Iran is India’s biggest diplomatic challenge today. The Chabahar Port of Balochistan in Iran along with a very strategic railway link offers India direct access to Afghanistan and the energy-rich Central Asia. But the allegations made by Israel that a recent bomb attack on one of its diplomats in Delhi was perpetrated by Iran sympathizers, adds to the problems in a already- complicated relationship. As a responsible Indian Ocean power, India must help resolve an international crisis, particularly in the Middle East where it has heavily invested, especially in human capital. Six million Indians living in the region send home more than $40 billion annually.
That said, India and Israel too have growing relations in several fields crucial for economic development, including defence technology, agriculture, R&D and tourism. India must be a safe place for Israelis to visit and do business.
Trade, investment, and diplomatic influence are highly correlated, and India needs to be innovative and aggressive. Finance minister Pranab Mukherjee’s visit to Chicago late January, quickly followed by foreign secretary Ranjan Mathai’s Washington trip, the India-European Union summit in Delhi to expedite broad-based trade and investment, and ongoing negotiations with Saudi Arabia and Iran on energy issues highlight the urgency of economic diplomacy to serve India’s long-term national interests.
Addressing the Chicago Council on Global Affairs, Mukherjee urged his audience of some top business leaders to “contribute to our collective prosperity,” especially when India has embarked on colossal infrastructure building projects that will require one trillion dollar investment during the next five years.
Mukherjee touted India’s “calibrated approach” to capital account convertibility; the success of external commercial borrowings policy in maintaining external debt at sustainable levels; the robustness of India’s banking sector; diversified export markets; and the robustness of the financial sector due to optimal regulatory mechanism. Financially, India stands like a rock.
With the Delhi-Mumbai Industrial Corridor and other similar projects in mind, Mukherjee explained the government’s manufacturing policy to create 100 million jobs in the next decade by establishing special zones with world-class urban centres, to make Indian industry globally competitive. This will be done by instituting a supportive framework to facilitate business, including availability of skills, technology, finance, and “compliance based on self-regulation,” with minimal government intervention. Mukherjee came as close as he could to promise that India will be as business-friendly as China.
While courting American investors, Mukherjee did not hesitate to assert India’s position on two vital issues – Obama’s outsourcing policy and Iran sanctions. Obama’s plan to limit outsourcing through tax incentives is counterproductive and will hurt both India and America. Of course, the best way for Indian IT industry to combat the looming outsourcing “protectionism” threat is to offer products and services so compelling that corporate America cannot refuse.
On India-Iran trade relations, Mukherjee was unequivocally frank: “It is not possible for India to take any decision to reduce the imports from Iran drastically, because among the countries which can provide the requirement of the emerging economies, Iran is an important country.” Buying Iran oil does not mean that India condones Iran’s nuclear ambitions other than for peaceful purposes. Maintaining stability in the Middle East to enable an uninterrupted flow of energy is a global challenge.
Later, on his visit to Washington DC, foreign secretary Ranjan Mathai told his audience at the Center for Strategic and International Studies, that, “while Iran has rights to peaceful uses of nuclear energy, it must also fulfill its international obligations as a non-nuclear weapon state under the NPT.” India’s voting record on Iran in IAEA is unambiguous.
But Mathai also focused on Iran’s geopolitical importance to India. Iran, apart from providing India with 12 % of its oil needs, worth $11 billion annually, also enables access to Central Asia including Afghanistan whose long-term stability and prosperity is vital to India; as it is to the US especially when it plans to withdraw its combat forces in 2014.
India’s forthcoming trade negotiations with Iran should have twofold aims – first, to negotiate the oil deal at best prices entirely in rupee terms. Rupee oil trade agreement will boost Indian exports to Iran. Besides, it will open up opportunities for other countries to do trade in rupee, further stimulating Indian exports. Although Indian economy is based on domestic consumption, international trade generates tremendous diplomatic leverage and influence – see what China is doing with its massive trade surplus and foreign currency reserves.
Second, India should use the opportunity to persuade Iran to resume negotiations regarding its nuclear programme since it claims its programme to be peaceful. In fact, during the recently concluded India-EU free trade talks, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso pressed India to use its leverage with Iran to return to the negotiating table.
India needs to make a large and meaningful diplomatic gesture for international cooperation without compromising its economic interests.
The writer is professor of communications and diplomacy at Norwich University, UK