AFP is reporting that Iran’s state oil company, NIOC, is threatening to stopper its flows of crude oil to India if India doesn’t start paying its debts. India consumes heavily from Iran–it imports 400,000 barrels per day, or about an eighth of its oil. However, sanctions have made it harder and harder for India to transfer payments for that oil, meaning they’re now billions of dollars behind, which is making the cash-strapped Islamic Republic antsy.
This will be an extremely interesting story to follow, as it might give insights into broader questions about India’s role as an emerging power. Since the end of the Cold War, India has been inching closer to the United States. However, India is also a rapidly growing country that must find fuel for its economy–I don’t have the figures, but the three million barrels of oil being consumed by India today are only the beginning. Oil markets will tighten up in the future, meaning India needs to build “special relationships” with suppliers now, lest it be left in the cold in the future. Iran is an excellent candidate supplier, and India’s been courting Iran fairly heavily. They’re helping develop a major port (with all sorts of rumors of related security deals) in Sistan and Baluchestan’s city of Chahbahar, and there was even talk of building an Iran-Pakistan-India pipeline. However, oil is just one of India’s concerns, and that relationship with the US is important as India tries to ensure it doesn’t become, as it were, the Mexico to China’s United States. Iran’s threat, as you can see in the article I linked to, is ambiguous–the spokesman warned India of potential shutdown and then said there were no plans to actually shut down. However, Iran certainly would like those two billion dollars back. If India can’t find a legal way to get that money to Iran–and Iran refuses to take rupees–then India may be forced to choose between violating sanctions and violating its contracts with Iran. The direction it chooses, should such a scenario arise, will show us how the Singh government balances its fundamental interests.