Iran Sanctions and Impact on India

Are you the ONE who don't like to take chances and waste one precious year by failing in Prelims?

Do you want to test your knowledge after reading a particular topic? Then The MCQ Factory (TMF) is for you! It provides topic wise high quality MCQs for testing your knowledge in a particular topic. More details here

Background:
  • Iran earlier had several sanctions imposed on it by USA, UN and other western world. These sanctions were earlier removed because of P5+1 negotiations and after Iran’s agreement to reduce its nuclear fuel stockpile in phased manner.
  • After Trump, US has imposed new sanctions on Iran unilaterally.
What is India’s response to these sanction removals?
  • India is  keen on taking ties with this “extended neighbor” to a higher level.
  • The removal of sanctions on Iran following the nuclear deal has ended its isolation, and enabled its return to the economic and diplomatic mainstream.
  • The visit is expected to bridge the trust deficit in bilateral cooperation and boost energy and trade ties while expediting India’s connectivity plans.
How did these sanctions impacted India-Iran relations?
  • Bilateral ties took a beating during the sanctions years.
  • India had voted against Iran at the International Atomic Energy Agency over its clandestine nuclear programme and, under pressure from the U.S., slashed oil imports from the country by up to 40 per cent during the period.
  • New Delhi had also backed off from a pipeline project that aimed to bring natural gas from Iran to India through Pakistan.
Why Iran is so important to India?
  • Till sanctions were imposed on Iran, it was India’s second largest source of crude oil after Saudi Arabia.
  • Once the Chabahar port in Iran is developed, it will offer India alternative access to landlocked Afghanistan, bypassing Pakistan.
  • Both Iran and India share the goal of a stable government in Kabul free of the Taliban’s influence. Globally, New Delhi and Tehran are on the same page in their opposition towards groups like Al-Qaeda and the Islamic State.
  • The Iran visit is an opportunity to restore equilibrium in India’s foreign policy, which, of late, was seen to be skewed towards Israel and Saudi Arabia.
What India is doing?
  • The government appears to be trying to reach out to the three poles of the region.
  • While it will pursue good ties with the Sunni Gulf for energy supplies, Iran would act as a gateway to Central Asia besides enhancing India’s energy security.
  • Israel remains one of India’s top defence and technology suppliers.
  • The success of this policy depends on New Delhi’s capacity to do the balancing act.
Why and what new sanctions are imposed by US?
  • Iran has conducted a ballistic missile test.
  • The United States has imposed new economic sanctions against Iran over its ballistic missile programme and for contributing to regional tensions.
  • The sanctions cover Iran’s banking and energy sectors and reinstate penalties for countries and companies in Europe, Asia and elsewhere that do not halt Iranian oil imports.
  • According to US, Iran’s continued support to terrorism and development of its ballistic missile programme pose a threat to the region, US and its partners worldwide.
  • Under the sanctions, those involved cannot have access to the US financial system or deal with US companies.
  • They are also subject to “secondary sanctions”, which means foreign companies and individuals are prohibited from dealing with them as they also can be blacklisted by US.
What is Iran’s response to these new Sanctions?
  • Iran has denounced the new sanctions as illegal and hailed that they are not compatible with US’s commitments and United Nations Security Council (UNSC) resolution that endorsed the nuclear deal (known as the Joint Comprehensive Plan of Action, or JCPOA) reached between Iran and P5+1 countries in 2015
Exemptions to India by US:
  • The decision comes after US imposed toughest ever sanctions on Iran under Iran Freedom and Counter-Proliferation Act, 2012.
  • The exemptions to India are with respect to development of Chabahar port, construction of associated railway and for shipment of non-sanctionable goods through port for Afghanistan’s use, as well as the country’s continued imports of Iranian petroleum products.
  • This exception relates to reconstruction assistance and economic development for Afghanistan.
  • These activities are vital for ongoing support of Afghanistan’s growth and humanitarian relief.
  • It is also part US President Donald Trump’s South Asia strategy which underscores US’s ongoing support of Afghanistan’s economic growth and development as well as close partnership with India.
  • This strategy states that India has major role in bringing peace and development in Afghanistan.