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India’s Iran Policy Dilemma: Nuclear Fuel Or Crude Oil? – Analysis


By J Jeganaathan

In a move to enervate Iran the US has recently imposed fresh economic sanctions that would stifle Iran’s financial institutions. Unlike in the past the US seems to be keen on persuading key oil importers such as India, China and Japan to implement sanctions against Iran. The proposed sanctions will severely hamper Iran’s oil revenues. While Japan has already decided to reduce its oil dependency on Iran, China has expressed anguish about US’ decision. The Indian position, however, remains unclear. India confronts a policy dilemma in choosing whether to bandwagon with the West or to befriend Iran. India wants to strengthen the strategic partnership with the US and at the same time wishes to maintain good relations with Iran. As a corollary, the inadvertent dilemma now is whether to choose nuclear fuel and loose crude oil or vice-versa. This article argues that the energy question is fueling India’s Iran policy dilemma and explores options for India to overcome it.

Iran - India Relations
Iran - India Relations

In general, economic sanctions are considered to be an element of coercive diplomacy in international politics. However, in Iran’s case it has proved to be a sign of timid diplomacy. The so-called western approach of ‘carrots and sticks’ has failed to persuade Iran to forgo its nuclear weapon programme. Moreover, neither the E3/EU nuclear diplomacy nor the IAEA negotiations could prevent Iran from pursuing the uranium enrichment programme. Despite the US’ campaign of international isolation and Israel’s sabre-rattling, Iran is brazenly furthering its uranium enrichment programme. Technically, Iran’s enrichment capability illustrates that nuclear weapon is within Iran’s reach. Whether the proposed economic sanction will bite Iran or boost the regime’s conviction is a moot question but the perplexing question is how it impacts India – a traditional friend which turned out to be a situational foe.

The India-Iran-US triangular relationship emerged as an inevitable phenomenon after the Indo-US nuclear deal steering the security dynamics of the region. India’s interest in this complicated trio seems to be driven largely by its energy security interests than other factors. As a third largest importer of crude oil from Iran amounting to 12 per cent of its overall import India will face a tough time ahead if the economic sanctions against Iran are implemented as well if Iran blocks the Strait of Homruz. Therefore, there is no doubt that it will severely upset India’s energy security which is sine quo non for its already sluggish economic growth.

India needs crude oil as well nuclear fuel for its fast growing economy. The former is supplied by Iran and the latter is ensured by the US under the Indo-US nuclear agreement. Thus India is situated in a very awkward position when it is asked to support oil sanctions on Iran. The economic sanctions will jeopardize India’s oil import from Iran. With the raising global oil price, booming inflation and increasing domestic energy consumption India cannot afford to lose oil supply from Iran. At the same time, India cannot stop the US or the west from exercising military option against Iran. India should, in the meanwhile, avoid any symbolic hostility and protect its energy security interests in this unending nuclear impasse.

India’s vote against Iran at the IAEA in 2005 was a symbolic gesture to show to the world that it is a responsible nuclear power and also to secure US help to ensure nuclear fuel supply from Nuclear Supplier Group (NSG). Nuclear energy contributes to 3 per cent of its electricity generation. However, crude oil and natural gas have become essential commodities without which the country’s economic engine will cease to function. Securing the supply and production of these energy sources have become top priority for the government in India.

Three plausible scenarios are likely to emerge in the future: Iran will be air-raided, Iran will test a nuclear bomb and the current nuclear stalemate will continue. None of these scenarios will be favourable to India and rather would endanger India’s energy security. To avoid a stalemate the following can be considered:

First, India needs to de-hyphenate its relationship with the US on Iran by articulating its energy security interests. This requires a ‘deft diplomacy’ from the Indian side and the present international security environment stormed by global economic crisis favours implementation of this option. This would help India to overcome a catch-22 situation vis-à-vis oil imports from Iran.

Second, India can stage-manage the present nuclear stalemate between Iran and the west by suggesting an alternative non-western approach similar to that of Brazil-Turkey initiative to strike a consensual deal with Iran. This would at least prolong the Iranian plan to test a bomb, thus avoid any nuclear domino effect in the region.

Third, India should prepare for a nuclear weapons-armed Iran. So far, there is no official statement from India stating nuclear-armed Iran is a threat to its national security. When India could live with the nuclear-armed Pakistan, it can simply do the same with Iran. But, securing India’s interests, in case if Iran is attacked is going to be a big challenge for India.

The possibility of war on Iran or Iran testing a nuclear weapon is minimal at least in the short-term due to global economic crisis and the forthcoming national elections in the US and Iran. This provides ample space for India to manoeuvre and exercise diplomatic skills to protect its vital energy security interests in the region.

J Jeganaathan
Research Officer, IPCS
email: [email protected]

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IPCS (Institute for Peace and Conflict Studies) conducts independent research on conventional and non-conventional security issues in the region and shares its findings with policy makers and the public. It provides a forum for discussion with the strategic community on strategic issues and strives to explore alternatives. Moreover, it works towards building capacity among young scholars for greater refinement of their analyses of South Asian security.

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