A major Indian trade delegation to Iran has pronounced the trip a success. The development underscores how difficult it will be for the Obama administration and the European Union to impose ‘crippling’ sanctions on Iran.
India imports $11 billion a year in petroleum from Iran, its second-largest supplier. The Indian economy is growing rapidly and the number of cars and trucks in the country is expanding along with it. 70% of petroleum in the world is used to fuel vehicles. The unilateral US and EU financial sanctions on Iran have crippled its international banking access. As a result, Iran is seeking barter arrangements. Instead of important things from Europe, Tehran instead will buy Indian-made goods, essentially bartering them for petroleum. Iran will also buy Indian goods with gold bullion. At the moment, Iran imports less than $3 billion in goods annually from India, but this trade imbalance is likely to be redressed soon.
India has also just exempted rupee payments made by Indian firms for Iranian petroleum from steep taxes, encouraging the trade.
Here are the reasons India is resisting US, European and Israeli pressure to cut Iran off:
1. It is not clear how India would replace the bulk of petroleum products it buys from Iran; international oil markets are relatively tight. India’s monthly imports from Iran are down slightly over the two previous years, but it is hard to see how they could go much lower unless Indian over-all petroleum demand feel (unlikely) or unless the world suddenly produced 2 million barrels a day more than the world demand, also at the moment unlikely.
2. The Indian manufacturing lobby sees an enormous opportunity for India in stepping into the vacuum left in Iranian imports by the US and EU sanctions.
3. Muslim voters are something like 12% of the Indian electorate, and the ruling Congress Party in particular is beholden to the Muslim vote. Indian Muslims generally do not approve of the US and Israeli attempt to isolate Iran.
4. India’s rivalry with Pakistan impels it to seek regional allies to offset Pakistan’s soft power in the Muslim world.
5. India’s economy is sufficiently big and diverse that it can probably arrange for some firms to deal with the US and other firms to deal with Iran, avoiding the worst impact of possible US Treasury Department sanctions. Moreover, Washington may be reluctant to follow through on its threats against India in this regard, since the US has wanted to play India off against China and would be deprived of that chip in global politics if relations soured with New Delhi.
© 2025 All Rights Reserved