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Potential Hurdles in Indo-Israeli Relations

03 Monday Jul 2017

Posted by in India, Israel, Middle East, South Asia

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Everyone is gaga over Prime Minister Narendra Modi’s trip to Israel, and they should be. Israel’s welcome to the Indian prime minister stops one step short of a Roman triumph thrown in honour of a conquering emperor. For his part, Modi has shown equal respect to his counterpart, Israeli prime minister Benjamin Netanyahu, by avoiding the ritual visit to Palestinian Ramallah and playing up the construction of a special relationship between the two countries rather than a transactional defence bonanza. Netanyahu has cleared his schedule to accompany Modi for the duration of the state visit and both prime ministers are known to have warm feelings towards each other.

Much ink has already been spilled on the natural synergy between the two countries in terms of security and the economy; though a genuinely blossoming relationship will take time to mature, there seems to be little doubt that it will. However, it is only prudent that one casts an eye on two shadows that have the potential to cloud the bonhomie between Delhi and Jerusalem. India’s relations with Iran and Israel’s relations with China stand to possibly be grounds for recriminations later on.

Although China extended recognition to the Jewish state barely five days earlier than India, its relationship with Jerusalem is far stronger in terms of simple numbers. Like India, the two sides have maintained covert contacts for defence purposes since at least 1979. Today, trade between Israel and China stands at over $11 billion – almost three times that between Israel and India. Chinese firms have invested substantially in the Israeli economy, acquiring a controlling stake in several companies and donating to Israeli universities and research labs to establish technological academic institutes. Over a thousand Israeli firms operate in China and an innovation park has been set up in Changzhou. Overall, China is Israel’s third-largest trade partner after the United States and Europe, and the largest in Asia. Militarily, Israel is China’s second-largest supplier of arms after Russia.

Like many countries worldwide, Israel has found it difficult to keep away from the renminbi gravy train. Although the personal chemistry might have been missing, Netanyahu has been quite ebullient in his meetings with his Chinese counterpart, Xi Jinping, marketing Israel as the perfect junior partner for China and hoping to marry Israel’s technology to China’s capacity. As one newspaper termed it, make in Israel, expand in China.

Any money, especially Chinese money, comes with political strings attached as Sri Lanka and Cambodia have already realised and Australia seems to be waking up to the same reality. Beijing’s deep forex pockets are difficult to compete with, even for advanced economies, let alone India. Delhi’s concern would be two-fold: where might such lucrative ties lead in terms of outside influence on Jerusalem, and what might be the impact of China having access to many of the same technologies India acquires from Israel?

For the moment, US pressure on Israel has prevented the sale of sensitive technologies such as the Phalcon airborne early warning and control system to China. However, as Chinese firms invest in Israeli technology and enter into joint ventures, Washington’s influence over Jerusalem would wane and Delhi might find itself in a very uncomfortable position vis-a-vis Israel and China.

Similarly, Israel has concerns about India’s ties with Iran. Going by rhetoric alone – there has been precious little action between Delhi and Tehran – India hopes to invest in Iranian hydrocarbons, build Chabahar, and encourage Iran to become part of its International North South Trade Corridor, which would bypass Pakistan and give India access to the heart of Asia for valuable energy and mineral resources. Thankfully for Jerusalem, Delhi has moved at its famed glacial pace and trade between the two countries stands at approximately $16 billion (per capita, that is less than half of that between India and Israel) despite the latter’s energy addiction.

While India has no defence ties to Iran to speak of – the situation in Afghanistan has evolved to the detriment of the synergy of the 1990s between Tehran and Delhi – Jerusalem might worry that increased trade between one of the fastest growing economies in the world and its present archenemy might give the latter greater economic muscle to create more problems on Israel’s doorstep.

Of course, there are many variables at play here still – Israel may offer India gas from its Tamar and Leviathan gas fields to offset Iranian gas, Tehran may prefer Bejing’s reliability and largesse in a partner than Delhi, or Israel may get frustrated with China’s notoriety in reverse engineering. The strongest counter to these concerns is to make a strong, unequivocal commitment, something that would indicate to the other side that the relationship means more than just dollars and sense. For India’s part, a proposal for nuclear cooperation may well be that indication, and Delhi may ask for something equally substantial from Israel in return. Yet the concerns remain for both Israel and India. Among friends, these are conversations best had as soon as possible. Of course, it is also impolite to discuss others one may be seeing on a first date.

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What Scope For India-Iran Ties?

15 Wednesday Jul 2015

Posted by in India, Iran, Middle East, South Asia

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With a nuclear deal between Iran and the N5+1 (Britain, France, Russia, the United States, China, and Germany) finally concluded, Narendra Modi’s meeting with Hassan Rouhani on the eve of the BRICS and SCO summits a few days ago gains more significance than it might have earlier. Leaders, geopolitical analysts, and businessmen are all keen to see what hints may be gleaned from the early interactions between Rouhani and Modi about how relations between two aspiring regional powers will develop. The fact is, however, that there are some very difficult days ahead for both countries and it will require burning a fair amount of the proverbial midnight oil.

Despite the jet-setting Modi has been accused of, the Indian prime minister is yet to visit Iran. An invitation was extended to him in January at the Vibrant Gujarat Summit and has been accepted though the dates have not yet been decided. However, other Indian leaders and officials have made their way to Tehran in recent months. Most notably, the Minister for Roads and Transport, Nitin Gadkari, visited the Middle Eastern country in May of this year and came back promising that upgrades to the Iranian port of Chabahar will be completed by December 2016 – India had won the contract in 2003. Additionally, Foreign Secretary S. Jaishankar visited Tehran in June and External Affairs Minister Sushma Swaraj was scheduled to make a trip towards the end of July for a meeting of the Non-Aligned Movement that has now been postponed by Venezuela until the first quarter of 2016. If Modi is to visit Iran this year, it will have to be between now and November when he is scheduled to visit Turkey for the G-20 meeting, Malaysia for the East Asia and ASEAN-India summits, and Israel and Singapore on state visits. Russia has been penciled in for December.

While the world expects a commercial bonanza from Iran in terms of lucrative contracts to modernise and develop the country’s industrial infrastructure and lower oil prices, India will most likely miss out on most of the party. However, its interest in Iran, now free from US pressure, is far deeper and lies in strategic initiatives more than commerce. In the post-sanctions era, Delhi hopes to see Tehran revive three or four projects of crucial bilateral importance that have languished in the doldrums for over a decade.

Security

Whenever Modi and Rouhani do meet, security will be high on their agenda. Ironically, India has had better relations with the Islamic Republic than with the Shah despite initial concern over the outcome of the 1979 Iranian Revolution. Tehran has been critical of Islamabad’s attempts to use fora like the Organisation of Islamic States to pass resolutions condemning India and in the 1990s, the two countries cooperated with the Northern alliance to fight the Taliban in Afghanistan. The latest situation in Afghanistan, however, does not bode well for either.

The fledgling appearance of ISIS in Afghanistan is of great concern to its neighbours. In the 1990s, Iran and India supported the Northern Alliance against the Pakistani-backed Taliban. However, Tehran sees the emergent ISIS as a far greater threat and may now be lukewarm to India’s concerns about their former enemy; India’s policy on the Middle Eastern terrorist syndicate is as yet unclear. In February 2015, ISIS killed a Taliban leader in Logar province and in April, claimed credit for a suicide bombing in Jalalabad that killed 35. US drone strikes have killed a few ISIS commanders in the country but the number of dissatisfied Taliban fighters heading over to the newcomers is steadily increasing though still small. The ultimate nightmare scenario for both India and Iran would be if ISIS spilled over into Pakistan’s toxic soup of terrorist safe havens. Both Tehran and Delhi need to develop a strategy that does not strengthen their old enemy, the Taliban, but also keeps ISIS out of the region. If US reports are to be believed, Iran has already made a few small shipments of arms and other supplies to the Taliban.

According to some analysts, ISIS has made an appearance in Afghanistan to stake a claim to a portion of the profits of the narcotics trade. US airstrikes against oil facilities in Iraq and Syria and the loss of important towns along the Turkish border have diminished their finances and ISIS hopes to find new economic pastures in Wilayat Khorasan – what they call their imaginary province in the Afghanistan-Pakistan area. If so, it could prove the task of eliminating them much harder as poppy traders have always been.

Economics

On a less dire front, much has been made of the potential for trade between India and Iran. Before US sanctions and pressure brought trade between the two countries to a trickle, it stood at approximately $15 billion per annum. There is no doubt that hydrocarbons will boost commerce between India and Iran quickly back to this level – India is already back to importing 370,000 barrels of Iranian crude per day – but questions remain on the emergence of a broader trading portfolio. Iran’s most immediate needs are in the upgradation of its hydrocarbon infrastructure, its factories, and other high-tech goods that are available in Western rather than Indian markets.

Iran will also want to improve its transport, education, health, and cyber infrastructure but with the prospect of the sanctions lifting, Iranian negotiators have become tougher negotiators and told several Indian delegations that they could acquire their needs from other sources at lower cost. One deal to be hit by Tehran’s increasing confidence was a $233 million State Trading Corporation venture to supply Iran’s railways with tracks; India was able to hold on to the deal but after lowering its price by seven per cent and officials are still worried that further cuts may be demanded or the order split. Iran has also withdrawn its offer to India to develop the Farzad B gas field since it was made in 2013 and free shipping as well as discounts on oil purchases have been canceled. Part of the reason is that India is seen as low on delivery; in 2007, ONGC Videsh was bumped from Yadavaran oil and gas field in favour of China’s Sinopec despite a memorandum of understanding.

Tehran has also reduced its purchase of Indian rice after its frozen assets were released from Indian banks. Exports from India may still include iron, edible oils, meat, diesel, tractors, turbines, grains, computers, machinery, and medicines, but they will face stiffer competition from the international market than before.

Regional Infrastructure

While the stars do not seem too favourable towards booming India-Iran trade, the Islamic republic still sees India as a valuable partner. In a recent interview, Iran’s ambassador to India, Gholamreza Ansari, expressed his country’s interest in developing the International North-South Trade Corridor through his country. Indian goods would reach European, Central Asian, and Russian markets sooner and at lesser cost if this corridor were completed. As a country along the route, Iran would also piggyback its imports and exports on the same network; Chabahar will already have been upgraded from 2.5 million tonnes to handle 12.5 million tonnes per annum. Coincidentally, Modi mentioned a similar proposal that linked Bombay to St. Petersburg in his discussions in Uzbekistan and Kazakhstan a couple of days ago. Such a project would be of immense economic as well as strategic value to India. it would bypass Pakistan and offer an alternative to China’s One Belt, One Road project; extending the INSTC from Bombay eastwards to Haiphong would alter trading patterns in the region.

Iran is still keen on building an undersea gas pipeline to India, another project hanging on from the previous decade. With improvements in technology and less US pressure, this might be a project India takes up with alacrity. This pipeline would diversify India’s hydrocarbon imports and certainly be more secure than the other project India has signed on to, the Turkmenistan-Afghanistan-Pakistan-India gas pipeline.

India also has the opportunity to develop a stronger naval presence in the Sea of Oman and the Arabian Sea. Iran is just as concerned as India about the safety of sea lanes in the area, its two major ports of Bandar Abbas and Chabahar both lying in those waters or adjacent to them. An expansion of the Indian Navy’s role westwards would improve Delhi’s grasp over the Indian Ocean Region as well as dilute the effect of Chinese presence in Gwadar.

Foreign Policy

Will India’s ties with Iran not interfere in Delhi’s relations with many of Tehran’s foes such as Israel, the United States, and Saudi Arabia? Absolutely not. India’s links to Iran are almost entirely commercial and overlap with US and Israeli interests where they are not – Afghanistan. Despite some literary affinity in the north, India does not share, to employ an overused expression in international affairs, a “strategic/special relationship” with Iran. In all likelihood, American companies will have a greater presence in Tehran after the sanctions are lifted than will Indian companies.

For similar reasons, there is little reason for Saudi Arabia to be alarmed by India’s ties to Iran – they are largely economic. South Bloack’s long-held belief that friendly relations with Riyadh would temper Rawalpindi’s misbehaviour has been proven wrong over the decades and has therefore diminished the Arab capital’s importance to Delhi. Nonetheless, Saudi Arabia still hosts almost two million Indian workers who make considerable remittances back to India. Yet greater economic interaction with Tehran hardly constitutes antagonism towards Riyadh and is no more than what the Gulf country has extended towards Pakistan.

Despite outward appearances, Israel has a somewhat intimate relationship with India that will take a lot to disrupt. India is a large country and has many needs both in volume and diversity; Israel is a useful partner in several arenas of its security framework and economy that India will not jeopardise. Renewed links to Iran do not change the fundamentals of India’s world view and should in no way concern Israel. Delhi’s influence in Tehran and jerusalem may be limited yet but a voice without geopolitical baggage in both capitals cannot hurt either side. Modi’s upcoming visit to Israel has caused some flutter as has India’s recent vote in the United Nations, abstaining from censuring Israel. This scaling down on rhetoric reflects a marginal course correction in Indian policy towards the region but ultimately, India has no skin in the game and is hardly a major player in the region to change the course of nations.

There is a lot on Modi’s plate whenever he visits Tehran. Though the scope for any rapid expansion in direct trade remains uncertain, the potential to transform trade routes in the region and with them local economies lies latent as does the hope that some stability if not peace will be brought to India’s mountainous northern borderlands. This is certainly too ambitious an agenda for one trip but perhaps the first steps may be taken.

This post appeared on FirstPost on July 16, 2015.

Timeo Sinae Et Dona Ferentes…

13 Saturday Sep 2014

Posted by in India, South Asia

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The visit of Chinese premier Xi Jinping to India next week is the most awaited meeting of Prime Minister Narendra Modi’s short tenure so far. Two of Asia’s largest states – in size, population, military, and economy – will discuss issues that affect over a third of humanity. Yet more interesting to observers is that the Xi visit comes between two other heads-of-state meetings that have elicited much attention, between Modi and Japanese prime minister Shinzo Abe a fortnight ago and between Modi and US president Barack Obama next fortnight.

In advance of the arrival of the Chinese diplomatic delegation, the barrage of ostensibly sweet yet meaningless words has already started. Assistant Chinese Foreign Minister Liu Jianchao told reporters, “India is a country with which China has been friendly for thousands of years.” Even Xi stated that when he met Modi for the first time at the BRICS summit in Fortaleza, it felt like he was meeting an old friend. As Sir Humphrey would remind us, “it is necessary to get behind someone before you can stab them in the back.” Nevertheless, to paraphrase the old priest Laocoön’s famous warning to his fellow Trojans, timeo Sinae et dona ferentes.

And come bearing gifts, they do. The Chinese delegation will have over 100 business heads and is expected to invest $100 billion in India over the next five years, thrice the $34 billion that Abe promised Modi a few days ago. The comparison was bluntly underscored by Liu Youfa, Beijing’s consul-general in Bombay. China’s banks hold $4 trillion in foreign currency reserves and are desperately looking for investment opportunities. India’s hungry economy is finally generating international interest and the Chinese, having already dealt with Modi when he was the chief minister of Gujarat, are optimistic about their southwestern neighbour.

India needs massive investment in infrastructure and developing its manufacturing potential. China Inc will be looking at the modernisation of Indian railways, construction of highways, power generation and distribution, irrigation, ports, and manufacturing. Two industrial parks, one in Pune and the other in Gandhinagar, have already been finalised and will make power equipment and automobiles; two more have been planned in Tamil Nadu for textiles and food processing. Orissa expects to be India’s energy gateway on the east coast.

If there is anything that can be foretold about the summit with certainty, it is that the China hawks in India will be sorely disappointed. Modi is far more pragmatic than his supporters or detractors give him credit for and realises that India is a pygmy compared to Chinese economic – and consequently military and diplomatic – wherewithal. The meeting between Modi and Xi will not see Delhi handing Beijing ultimatums on Chinese-occupied Kashmir or China’s activities in Gilgit-Baltistan.

However, international optimism in Modi’s leadership has allowed India to leverage its ties with Japan and the United States to force China to be more sensitive to its concerns. Beijing is well aware that there is no pivot to Asia by anyone without Delhi and it hopes to persuade its neighbour of the virtue of remaining, as it were, non-aligned. Additionally, an unhappy India would open up another flank and divert resources from China’s competition in the Pacific with the United States. Interestingly, India has found itself alongside China on several economic issues such as subsidies and climate change yet with the United States on political issues such as democracy, a larger geopolitical role for India in the region, and Islamism.

Despite the big investments, it remains unclear how much China is willing to pander to India. As much as India needs capital inflows, China is also looking for sound markets to park its money. Even economically, there is some friction between the Asian giants. India is concerned about its trade deficit with China and would like easier access to Chinese markets for its pharmaceutical, agricultural, and information technology products; similarly, China would like to expand in India’s telecom sector but suspicions in Delhi about its neighbour’s intentions and cyber capabilities has so far put the idea on the back burner.

As part of the economic integration of South and Southeast Asia, China has invited India to become part of its Maritime Silk Route (MSR). However, this may well be a strategy to hem India into a Chinese regional order – BRICS and the Shanghai Cooperation Organisation (SCO) are both fora in which Beijing’s superior clout may prevent India from chasing its interests but not vice versa. India’s growing weapons purchases from the United States and the West has irked Russia, and with Western policies pushing it towards China, Delhi might find that it does not have as sympathetic an ear in Moscow anymore either.

The temptations of joining a ready-made mechanism are many, especially when one cannot afford the enormous infrastructural development outlays needed for Southeast or Central Asia. However, Delhi must exercise caution not to be too indebted to Beijing that it restricts political manoeuvrability, a lesson not lost on Laos or Cambodia. India has envisioned its own International North South Trade Corridor (INSTC) that would connect India with Central Asia and the Mediterranean but, not surprisingly, the proposal has been languishing in the doldrums for years.

The root of Sino-Indian tensions, however, lies in their old border dispute over which a war was fought in 1962. The result was the loss of 38,000 km2 by India to China in addition to the 5,180 km2 Pakistan illegally ceded to China a year later, a bruised Indian national ego, and an enduring Sinophobia among many Indians. To make matters worse, China still claims Arunachal Pradesh and border incursions are frequent and serious. India caved in on the question of Tibetan independence and it is not even on the horizon.

China’s hand in its negotiations with India is not as weak as some would portray – the China-in-need-of-an-ally against an aggressive US pivot to Asia image is a myth. For Beijing, a calm southwestern border would be nice but it has already invested strategically in India’s other neighbour Pakistan to keep Delhi off-balance. Islamabad’s nuclear weapons and missiles, both initially gifted by the Chinese, have created a permanent thorn in India’s side. Beijing merely has to be nice enough to India that South Block does not begin to think seriously about an alliance, even an unofficial one, with Japan and the United States and bring Barack Obama’s pivot to fruition.

Indeed, Islamism is a rising menace and has spread in recent months from Xinjiang to all across China. However, Beijing probably reckons that the Uighurs may yet be brought to heel internally via police repression and population migration. In the meantime, economic aid to its -stan neighbours – Afghanistan, Kazakhstan, Kyrgyzstan, and Pakistan – will gain the cooperation of local governments against cross-border terrorism. Pakistan’s jihadist complex and the instability of the state has been of growing concern but China is yet to take concrete measures to rein in its all-weather ally.

A more insidious goal of Beijing is to degrade India’s credibility in the neighbourhood. If India shies away from taking a more proactive role in South and Southeast Asian security, the other states of the region will begin to see Delhi as unreliable and weak rather than as a potential counter-balance to Beijing. Today, Modi is welcomed in Japan, Vietnam, and Australia, in ASEAN and in SAARC; yet if India remained apathetic to Asia’s increasing fears of Chinese dominance today, it would be far more isolated ten years on if it then tried to cobble together an anti-China alliance.

Perhaps it is because of their small stature on the world stage, but Indians are particularly susceptible to flattery. A few words about India’s civilisational greatness will easily substitute for the lack of substance during the talks. So far, Modi has struck the right note – he has indicated that India is open for business but he has also chastised an unnamed country during his visit to Japan for its expansionism.

For all the investment Xi will bring to India, little will be achieved towards solving the geopolitical loggerhead and the Gordian knot at the heart of Asian power politics. Sino-Indian trade will increase and the Chinese and Indian economies will move closer, but contrary to the hopes of those who see economics as the driver of history and believe in the rational actor theory, the two Asian giants will continue to glare at each other across the Himalayas.

This post appeared on Daily News & Analysis on September 15, 2014.