The United States advised all nations to follow economic sanctions on Iran in reaction to Iran’s nuclear arms program. However, in early February 2012, India’s Prime Minister announced that India will double its oil trade with Iran within the next two months. The direct contradiction to the U.S.’s request could cause a rift in relationships between the world’s second largest country and the world’s economic leader.
Key trading partner
Indian Prime Minister Manmohan Singh claims that India’s reasons for ignoring the sanctions are largely economic. According to India, Iran is a key trading partner and Iran’s oil – which contributes to 12% of India’s imports – is “necessary for the energy security of the country.” Furthermore, India intends to expand exports to Iran to approximately $10 billion annually, citing Iran’s large and promising market. India’s Commerce and Industry Ministries are already planning visits to Iran to discuss trade negotiations.
A test of friendship
From the U.S.’s perspective, India seems to be placing its economic policy and trade ahead of a possible nuclear threat, as well its relationship with the U.S. Yet former Indian Ambassador Lalit Mansingh argues against this view. “This can’t be a test of our friendship,” he said, explaining that India is in a region in which Iran plays a central role. Therefore, India cannot immediately switch from one exporting country to another without suffering a huge loss in resources and disrupting the Indian economy. India also has to take into account many other factors, including the complicated political issues between South Asia and the Middle East.
Emerging from a shaky past
Though the United States and India have seemed to be on good terms for the past decade, the two countries have emerged only recently from a shaky past. After Indian independence in 1947, the U.S. and India were on good trade terms for two decades. Relations broke off after the Indo-Pakistani War of 1965 when India aligned with the Soviet Union. The relationship between U.S. and India was hence stale until 2004, when they decided to pursue a “strategic friendship.” America found India an ideal place for direct investment opportunities, while India was concerned with furthering economic growth. Today, India is the U.S.’s 12th largest trading partner, with trade between the two countries amounting to $48.8 billion in 2010.
Therefore, India cannot afford to jeopardize the relationship it has built with the U.S. Ignoring U.S.’s sanctions on Iranian oil trade could adversely affect U.S.-India ties. How India will choose to deal with this delicate situation remains to be seen.
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