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6 July 2016

Learn from Obama the ABC of doing business with Iran


Three significant developments within the week signal that the momentum built up by Prime Minister Narendra Modi’s path-breaking visit to Iran in May has not petered out. This may seem a sardonic remark to make, because we are displaying here a rare buck-the-trend syndrome. In the usual case, we don’t care to follow through with the groundswell that appears during a high level visit.

Thus, the government notification last week lifting the ban on trade of specified items with Iran (Reuters), the ‘operationalization’ of a new payment channel to transfer to Iran its blocked funds in India (Economic Times), and the ‘breaking news’ that India’s oil imports from Iran surged by 39% in June year-on-year (Reuters) – each in its own way becomes a signpost marking appreciable dynamism in the policies toward post-sanctions Iran.

But the big ticket items remain yet to be closed, especially the ONGC proposal and the proposals on industrial collaboration in sectors such as steel, petrochemicals, etc. In fact, Chabahar port development project should not have hogged the limelight to the extent it did. The former National Security Advisor M. K. Narayanan has questioned in an opinion-piece such hype over Chabahar. One cannot but agree — even while rejecting his unwarranted advice to take a ‘pause’. The point is, our zero sum mindset got the better of our judgment in caricaturing Chabahar as a ‘strategic setback’ for China and Pakistan. (Hindu)

Indeed, our old mindset toward Iran needs to be discarded. It’s economy, stupid! The US sets a brilliant example here. No doubt, the Boeing’s $25 billion deal to sell aircraft to Iran is a game changer. (USA Today) The Obama administration has shown pragmatism of a sort that is simply breath taking – bending the US’ sanctions regime to enable Boeing to secure such lucrative business.

Unsurprisingly, the Israeli lobby and the American politicians who are under the spell of that lobby — who are no less potent than the anti-Iran, pro-Israel lobby within our security establishment — is unhappy. A furious war of words has erupted (The Tower). Israeli commentators too have jumped into the fray (Israel Hayom). But of no avail. The Obama administration is ignoring them. Secretary of State John Kerry even stuck out his neck to defending Boeing’s deal. (CNS News)

What prompts the Obama administration to act in this fashion? Simply put, as a media report neatly summed up, more than airplanes are riding on Boeing’s deal with Iran.

For one thing, the Boeing deal will attract other American and western companies to invest in Iran, imparting “optimism, confidence and renewed enthusiasm for potential investors in Iran”, to quote Elizabeth Rosenberg who was with the Treasury Department and is presently with the Center for a New American Security in Washington. The, there is also a political dimension to it. “Having this kind of very large deal go through with a lot of support from the U.S. Treasury, it becomes a measure of insurance for longevity for the nuclear deal,” Rosenberg says. (NPR)

Now, it may seem the mother of ironies that we need to sit on Uncle Sam’s knees and learn the ABC of doing business with Iran. But we’d better do that after being such an obedient American poodle for a decade in determining our reflexes toward Iran.

The Boeing saga teaches us three things. First, the importance of governmental intervention in foreign economic relations, especially in wrapping up lucrative business deals with a country like Iran. Indeed, our government – Minister Nitin Gadkari in this case – must have a monitoring mechanism. Gadkari is one of the few ministers who can operate like a CEO to crack the whip and get the projects in Iran through.

Second, the importance of launching high profile projects on the virgin soil that is post-sanctions Iran. Such projects attract attention and become trendsetters. What Rosenberg did not mention is that the Persian interlocutor, who is known to have a swagger, has a panache for grandiose projects. India’s strategy should also be to register big-time presence and that can only be through industrial collaboration – and not by selling more basmati rice or buying pistachios.

Finally, the importance of creating political leverage through economic cooperation and business deals. Kerry was spot on by insisting that the Boeing deal goes a long way to cement Iran’s commitment to the nuclear deal.

To be sure, India should have revived by now the Iran-Pakistan-India (IPI) gas pipeline project. The IPI should have been a talking point between Prime Minister Modi and President Barack Obama. In fact, we should canvass for Big Oil undertaking the IPI project. Of course, that needs political vision as well as creative thinking as to how to make Pakistan a stakeholder in friendly relations with India.

Will American oil companies bite into the IPI project? You bet, they will. If anyone reads a reality check, read this fascinating report by Hellenic Shipping News; Indian Oil Trade – Getting Into The Driving Seat.

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