India, Praising U.S. Ties, Defends Buying Iran's Oil

February 11, 2012

India, Praising U.S. Ties, Defends Buying Iran's Oil

By JIM YARDLEY
<http://topics.nytimes.com/top/reference/timestopics/people/y/jim_yardley/in
dex.html?inline=nyt-per>

http://www.nytimes.com/2012/02/12/world/asia/india-trumpets-ties-with-us-ami
d-iran-oil-deal.html?google_editors_picks=true

NEW DELHI - Ranjan Mathai, the Indian foreign secretary, made the rounds in
Washington last week, describing India
<http://topics.nytimes.com/top/news/international/countriesandterritories/in
dia/index.html?inline=nyt-geo> 's relationship with the United States as one
of growing comfort, depth and candor, if not perfect harmony. On that last
point he could have been talking about the recent frictions between the two
countries over Iran
<http://topics.nytimes.com/top/news/international/countriesandterritories/ir
an/index.html?inline=nyt-geo> .

India's determination to continue buying Iranian oil, despite sanctions and
growing political pressure from the United States and Europe, has frustrated
officials in Washington at a time when the forward momentum in the United
States-India relationship has slowed, with differences over issues including
civil nuclear cooperation, trade protectionism
<http://topics.nytimes.com/top/reference/timestopics/subjects/p/protectionis
m_trade/index.html?inline=nyt-classifier> and military sales.

The situation was exacerbated last week by news reports that India had
become Iran's top oil customer, while an Indian official announced plans
<http://www.nytimes.com/2012/02/10/world/middleeast/india-sees-economic-oppo
rtunities-in-iran.html> to send a trade delegation to Tehran. In New Delhi,
diplomats and analysts say India's purchasing of Iranian oil is a matter of
economic necessity, given its dependence on imported oil. Some say the
purchases also represent diplomatic hedging in a region bracing for the
withdrawal of American troops from Afghanistan by 2014, or possibly sooner.

Indeed, many Indian officials, even those supportive of a stronger
partnership with the United States, caution against turning issues like Iran
into diplomatic litmus tests, considering the complexities of a neighborhood
in which India represents a bulwark of stability, democracy and economic
opportunity compared with Pakistan, Afghanistan and other countries.

"This can't be a test of our friendship," said Lalit Mansingh, a former
Indian ambassador to the United States. "Washington must realize that we are
in a neighborhood where Iran is a factor."

India's most immediate concern is fueling its economy, which has slowed in
the past year. India buys about 12 percent of its crude oil from Iran, and
many Indian refineries have been built to run solely on Iranian crude,
meaning they would have to be retrofitted in order to process oil from other
countries.

"To shift is not something that can be done very easily," said one senior
Indian official, who would speak only on the condition of anonymity given
the delicacy of the situation. The official added: "Where would we get that
refining capacity? Who would be our new suppliers?"

Even so, India has tried for several years to reduce its dependence on
Iranian crude oil, partly because of the new sanctions by the Obama
administration punishing any banks that do business with Iran. To work
around these sanctions, Indian oil companies have made payments to Iran
through a bank in Turkey that fell outside the American restrictions.

However, Indian officials are preparing for the likelihood that the Turkish
avenue may soon be closed. The senior Indian official confirmed recent
reports that India and Iran had agreed on a deal in which Indian companies
would pay for 45 percent of their imports in Indian rupees - thus avoiding
the need to pay in dollars - and might even settle the remainder of the
debts through barter.

Last month, Senator Mark Warner, Democrat of Virginia and leader of the
India Caucus in Congress, met with several government ministers in New
Delhi. "The issue came up," Mr. Warner said of Iran in an interview last
month. "The Indians raised the concern that this has immediate economic
impact upon them. We acknowledged that this was a blunt instrument,
sanctions, but that the status quo in Iran was not working."

Like the United States, India is alarmed at the possibility of Iran's
developing nuclear
<http://topics.nytimes.com/top/news/science/topics/atomic_weapons/index.html
?inline=nyt-classifier> weapons, and it has called on Iran to fulfill its
obligations as a nonnuclear weapon state under the Nuclear Nonproliferation
Treaty. Indian diplomats, though, also worry about the economic impact of
greater instability in Iran and the Persian Gulf region; they say more than
six million Indians work in the gulf, sending home roughly $40 billion a
year in remittances.

Iran is also a factor in the uncertain endgame in Afghanistan. K. C. Singh,
a former Indian ambassador in Tehran, said India and Iran cooperated to
support the anti-Taliban Northern Alliance before the fall of the Taliban in
2001. But that relationship cooled as American troops settled in
Afghanistan, and India and the United States moved closer together. Now,
though, Mr. Singh said India was "scampering to recover" its relationship
with Iran as a hedge to prepare for an uncertain future in Afghanistan.

"They are attempting to do it now out of some serious concerns about what
may happen after 2014, or earlier," Mr. Singh said.

Even so, India's current leaders remain committed to ever-strengthening ties
with the United States. In a speech on Monday in Washington, Mr. Mathai
spoke of the great potential of the two nations' partnership, if also the
complexities embedded into it.

"Given our different circumstances, history, location and levels of
development, we will occasionally have differing perspectives and policies,"
he said, according to a
<http://www.indianembassy.org/prdetail1860/speech-by-foreign-secretary-of-in
dia,-mr.-ranjan-mathai-at-the-center-for-strategic-and-international-studies
-(csis),-washington-dc-on-february-6,-2012-on-andquot%3Bbuilding-on-converge
nces%3A-deepening-india-u.s.-strategic-partnershipandquot%3B> transcript of
his speech. "But this can be a source of great value and strength."