Pakistan, now and in the future. While most experts agree that India’s investment in Iran’s Chabahar port does not in any way compete with or threaten China’s investment in Gwadar, it does provide Afghanistan with a transit route alternative to Pakistan.
Restrictions on Indian exports to Afghanistan through Wagah border has long been a thorn on India’s and Afghanistan’s side. Investment in Chabahar enables India to bypass Pakistan to export to Afghanistan and other Central Asian countries.
On another front, it is in US’s interests that India develops Chabahar so that US can stop relying on Pakistan as a route to supply to its troops. While on one hand US has told India and other countries to cut oil imports from Iran down to zero by November or face sanctions, on the other it has also given India the go ahead to continue with its Chabahar investments.
Iran, in retaliation, has informed India that it will lose “special privileges” if it sources oil from other countries. Iran offers economic sweeteners on freight and insurance as well 60 days of credit for purchases, double the amount of time given to Indian importers by other producers. India is among Iran’s top markets for oil and has managed to continue to use a pseudo-barter system to buy from Iran while sanctions were in place in the past.
India’s current account will also be taking a hit as it will have to forgo the combination of barter and Indian Rupees that it had set up as a system to pay for Iranian oil and revert to dollar-denominated imports. Iran was India’s third largest supplier of oil in 2017, exporting nearly 20 million tons annually.
Furthermore, India is facing discontent internally as oil prices rise. One of the promises made by Modi during election time was to lower oil prices to INR 40 whereas global movements have pushed it up to INR 80. Blocking of Iranian oil is likely to further push up domestic prices.
While the US game of isolating Pakistan globally played out, India and Iran grew closer resulting in strained ties between the two neighbours (read “Pak-Iran ties: mired in polities”, published on March 15, 2018). The impact of US sanctions on Iran is now adversely affecting relations between India and Iran for which investments in Chabahar port are paying the price. Repeated delays on the Indian side have Iran turning to China for further investment. From being a golden opportunity, the Chabahar port is edging towards being a strategic defeat for India.
While Pakistan is sitting on the sidelines, it is an indirect beneficiary as its status as the main route to Afghanistan for its imports as well as for supplies to US troops remains intact. And though the oil situation in India is none of Pakistan’s concerns, watching India pay the price of being US’s ally while Pakistan is in the doghouse, is not too hard to watch.
Comments
Comments are closed for this article.