With Iran and trade rifts, India feels brushed aside by Trump

By: |
Washington | Published: April 24, 2019 10:58 PM

The Iran diktat followed Trump's announcement in March that India, along with Turkey, would no longer enjoy a preferential trading status for a wide range of manufactured goods.

Iran, trade, trade rifts, india, narendra modi, india news, Donald Trump, economy newsUS President Donald Trump. (Reuters)

President Donald Trump may count Indian Prime Minister Narendra Modi among his international allies, but New Delhi is smarting over unexpected US decisions it sees as ignoring the interests of an increasingly close partner. The Trump administration this week said it would start to sanction countries that do not comply with its orders to stop buying oil from Iran, demanding that eight governments — including India and China — end all imports when six-month waivers run out next week.

The move, which triggered a hike in global oil prices that could disproportionately hit poorer Indians, came just as Modi was campaigning for a new mandate in ongoing, multi-phase elections.

The Iran diktat followed Trump’s announcement in March that India, along with Turkey, would no longer enjoy a preferential trading status for a wide range of manufactured goods. Trump, who has rocky relations with the leaders of numerous Western allies, has publicly highlighted his bond with Modi.

India’s main opposition Congress party quickly seized on the Iran sanctions to attack Modi. Trump, while popular among much of the Hindu right, has also drawn resentment in India over viral reports that he mimics Modi’s accent in private — a far cry from the reverential treatment US presidents since Bill Clinton have shown Indian leaders.

An Indian official, speaking on condition of anonymity, described New Delhi as “surprised and disappointed” by the decision on Iran, saying the Trump administration had sent a message in March that India’s cuts in imports were sufficient to be granted a fresh waiver. “We thought that, as a major defense and strategic partner, the United States would take into consideration our concerns,” the official said.

Trump is seeking to eliminate Iran’s top source of revenue in a bid to curb the clerical regime’s regional clout, including its backing of Shiite militants. India is the world’s third-largest oil importer. The official said the South Asian nation has cut Iranian oil from 17 to five per cent of its total crude imports and had also ended oil purchases from Venezuela, succumbing to US pressure as Trump tries to oust leftist President Nicolas Maduro.

“We did this not because we agree with the US, but because we are strategic partners,” he said. Similarly, the official said the Trump administration ignored a detailed proposal from New Delhi when it announced it would scrap its designation in the Generalized System of Preferences, which grants favorable access to goods from developing countries.

India is proposing a 90-day delay in implementation as the government cannot make a counter-proposal under laws that forbid policy decisions during elections, the official said. Another rift could come up as India — a Cold War partner of the Soviet Union turned major buyer of US defense equipment — finalizes its purchase of Russia’s advanced S-400 missile system.

Defense Minister Nirmala Sitharaman recently told AFP that India has been “heard and understood” by the United States, which imposed sanctions on China and has warned NATO ally Turkey over buying the S-400. Few expect India and the United States to drift apart significantly, let alone return to their Cold War estrangement, with the major parties in both democracies broadly supporting a strong relationship.

And Trump pleased Modi in February by backing India’s air incursions into rival Pakistan, home to virulently anti-Indian militants, in response to an attack on Indian forces in Jammu and Kashmir. Tanvi Madan, a fellow at the Brookings Institution and director of its India Project, said that this week’s sanctions decision for the United States “is about Iran, not about its approach to India.”

“But I think that India will feel once again that it will be collateral damage,” she said.

“It reinforces the sense in India that the US isn’t factoring in Indian interests when it comes to these decisions, yet they affect India.”

Madan added that New Delhi was less concerned about oil than with preserving a relationship with Tehran, even while developing close ties with Iran’s rivals Israel and Saudi Arabia. India is hoping to keep working with Iran on its Chabahar port, through which New Delhi hopes to send supplies to war-torn Afghanistan, cracking the landlocked country’s reliance on Pakistan.

Madan said there was one wild card that could shake up US-India ties — if China seized on the rift and offered reconciliation with India by making concessions on the Asian giants’ myriad disputes. “Will that happen? I find it hard to believe the Chinese will get around to doing it,” she said. “But the possibility exists.”

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Rising petrol, diesel prices: Modi’s tax hikes on retail fuel are putting brakes on economic recovery
2UK economic bounceback in May far slower than anticipated
3Singapore slips into recession with record economic contraction of 41% in Q2; govt blames lockdown