Tag Archives: Iran

Afghanistan is Key to India’s Iranian Connection

Washington grumbles about the Indian relationship with Iran, but the U.S. withdrawal from Afghanistan leaves New Delhi little choice

The striking juxtaposition this week in New Delhi is a nice illustration of how Tehran has become a complicating factor in U.S.-India relationsSecretary of State Hillary Rodham Clinton was in town to exhort Prime Minister Manmohan Singh’s government to do more on curtailing imports of Iranian oil.  All the while, a large Iranian trade delegation was a few miles away striking deals for the provision of agricultural commodities that Tehran is finding harder to purchase.

On the surface, the awkward tableau was reminiscent of the situation three months earlier when the Obama administration moved to enforce new U.S. sanctions aimed at shutting down the Iranian petroleum sector as a means of pressuring the Islamic Republic to abandon its nuclear weapons program.  At the time, reports emerged that India had overtaken China as Iran’s largest oil customer and that a new rupee payments system and barter trade arrangement were being set up for the purpose of circumventing the sanctions regime.  Adding to the perception of New Delhi’s defiance was the announcement that an Indian trade mission would visit Iran to scope out commercial opportunities created by the U.S. and European Union sanctions.  Even if the Americans and Europeans wished to shun business with Tehran, Commerce Secretary Rahul Khullar was quoted as saying, “tell me why I should follow suit? Why shouldn’t I take up that business opportunity?”

These actions caused the Wall Street Journal to editorialize about “Iran’s Indian enablers” who were “turning about to be the mullahs’ last best friend.”  Nicholas Burns, who during the George W. Bush administration did yeoman’s work in bringing about the new era in bilateral affairs, issued a cri de couer:

This is bitterly disappointing news for those of us who have championed a closer relationship with India.  And it represents a real setback in the attempt by the last three American presidents to establish a close and strategic partnership with successive Indian governments.

Others pointed to New Delhi’s actions as evidence that Washington’s efforts to forge a strategic partnership with India were naïve and foolish.

But things have changed over the last few months.  While New Delhi continues to protest publicly the unilateral character of U.S. sanctions, it has quietly taken steps to accommodate U.S. concerns.  According to media reports, the Indian government has instructed domestic refineries to reduce imports of Iranian oil by 15 percent.  As a result, Baghdad has replaced Tehran as the country’s second largest crude oil supplier and Iranian oil now constitutes nine percent of India’s import profile as opposed to 12 percent last year.  Imports of Iranian crude declined by a third in April compared to March’s figures.  And the state-run Indian Oil Corporation, the country’s largest refiner, did not purchase any Iranian crude last month, down from 75,000 barrels per day in March.

During her trip, Mrs. Clinton publicly commended these efforts but also insisted that “India’s role in the international community” obliges it to go further.  To continue pressing this point, Washington is dispatching a special envoy next week to New Delhi.  This visit is significant since the Obama administration will soon begin rolling out punitive measures against foreign entities that have not lived up to Washington’s expectations.  It earlier granted passes to Japan and EU nations but pointedly left out such countries as India, China, Turkey and South Korea.

There is some speculation that India is in danger of being sanctioned for its continued oil transactions with Iran.  But a better bet is that this will not happen.  The rupee-based payment mechanism that India has fashioned to buy Iranian oil is certainly problematic from Washington’s perspective, though it is something U.S. officials can tolerate since it does not entail the exchange of major convertible currencies like the U.S. dollar or the euro.

Moreover, the third round of the U.S.-India Strategic Dialogue is taking place next month and Washington will not want the sanctions issue to derail the momentum coming out of the talks.  Indeed, according to sources quoted in the Indian media, the matter was not a major agenda item in Clinton’s discussions with Foreign Minister S.M. Krishna:

“Both sides referred to it obliquely, but Clinton didn’t even push it.  In fact, she seemed much more keen to talk about possible deliverables that could be achieved when the two ministers meet again for the bilateral strategic dialogue in mid-June.”

In his joint press conference with Clinton, Mr. Krishna once again pleaded that the country’s burgeoning energy security needs – it imports 75 percent of its petroleum requirements – limit how quickly it can break its oil links with Tehran.  Washington urges India to get more of its supplies from Saudi Arabia, which has happened to an extent though New Delhi remains wary of Riyadh given its close friendship with Islamabad.

But there is another factor at work here than just the geopolitics of oil, one that seems not to have been squarely acknowledged during the Clinton visit: A significant reason for New Delhi’s continuing desire to engage Tehran resides in the adverse effect on Indian security concerns caused by U.S. withdrawal from Afghanistan.

With domestic politics largely driving U.S. strategy, key differences are bound to emerge between the United States and India regarding the political endgame that is now unfolding.  Looking toward the exits, Washington will not be overly concerned with the exact details of the country’s future or the viability of the government in Kabul it leaves behind.  In contrast, New Delhi, which has invested heavily in Hamid Karzai’s government, has strong security interests in ensuring that any regime in Kabul is capable enough to be a bulwark against Pakistan as well as a gateway to trade links and energy resources in Central Asia.

India has traditionally relied upon Iran, whose interests in Afghanistan are roughly congruent, to help accomplish these goals.  After the fall of the Taliban regime, New Delhi played a key role in building a transportation corridor from the port of Chabahar in southeastern Iran into Afghanistan.  Late last year, it announced plans to expand this link by constructing a 900-kilometer rail line to Bamiyan province in Afghanistan, where an Indian consortium has won mineral development rights.

Indeed, New Delhi and Tehran may go so far as to revive their cooperation during the 1990s that provided critical support to the non-Pashtun militias battling the Taliban regime.  (Already reports are surfacing that the old Northern Alliance may be reconstituting itself.)  The Americans will surely grumble about the cozying up with Iran, but the geopolitical logic of the Obama withdrawal leaves New Delhi little choice.

India has for some time now telegraphed how the Afghanistan factor looms over its relations with Iran.  Speaking in mid-2010, at a time of renewed U.S. pressure on New Delhi’s bonds with Tehran, Indian Foreign Secretary Nirupama Rao (who now serves as New Delhi’s ambassador in Washington) gave a noteworthy address on the relationship.  She highlighted the “unique” civilizational ties and “the instinctive feeling of goodwill” between the two countries.  She spoke of how links with Tehran are a “fundamental component” of Indian foreign policy and how there has been a recent “convergence of views” on important policy issues.  Regarding bilateral cooperation on Afghanistan, she argued that New Delhi and Tehran “are of the region and will belong here forever, even as outsiders [read the Americans] come and go.”

Reinforcing this message, a senior Indian official was quoted in the press at the same time as saying that efforts to tighten relations with Iran were a policy “recalibration” caused by the “scenario unfolding in Afghanistan and India’s determination to secure its national interests.”

The tussle over Iranian sanctions is a harbinger of bigger challenges ahead for U.S.-India relations.  One of the key foreign policy conundrums the Obama administration faces is how to reconcile its approach on Afghanistan, which has the effect of aggravating ties with New Delhi, with its recently-unveiled strategic “pivot” toward Asia, the success of which hinges in important measure on a strengthening of the security partnership with India.  The interplay of two conflicting dynamics in bilateral affairs – growing strategic cooperation in East Asia and unfolding differences over the future of Afghanistan – will be a key factor to watch for in the years ahead.

This commentary was originally posted on Chanakya’s Notebook.  I invite you to follow me on Twitter.

Iran Sanctions – Cut Off the World’s Nose to Spite Iran’s Face?

Last time, we saw the U.S. Congress so impassioned, so emotional was in the aftermath of 9/11.  With an office within a couple of blocks of the World Trade Center, we witnessed that event firsthand. We walked through the smoke and the soot to return home late that morning. A man working on our floor, the CEO of his small business, had a breakfast meeting at the World Trade Center that morning. He did not return from that breakfast. We are still emotional about that event. That day, all Americans were willing to support carpet bombing of any country that helped that attack in any way. That emotion in America was justified. The American people were unanimously with the U.S. Congress and the Bush Administration in that emotional period.

Today, the U.S. Congress is again emotional, almost hysterically emotional. But today, the American people are not even exercised, forget being emotional. The emotion of 2001 was cold, determined anger, the sort of anger that allows us to take our time and then strike a decisive blow like we did in November 2001. In contrast, today’s anger is hot anger, the sort of anger that bubbles over the edge and makes people go nuts in a violent spree that causes serious collateral damage without achieving any real results.

The hot emotional anger we see today is a willingness in the U.S. Congress to hit out at the entire world in an effort to coerce the world to inflict severe economic damage on Iran. This hit on the world is a threat to cut off countries from the U.S. financial system for continuing trade with Iran, regardless of whether the countries are a parties to  the Iran-Israel fight or whether the countries are even in Iran’s neighborhood. This threat applies to every country in the world, except those that are specifically exempted by the Obama Administration.

Below we examine the consequences of this action on America’s long term interests.

1. Is Iran the greatest threat to America?

There is no question Iran is America’s foe. There is no question that Iran has acted against America’s interests on many occasions. But does Iran pose the biggest threat to America? Has Iran ever attacked America or American forces? Did elements inside Iran help in the 9/11 attacks? Is Iran the principal backer of the Taleban? Does Iran provide terrorist sanctuaries for the Taleban from which they attack American forces in Afghanistan? Was the shoe-bomber trained inside Iran? Was the unsuccessful attack in Times Square planned and helped by elements inside Iran? Is Iran the epicenter of global Islamic terrorism that attacked London, Madrid and Mumbai?

No. That dubious honor goes to Pakistan and specifically to the military regime in Pakistan. So how have the U.S. Congress and the Obama Administration handled Pakistan? By providing billions of dollars in aid, by providing F-16 fighters and P3-Orion antisubmarine planes even though Afghanistan is land-locked and the Taleban don’t have any boats, let alone deep diving submarines.  The Obama Administration has turned a blind eye to the massive drive by the Pakistani military to build a huge nuclear arsenal, reportedly the fourth largest in the world. In contrast, the U.S. Congress seems absolutely determined to wage war on Iran with every weapon at its disposal, on an Iran which might not have a nuclear weapon for next 2-3 years.

The last time we saw such hysteria was in 2003 when the Bush Administration painted Iraq as a imminent nuclear threat while ignoring the greater threat from Iran. What did the Iraq war achieve? It made the bigger enemy Iran far more powerful while saddling America with a long horrible expensive conflict.

Today, the Obama Administration and the U.S. Congress are moving towards a conflict with Iran in a similar emotionally charged campaign while ignoring the greater threat from Pakistan. Could an American war with Iran result in Pakistan becoming more powerful and more dangerous for America and the world?

The bottom line of this paragraph is simple:

  • Iran is likely to eventually put a bomb in Tel Aviv while Pakistan is likely to eventually put a bomb in New York City.

We understand the need for a targeted, tactical campaign against Iran. But why make Iran the emotional  focus of all of America’s attention? The short and simple answer is Israel.

2. Israel & Britain – Case of Two Close Allies

From Israel’s point of view, Iran is a grave danger while Pakistan is nearly irrelevant. Pakistan has not demonstrated any aggressive intent towards Israel while Iran has verbally threatened to wipe Israel from the face of the earth. Israel views Iran as an existential danger and rightly so. So Israel has every reason and every right to defend itself by any means it deems necessary. And Israel is a close ally of America, the closest ally with one possible exception.

That exception is Britain. Britain has been America’s oldest and most steadfast ally. Britain does not ask America for financial aid.  Wherever America needs support., Britain has provided it. British troops fought alongside America’s troops in Iraq. British troops are fighting alongside American forces in Afghanistan.

So what did America do when Britain found itself at war with Argentina a few years ago. America did not get involved in that war to help America’s closest ally. America did not break relations with Argentina. America did not sanction other Latin American countries for maintaining their relations with Argentina. America provided Britain with intelligence and helped in other quiet ways. This was sensible because America is a global power with global interests and America cannot sacrifice those interests in a regional conflict.

This common sense, this necessary focus on America’s global interests has been jettisoned today by the Obama Administration and the U.S. Congress. Instead, they are putting every other American interest in every other part of the world at grave risk in their emotional charge to proclaim their solidarity with Israel.

Why this difference between two close allies? Why does the U.S. Congress behave rationally in the case of Britain but act with wanton emotional fervor when it comes to Israel? They do so even when, according to a survey by Bill O’Reilly’s Factor, 61% of Americans surveyed said America should not get directly involved.

3. Does Israel even want this Sanctions Plan?

The straight answer is No. We don’t see Israel applauding the U.S. Congress for its desire to punish the rest of the world to support Israel. Israel is a smart, clear-headed, calculating country. Israel knows that it will face substantial backlash from all over the world for financial damage resulting from U.S. sanctions. And these sanctions don’t do Israel any good.

Israel wants America to participate in an attack on Iranian nuclear installations. If America is unwilling to do so, Israel would like America to provide it with bunker-busting bombs and refueling tankers. That will enable Israel to mount a large enough air attack to destroy a large part of Iranian nuclear capability.  Such an attack would not damage Iran’s conventional military capabilities, it would not cause severe financial damage to the Iranian people.  It would be a limited attack.

If successful, Israel will be privately applauded and even thanked by every country in Iran’s neighborhood, even by China and Russia.  If it fails, it will suffer the blame alone. Now if Iran is stupid enough to attack America in response, the Obama Administration should retaliate with all of America’s might to destroy Iran’s conventional military capacity as well as Iranian regime. The Iranian regime is smart, rational and they will not risk their survival if they believe the Obama Administration will retaliate with all its might.

We understand that a limited attack by Israel on Iran would create regional risks to America and we don’t recommend it. But it would be a regional issue and it would not damage America’s global interests. So it would be far better than the utterly asinine plan to impose sanctions on the rest of the world to bring pressure on Iran.

4. The Utter Insanity of the Sanctions Plan – 1

Several informed and sensible analysts have argued that the sanctions on Iran could actually backfire on America. Ian Bremmer, President of the Eurasia Group, wrote the following in his article in the Financial Times titled: Iran oil sanctions threaten global economic recovery:

  • While the strategy of squeezing Iran financially is logical, it comes with serious economic risks that are not often recognized. We’ve entered a new era in which the distinction between the financial and security spheres no longer holds: geopolitics drive markets even as markets drive geopolitics.
  • Enforcing oil sanctions against Iran could threaten the global economy. In the context of improving global growth, removing too much Iranian oil from the world’s energy supply could cause an oil price spike that that would halt the recovery even as it does some financial damage to Iran. For perhaps the first time sanctions have the potential to be “too successful”, hurting the sanctioners as much as the sanctioned.

A detailed description of how the Iran sanctions could backfire on America was provided by Kenneth Pollack, Director of the Saban Center of Middle East policy at the Brookings Institution. Mr. Pollack argues:

  • The problem is that these sanctions are potentially so damaging that they could backfire, creating at least three sets of consequences that would leave the United States in a worse position, whatever the impact on Iran.
  • To the extent that Iranian oil is truly off the market for the U.S. and Europe, it will increase the price for what remains. In case you missed the past 40 years of American economic history, there is no commodity on earth that affects the American economy faster or more profoundly than oil.
  • Another potentially fatal flaw in these sanctions is that they turn up the heat on Iran so much that they may well be unsustainable diplomatically, and that is very problematic because sanctions rarely work quickly. And over time, there is a high likelihood that other countries will come to see the misery of the Iranian people as being the fault of the United States, not of the Iranian leadership, exactly as happened with Saddam.

This may be why Ian Bremmer made a very interesting suggestion in his FT article:

  • The U.S. can pressure Iran without sabotaging the economic recovery. What he must do is maintain his tough public rhetoric on sanctions, no matter how harsh it appears, while privately signaling China and India – and only China and India – that it is fine for them to purchase Iranian crude, but at a significant discount from market price. Forcing Tehran to sell discounted barrels would provide the desired result: a substantial reduction in Iranian revenue with less impact on global energy prices and less harm to the U.S. and world economies.

5. The Utter Insanity of the Sanctions Plan – II

The above issues have been well discussed and are well understood in America. They are serious issues indeed, but they are essentially short term in their scope and impact. We are far more concerned about the long term strategic impact on America and its relationship with the rest of the world. And when we say “world”, we mean the real world; we mean Africa, China, India, Asia, Latin America, the world in which 3/4th of the world’s population lives, the part of the world which will show the strongest growth in the next three decades.

With its emotional plan accompanied by strident, sometimes hysterical rhetoric, the U.S. Congress has threatened to declare financial war on virtually the entire world if they don’t break off financial and trading relations with Iran.  The U.S. Congress does not seem to care about the serious impact that might have on the countries, their economies and their people. And these countries have nothing to do with the Israeli-Iran conflict. In fact, as Ian Bremmer pointed out in his interview with Reuters, “[Iran] doesn’t exactly look deplorable to large parts of the global community — like Russia, China, nearly all of Africa and even much of the Middle East.”

Remember Iraq? That was strictly a regional conflict between America and Iraq. America did not involve any other region of the world in that conflict. Still America suffered a massive downgrade of respect and support in the entire world. Not only is America now getting involved in another regional conflict with Israel and Iran, the U.S. Congress is threatening to sacrifice the economic interests of virtually every country in Africa, Asia and Latin America. Can we imagine the backlash from the rest of the world and can we fathom the extent of long term damage America could suffer?

There is one long term damage that worries us the most – the damage to America’s financial system, the foundation of America’s prosperity.

5. The Utter Insanity of the Sanctions Plan – III

The foundation of U.S. financial dominance is the reserve currency status of the U.S. Dollar. This is why the world’s financial system goes through the American financial system. The American financial system is open, flexible, transparent and trusted.

The Sanctions Plan of the U.S. Congress & the Obama Administration is based on using the U.S. Financial System as a weapon to browbeat the world. There are grave dangers in threatening the use of your most powerful weapon. If the threat of using it fails to coerce, then it has to be used. If it is used but fails to deliver a victory, then there is nothing else left in the quiver. And just the threat prompts serious efforts to build countermeasures.

That is what we are afraid of.  The world has been using the U.S. Dollar and the U.S. financial system both out of convenience and inertia. That inertia was shaken up a bit in the aftermath of the 2008 financial crisis in America. That crisis prompted China to intensify its efforts to make its currency,  the Renminbi, an international currency. The crisis also prompted Russia to seek alternatives to the U.S. Dollar at the IMF, the International Monetary Fund.

These efforts have gone nowhere because Latin America, Africa and the rest of Asia preferred the convenience of the current Dollar-based financial system. Now the U.S. Congress is threatening to shut these countries out of the U.S. Financial system if they don’t obey U.S. rules about Iran. If the U.S. Congress can do this once, they can do it again. No country, no country dedicated to the well being of its people can tolerate such an economic stranglehold.

Perhaps they had no choice in the last century. But this is not our father’s world, as Jim O’Neill*, Chairman of Goldman Sachs Asset Management, made clear to CNBC recently:

  • “We are only three years off maximum, maybe two years before the 4 BRIC (Brazil, Russia, India, China) countries become bigger than the United States….a few of the countries that are also becoming more important such as Indonesia, Turkey, Korea, Mexico. If you put those 4 together with the BRICs, this decade, those eight will create double the amount of global GDP that Europe and the U.S. will do put together.”

The primary American goal ought to be to ensure these countries do not act in unison against U.S. interests.  Instead, by threatening to impose sanctions on all the BRICS (S for South Africa) and on the other countries, the Obama Administration and the U.S. Congress are virtually forcing all these countries to come together to build an alternative financial architecture. This is not just insane, but suicidal.

This is not idle or fanciful speculation. This past week, the five BRICS countries met in New Delhi and agreed to support intra-BRICS trade in local currencies. If successful, this could pose a long term threat to the primacy of the U.S. Dollar.

The BRICS also discussed the establishment of a new multilateral financial institution, a new BRICS bank that will help the BRICS countries with their financial development. Such a Bank will be outside the realm of the World Bank which the U.S. dominates. It is not hard to see such a bank eventually issue a special currency  (SDR or Special Drawing Right units in the financial lingo) for use in intra-BRICS trade. Each one of these countries is a regional leader. So we could see such BRICS SDR used by smaller countries in Asia, Africa and Latin America to trade with the 5 BRICS and with each other.

This will not doom the United States. It will simply make the U.S. Financial system more regional and less global. It will also help the rest of the world move away from the U.S. Dollar over time. This is negative for America’s future prosperity.

None of the above is easy. But it is doable if the impetus is strong enough. Unfortunately, the U.S. Congress and the Obama Administration are the ones delivering the impetus to BRICS and other emerging economies to plan to move away from the U.S. Dollar. As we said before, this is not just insane but suicidal.

The Bush Administration was excoriated for being arrogant with the world and for damaging America’s standing. Frankly, the Bush Administration was a sissy compared to what the Obama Administration and the U.S. Congress are doing to the world with their Iran Sanctions plan. In doing so, they are gambling with the future of the U.S. Dollar and American prosperity. For what goal? To proclaim their commitment to Israel. And Israel doesn’t even want this plan. Isn’t Insanity the right word for this?

Last time, we saw the U.S. Congress so impassioned, so emotional was in the aftermath of 9/11.  With an office within a couple of blocks of the World Trade Center, we witnessed that event firsthand. We walked through the smoke and the soot to return home late that morning. A man working on our floor, the CEO of his small business, had a breakfast meeting at the World Trade Center that morning. He did not return from that breakfast. We are still emotional about that event. That day, all Americans were willing to support carpet bombing of any country that helped that attack in any way. That emotion in America was justified. The American people were unanimously with the U.S. Congress and the Bush Administration in that emotional period.

Today, the U.S. Congress is again emotional, almost hysterically emotional. But today, the American people are not even exercised, forget being emotional. The emotion of 2001 was cold, determined anger, the sort of anger that allows us to take our time and then strike a decisive blow like we did in November 2001. In contrast, today’s anger is hot anger, the sort of anger that bubbles over the edge and makes people go nuts in a violent spree that causes serious collateral damage without achieving any real results.

The hot emotional anger we see today is a willingness in the U.S. Congress to hit out at the entire world in an effort to coerce the world to inflict severe economic damage on Iran. This hit on the world is a threat to cut off countries from the U.S. financial system for continuing trade with Iran, regardless of whether the countries are a parties to  the Iran-Israel fight or whether the countries are even in Iran’s neighborhood. This threat applies to every country in the world, except those that are specifically exempted by the Obama Administration.

Below we examine the consequences of this action on America’s long term interests.

1. Is Iran the greatest threat to America?

There is no question Iran is America’s foe. There is no question that Iran has acted against America’s interests on many occasions. But does Iran pose the biggest threat to America? Has Iran ever attacked America or American forces? Did elements inside Iran help in the 9/11 attacks? Is Iran the principal backer of the Taleban? Does Iran provide terrorist sanctuaries for the Taleban from which they attack American forces in Afghanistan? Was the shoe-bomber trained inside Iran? Was the unsuccessful attack in Times Square planned and helped by elements inside Iran? Is Iran the epicenter of global Islamic terrorism that attacked London, Madrid and Mumbai?

No. That dubious honor goes to Pakistan and specifically to the military regime in Pakistan. So how have the U.S. Congress and the Obama Administration handled Pakistan? By providing billions of dollars in aid, by providing F-16 fighters and P3-Orion antisubmarine planes even though Afghanistan is land-locked and the Taleban don’t have any boats, let alone deep diving submarines.  The Obama Administration has turned a blind eye to the massive drive by the Pakistani military to build a huge nuclear arsenal, reportedly the fourth largest in the world. In contrast, the U.S. Congress seems absolutely determined to wage war on Iran with every weapon at its disposal, on an Iran which might not have a nuclear weapon for next 2-3 years.

The last time we saw such hysteria was in 2003 when the Bush Administration painted Iraq as a imminent nuclear threat while ignoring the greater threat from Iran. What did the Iraq war achieve? It made the bigger enemy Iran far more powerful while saddling America with a long horrible expensive conflict.

Today, the Obama Administration and the U.S. Congress are moving towards a conflict with Iran in a similar emotionally charged campaign while ignoring the greater threat from Pakistan. Could an American war with Iran result in Pakistan becoming more powerful and more dangerous for America and the world?

The bottom line of this paragraph is simple:

    Iran is likely to eventually put a bomb in Tel Aviv while Pakistan is likely to eventually put a bomb in New York City.

We understand the need for a targeted, tactical campaign against Iran. But why make Iran the emotional  focus of all of America’s attention? The short and simple answer is Israel.

2. Israel & Britain – Case of Two Close Allies

From Israel’s point of view, Iran is a grave danger while Pakistan is nearly irrelevant. Pakistan has not demonstrated any aggressive intent towards Israel while Iran has verbally threatened to wipe Israel from the face of the earth. Israel views Iran as an existential danger and rightly so. So Israel has every reason and every right to defend itself by any means it deems necessary. And Israel is a close ally of America, the closest ally with one possible exception.

That exception is Britain. Britain has been America’s oldest and most steadfast ally. Britain does not ask America for financial aid.  Wherever America needs support., Britain has provided it. British troops fought alongside America’s troops in Iraq. British troops are fighting alongside American forces in Afghanistan.

So what did America do when Britain found itself at war with Argentina a few years ago. America did not get involved in that war to help America’s closest ally. America did not break relations with Argentina. America did not sanction other Latin American countries for maintaining their relations with Argentina. America provided Britain with intelligence and helped in other quiet ways. This was sensible because America is a global power with global interests and America cannot sacrifice those interests in a regional conflict.

This common sense, this necessary focus on America’s global interests has been jettisoned today by the Obama Administration and the U.S. Congress. Instead, they are putting every other American interest in every other part of the world at grave risk in their emotional charge to proclaim their solidarity with Israel.

Why this difference between two close allies? Why does the U.S. Congress behave rationally in the case of Britain but act with wanton emotional fervor when it comes to Israel? They do so even when, according to a survey by Bill O’Reilly’s Factor, 61% of Americans surveyed said America should not get directly involved.

3. Does Israel even want this Sanctions Plan?

The straight answer is No. We don’t see Israel applauding the U.S. Congress for its desire to punish the rest of the world to support Israel. Israel is a smart, clear-headed, calculating country. Israel knows that it will face substantial backlash from all over the world for financial damage resulting from U.S. sanctions. And these sanctions don’t do Israel any good.

Israel wants America to participate in an attack on Iranian nuclear installations. If America is unwilling to do so, Israel would like America to provide it with bunker-busting bombs and refueling tankers. That will enable Israel to mount a large enough air attack to destroy a large part of Iranian nuclear capability.  Such an attack would not damage Iran’s conventional military capabilities, it would not cause severe financial damage to the Iranian people.  It would be a limited attack.

If successful, Israel will be privately applauded and even thanked by every country in Iran’s neighborhood, even by China and Russia.  If it fails, it will suffer the blame alone. Now if Iran is stupid enough to attack America in response, the Obama Administration should retaliate with all of America’s might to destroy Iran’s conventional military capacity as well as Iranian regime. The Iranian regime is smart, rational and they will not risk their survival if they believe the Obama Administration will retaliate with all its might.

We understand that a limited attack by Israel on Iran would create regional risks to America and we don’t recommend it. But it would be a regional issue and it would not damage America’s global interests. So it would be far better than the utterly asinine plan to impose sanctions on the rest of the world to bring pressure on Iran.

4. The Utter Insanity of the Sanctions Plan – 1

 

Several informed and sensible analysts have argued that the sanctions on Iran could actually backfire on America. Ian Bremmer, President of the Eurasia Group, wrote the following in his article in the Financial Times titled: Iran oil sanctions threaten global economic recovery:

    While the strategy of squeezing Iran financially is logical, it comes with serious economic risks that are not often recognised. We’ve entered a new era in which the distinction between the financial and security spheres no longer holds: geopolitics drive markets even as markets drive geopolitics.

    Enforcing oil sanctions against Iran could threaten the global economy. In the context of improving global growth, removing too much Iranian oil from the world’s energy supply could cause an oil price spike that that would halt the recovery even as it does some financial damage to Iran. For perhaps the first time sanctions have the potential to be “too successful”, hurting the sanctioners as much as the sanctioned.

A detailed description of how the Iran sanctions could backfire on America was provided by Kenneth Pollack, Director of the Saban Center of Middle East policy at the Brookings Institution. Mr. Pollack argues:

    The problem is that these sanctions are potentially so damaging that they could backfire, creating at least three sets of consequences that would leave the United States in a worse position, whatever the impact on Iran.

        To the extent that Iranian oil is truly off the market for the U.S. and Europe, it will increase the price for what remains. In case you missed the past 40 years of American economic history, there is no commodity on earth that affects the American economy faster or more profoundly than oil.

         Another potentially fatal flaw in these sanctions is that they turn up the heat on Iran so much that they may well be unsustainable diplomatically, and that is very problematic because sanctions rarely work quickly. And over time, there is a high likelihood that other countries will come to see the misery of the Iranian people as being the fault of the United States, not of the Iranian leadership, exactly as happened with Saddam.

This may be why Ian Bremmer made a very interesting suggestion in his FT article:

    The U.S. can pressure Iran without sabotaging the economic recovery. What he must do is maintain his tough public rhetoric on sanctions, no matter how harsh it appears, while privately signaling China and India – and only China and India – that it is fine for them to purchase Iranian crude, but at a significant discount from market price. Forcing Tehran to sell discounted barrels would provide the desired result: a substantial reduction in Iranian revenue with less impact on global energy prices and less harm to the U.S. and world economies.

5. The Utter Insanity of the Sanctions Plan – II

The above issues have been well discussed and are well understood in America. They are serious issues indeed, but they are essentially short term in their scope and impact. We are far more concerned about the long term strategic impact on America and its relationship with the rest of the world. And when we say “world”, we mean the real world; we mean Africa, China, India, Asia, Latin America, the world in which 3/4th of the world’s population lives, the part of the world which will show the strongest growth in the next three decades.

With its emotional plan accompanied by strident, sometimes hysterical rhetoric, the U.S. Congress has threatened to declare financial war on virtually the entire world if they don’t break off financial and trading relations with Iran.  The U.S. Congress does not seem to care about the serious impact that might have on the countries, their economies and their people. And these countries have nothing to do with the Israeli-Iran conflict. In fact, as Ian Bremmer pointed out in his interview with Reuters, “[Iran] doesn’t exactly look deplorable to large parts of the global community — like Russia, China, nearly all of Africa and even much of the Middle East.”

Remember Iraq? That was strictly a regional conflict between America and Iraq. America did not involve any other region of the world in that conflict. Still America suffered a massive downgrade of respect and support in the entire world. Not only is America now getting involved in another regional conflict with Israel and Iran, the U.S. Congress is threatening to sacrifice the economic interests of virtually every country in Africa, Asia and Latin America. Can we imagine the backlash from the rest of the world and can we fathom the extent of long term damage America could suffer?

There is one long term damage that worries us the most – the damage to America’s financial system, the foundation of America’s prosperity.

5. The Utter Insanity of the Sanctions Plan – III

The foundation of U.S. financial dominance is the reserve currency status of the U.S. Dollar. This is why the world’s financial system goes through the American financial system. The American financial system is open, flexible, transparent and trusted.

The Sanctions Plan of the U.S. Congress & the Obama Administration is based on using the U.S. Financial System as a weapon to browbeat the world. There are grave dangers in threatening the use of your most powerful weapon. If the threat of using it fails to coerce, then it has to be used. If it is used but fails to deliver a victory, then there is nothing else left in the quiver. And just the threat prompts serious efforts to build countermeasures.

That is what we are afraid of.  The world has been using the U.S. Dollar and the U.S. financial system both out of convenience and inertia. That inertia was shaken up a bit in the aftermath of the 2008 financial crisis in America. That crisis prompted China to intensify its efforts to make its currency,  the Renminbi, an international currency. The crisis also prompted Russia to seek alternatives to the U.S. Dollar at the IMF, the International Monetary Fund. 

These efforts have gone nowhere because Latin America, Africa and the rest of Asia preferred the convenience of the current Dollar-based financial system. Now the U.S. Congress is threatening to shut these countries out of the U.S. Financial system if they don’t obey U.S. rules about Iran. If the U.S. Congress can do this once, they can do it again. No country, no country dedicated to the well being of its people can tolerate such an economic stranglehold.

Perhaps they had no choice in the last century. But this is not our father’s world, as Jim O’Neill*, Chairman of Goldman Sachs Asset Management, made clear to CNBC recently:

    “We are only three years off maximum, maybe two years before the 4 BRIC (Brazil, Russia, India, China) countries become bigger than the United States….a few of the countries that are also becoming more important such as Indonesia, Turkey, Korea, Mexico. If you put those 4 together with the BRICs, this decade, those eight will create double the amount of global GDP that Europe and the U.S. will do put together.”

The primary American goal ought to be to ensure these countries do not act in unison against U.S. interests.  Instead, by threatening to impose sanctions on all the BRICS (S for South Africa) and on the other countries, the Obama Administration and the U.S. Congress are virtually forcing all these countries to come together to build an alternative financial architecture. This is not just insane, but suicidal.

This is not idle or fanciful speculation. This past week, the five BRICS countries met in New Delhi and agreed to support intra-BRICS trade in local currencies. If successful, this could pose a long term threat to the primacy of the U.S. Dollar.

The BRICS also discussed the establishment of a new multilateral financial institution, a new BRICS bank that will help the BRICS countries with their financial development. Such a Bank will be outside the realm of the World Bank which the U.S. dominates. It is not hard to see such a bank eventually issue a special currency  (SDR or Special Drawing Right units in the financial lingo) for use in intra-BRICS trade. Each one of these countries is a regional leader. So we could see such BRICS SDR used by smaller countries in Asia, Africa and Latin America to trade with the 5 BRICS and with each other.

This will not doom the United States. It will simply make the U.S. Financial system more regional and less global. It will also help the rest of the world move away from the U.S. Dollar over time. This is negative for America’s future prosperity.

None of the above is easy. But it is doable if the impetus is strong enough. Unfortunately, the U.S. Congress and the Obama Administration are the ones delivering the impetus to BRICS and other emerging economies to plan to move away from the U.S. Dollar. As we said before, this is not just insane but suicidal.

The Bush Administration was excoriated for being arrogant with the world and for damaging America’s standing. Frankly, the Bush Administration was a sissy compared to what the Obama Administration and the U.S. Congress are doing to the world with their Iran Sanctions plan. In doing so, they are gambling with the future of the U.S. Dollar and American prosperity. For what goal? To proclaim their commitment to Israel. And Israel doesn’t even want this plan. Isn’t Insanity the right word for this? 

Indian Entrepreneurs Fit into an American Tradition

America is a nation of immigrants. But it is historically has been a nation of entrepreneurs. Because of geography and U.S. immigration laws it was not possible for Indian immigrants to play a large role as entrepreneurs in the U.S. economy. However, the rise of Indian business people in America, especially since 1990, fits into a long tradition in America.

Early History of Immigrant Entrepreneurs in America

American history is fueled by the story of entrepreneurs. “The history of the United States lies in entrepreneurial ambition,” notes the Babson Entrepreneur Experience Lab. “The first colonies established in the New World sought to take advantage of new access to raw materials, agricultural lands and trade routes. More importantly, immigration to America offered the chance to escape class and persecution and to create opportunities for oneself; it was seen as the ‘land of opportunity.’ In particular, economic growth and entrepreneurial opportunities were found in owning land, various mercantile activities and exploration.”

Entrepreneurs Introducing New Methods and Technologies

Individual entrepreneurs, both native-born and foreign-born, have influenced how Americans communicate from the time of the telegraph up to the modern-day advent of mobile phones. In 1844, Samuel Morse won a federal grant to demonstrate the feasibility of the telegraph, though initially it could only transmit about 1,000 feet. When the federal government showed little interest in expanding the capability of the technology, Morse licensed private companies that within 6 years had built a “comprehensive network between major commercial centers.” According to Gerald Gunderson, author of An Entrepreneurial History of the United States, “Merchants extended their operations over a much wider area as the delays and uncertainty of working in distant markets fell. The telegraph took Americans a long way toward creating a national market by eliminating much of the disadvantage of distance.”

Entrepreneurs have also helped introduce new methods of operating businesses that later became common practice. Andrew Carnegie, an immigrant from Scotland, is famous for producing steel. “Carnegie’s challenge in 1870 was to develop an organization that improved efficiency as rapidly as possible,” explained Gunderson. “This turned not so much on inventing technology to produce steel, as on building an organization whose instinctive, primary focus was to reduce costs. Some of Carnegie’s innovations are so widely employed today they have become standard topics in management textbooks. One was the development of profit centers.”

Indian Entrepreneurs Emerge in America Post-1965

Between 1820 and 1959, only 13,363 Indians immigrated to America. This was due to the long distances but also because of immigration legislation passed in 1924 that severely limited immigration from eastern European, Asian, and African countries.

The 1965 Act eliminated the national origins quotas, opening the door to the immigration of Indians, Chinese and many others. The rise of Indian students in the United States helped lead to more family and employment-based immigrants and, as a result, that helped lead to more immigrant entrepreneurs.

A study I did for the National Venture Capital Association in 2006 examined publicly traded companies that had received venture capital. (See study here.) The study found, India, with 32 companies (22 percent), ranked first as the country of origin for immigrant-founded venture-backed public companies, followed by Israel with 17 companies (12 percent), and Taiwan with 16 companies (11 percent). Canada, France, the United Kingdom, Germany, Australia, China, Iran, and two dozen other countries were also among the countries of origin of the immigrant entrepreneurs on the list.

A study just released by the National Foundation for American Policy examining the top privately-held venture-funded companies. It also found India was the leading source country for immigrant entrepreneurs. (See study here.) Today’s Indian entrepreneurs are fitting into an American tradition of influencing society through entrepreneurship that goes back hundreds of years in our country’s history.

Afghanistan Antagonists

Indian Prime Minister Manmohan Singh and Afghan President Hamid Karzai

India has begun maneuvering to fill the potential power vacuum in Afghanistan.

As an earlier post argued, the quickening U.S. disengagement from the Afghan conflict that President Obama signaled four months ago will inevitably spark an intense regional scrimmage for influence as that country’s neighbors scramble to fill the resulting vacuum. The last few weeks have witnessed India making its opening moves in this jockeying by signing a strategic partnership agreement with Afghanistan and by repairing strained relations with Iran.

The strategic partnership that India and Afghanistan sealed last week – the first of its kind that Kabul has entered into – will significantly enhance New Delhi’s profile in Afghanistan. The arrangement provides for increased cooperation in counter-terrorism operations, as well as for expanded Indian training and equipping of Afghan security forces. It opens the development of Afghanistan’s mineral wealth (which may be worth nearly $1 trillion) and newly-discovered hydrocarbon resources to Indian companies. New Delhi also pledged to work with Iran to develop trade routes to Afghanistan that bypass Pakistan. Afghan President Hamid Karzai, who signed the agreement during a two-day trip to New Delhi – his second visit this year – praised India as a “steadfast friend and supporter” of his country, while Indian Prime Minister Manmohan Singh promised that India would “stand by the people of Afghanistan” even after the 2014 pull-out of U.S. and NATO forces.

Although Karzai insists that the partnership is not directed against Pakistani interests, it coincides with a serious deterioration of relations between Kabul and Islamabad. In the past week, the Afghan government has accused Pakistan of being behind the September 20th assassination of Burhanuddin Rabbani, Karzai’s chief envoy to the fledgling peace negotiations with the Taliban, as well as a foiled plot to kill Karzai himself. Standing in New Delhi, Karzai termed Pakistan a “twin brother” to his own country, but that was hardly enough to disguise the fact that his government was openly spurning Pakistan’s professions of friendship in favor of a wide-ranging covenant with its arch-nemesis.

The partnership underscores that New Delhi, unlike Washington, has no exit strategy in Afghanistan. Since the start of the Afghan conflict ten years ago this month, India has emerged as the country’s largest regional donor. It has invested more than $1 billion in assistance, mainly in infrastructure and development projects, including constructing the new parliament building in Kabul. It has also undertaken small-scale training of the country’s police, army leadership and bureaucrats. Prime Minister Singh traveled to Kabul this past May seeking to broaden India’s engagement. There he unveiled a significant expansion of Indian aid, committing an additional $500 million over the next few years.

Besides shoring up the precarious Karzai government, New Delhi is also moving to patch up strategic ties with Tehran, whose interests in Afghanistan are roughly congruent. India has traditionally relied upon Iran to help blunt Pakistan’s influence in Central Asia and to serve as a bridge to trade and energy opportunities there.  Relations between New Delhi and Tehran have been strained for the past few years as India, at America’s behest, supported several international censures of the Iranian nuclear weapons program. Prime Minister Singh turned down a number of invitations for a state visit to Tehran, and his government engaged in a convoluted exercise to avoid having Indian payments for crucial energy imports from Iran run afoul of U.S. sanctions against Tehran.

Yet the prospect of a geopolitical vacuum in Afghanistan is driving the two countries closer again. Singh met with Iranian President Mahmoud Ahmadinejad on the sidelines of the United Nations General Assembly annual conclave in New York last month and pointedly accepted a renewed invitation to visit Tehran in the near future. The two countries have also established a new payments mechanism for Iranian oil exports and are setting up a joint commission to explore even closer economic and security links.

Pakistan has long considered Afghanistan to be its strategic backyard. With so much of its national security posture driven by an obsessive focus on India, Islamabad is bound to regard New Delhi’s growing involvement there as a grave provocation. Pakistan regularly charges (see here and here) that India is using its large diplomatic presence in Afghanistan to funnel covert support to separatists in the restive province of Baluchistan, and the new India-Afghanistan partnership will be taken as further confirmation that New Delhi is intent on encircling and dissecting the country. Likewise, the renewed coordination between New Delhi and Tehran will be interpreted as a return to the role they played a decade, when their support for the Northern Alliance helped frustrate the Taliban regime. (Indeed, there are increasing signs that the remnants of the old anti-Taliban movement are being reconstituted.)

Given the region’s geopolitical dynamics, India has strong strategic interests in ensuring that any government in Kabul is capable enough to be a bulwark against Pakistan. And so India’s maneuvers are predictable enough. Inevitable, too, is the blowback from Islamabad. The nascent thaw in bilateral relations that has developed in the wake of the mid-July visit to New Delhi by Pakistani Foreign Minister Hina Rabbani Khar is now in jeopardy. Also expect increased attacks by Pakistan-based jihadis targeting Indian interests in Afghanistan, like the bombings of the Indian embassy in Kabul in July 2008 that killed 58 people, including the Indian defense attaché, and in October 2009 that left 17 Afghans dead.

Iran Imbroglio?

Is the U.S. sanctions regime against Iran’s petroleum sector undermining India’s energy security efforts? One might think so given the dispute that played out between New Delhi and Tehran over the past few weeks. India is Iran’s second largest oil customer after China and absorbs about 20 percent of its crude exports. But because U.S. sanctions complicate the payment process, the Islamic Republic had threatened to cut off deliveries unless India paid some $5 billion in outstanding arrears by August 1. If implemented, the threat would have disrupted 12 percent of India’s oil imports.

Credit: http://irdiplomacy.ir Tehran’s atomic ambitions have become an irritant in US-India relations. President Obama signed into law last summer a new round of anti-Iran penalties, which affected some Indian companies and prompted complaints from New Delhi about the extra-territorial reach of U.S. laws. Some believe that continued friction over the issue might endanger New Delhi’s candidacy for a permanent seat on the United Nations Security Council, while others fear that compliance with U.S. laws will compromise India’s foreign policy independence.

In truth, though, the issue is losing its potency to bedevil US-India ties. This is not because Washington will cease regarding the Iranian nuclear program as a matter of concern. Nor will South Block finally figure out how to painlessly balance its simultaneous quest for constructive relations with Iran and its American nemesis.  Rather, now that Tehran has largely accumulated the requisite materials and technology for a nuclear weapon, U.S. policymakers are increasingly coming to the grudging realization that there are real limits as to what can be done to elicit Iranian compliance with the global nonproliferation regime.

One of the ironies of the diplomatic process that eventuated in the US-India civil nuclear accord is that as concerns about Indian proliferation activities ceased being a hindrance to closer bilateral ties, the Iranian nuclear issue surfaced as a new point of discord. Indeed, in some quarters in both Washington and New Delhi, the two developments were inextricably linked. In the months following the path-breaking July 2005 summit between President George W. Bush and Prime Minister Manmohan Singh, US Ambassador David C. Mulford continuously sounded the alarm that a failure to back a series of International Atomic Energy Agency (IAEA) motions censuring Iran risked jeopardizing Congressional support of the agreement.

Influential Congressional voices underscored the admonishments. The U.S. Congress gave preliminary assent to the nuclear initiative when it passed the so-called Hyde Act in late 2006. But it also attached provisions to encourage Indian backing of the U.S. approach on Iran, thus ensuring that the issue would continue hanging in the air throughout the negotiations over the enabling “123 Agreement.” Congressional leaders also sent a toughly-worded letter to Prime Minister Singh in May 2007 warning of “grave concern” that India’s ties with Iran “have the potential to significantly harm prospects” for the accord’s final passage.

Although President Bush took the position that the Hyde Act’s provisions on Iran were “advisory” in nature, an odd alliance of the Indian Left and Right regarded them as an outright affront to the country’s sovereignty. Pointing to New Delhi’s support of the IAEA censures in late 2005 and early 2006, they accused Mr. Singh of purchasing Washington’s concessions on the civil nuclear initiative by mortgaging India’s prized strategic autonomy. These passions came to a head in the parliamentary vote of confidence that occurred in July 2008, an unprecedented act for a foreign policy matter.

Given what was at stake in the US-India nuclear negotiations – not only critically-need access to reactor technology and fuel but also the prospect of converting a strategic rapprochement with the world’s premier power into a full-fledged partnership – it is not surprising that New Delhi sought to mollify Washington’s concerns on Iran. Still, the charges leveled against the Singh government were off the mark. The IAEA votes in 2005 and 2006 represented a tactical adjustment rather than a wholesale shift occasioned by excessive deference to U.S. policy preferences.

This is not to say that India would otherwise have been supportive of Iran’s nuclear weapons program. New Delhi has been consistent that Tehran must live up to its obligations under the Non-Proliferation Treaty, a position that was reaffirmed in November 2009 when it backed another IAEA rebuke of Iran.

Yet the Indian government also has done little to surrender the pursuit of what it considers important national interests vis-à-vis Tehran. This is vividly demonstrated by the recent acrobatics in finding a mechanism to pay for crucial energy imports from Iran. Acceding to U.S. pressure, New Delhi barred Indian oil and gas companies last December from settling payments through the Tehran-based Asian Clearing Union. Iran had advertised the ACU as a means of sidestepping U.S. economic sanctions and Indian enterprises made extensive use of the facility. Through American officials hailed the move as a “significant step,” New Delhi quickly arranged an alternative conduit, using an Iranian-owned bank in Germany to funnel euro-denominated payments.

When the new connection was shut down this spring, again due to Washington’s insistence, India and Iran began discussions on another arrangement, which despite Iranian threats of shutting off the oil spigot eventuated in an agreement this week to route payments (mainly in euros) through a state-owned bank in Turkey. And even as New Delhi was going through these maneuvers, a consortium of firms, led by the overseas arm of the state-owned Oil and Natural Gas Corporation, was moving forward with plans to invest $5 billion in developing the Farsi gas field in Iran.

Energy security is a substantial reason for New Delhi’s desire to continue its engagement with Tehran. Possessing the world’s second largest oil and natural gas reserves, Iran ranks just behind Saudi Arabia as India’s most important crude oil supplier. And with the country’s power requirements burgeoning, India will be increasingly dependent upon foreign energy sources, including Iran.

Besides the petroleum connection, geopolitics will also drive New Delhi into a closer relationship with Tehran. India has traditionally relied upon Iran to help blunt Pakistan’s influence in Central Asia and to serve as a bridge to trade and energy opportunities there.  And with the endgame of the Afghan conflict beginning to unfold, this reliance will only deepen. New Delhi now has even less incentive to go along with any new exertions of U.S. sanctions, and India and Iran may go so far as to revive their cooperation during the 1990s that provided critical support to the non-Pashtun militias battling the Taliban regime. The Americans will surely grumble about the cozying up with Tehran, but the strategic logic of the U.S. withdrawal from Afghanistan leaves New Delhi little choice.

But as New Delhi adjusts policy, an even more significant change is underway in Washington, with U.S. options in dealing with Iran narrowing in important ways. Critics urge the Obama administration to be more forthcoming in diplomatic talks, though with the current disarray in the Iranian government it is difficult to see how even the most sincere of efforts could gain meaningful traction. The administration has also pointedly stressed that “all options are on the table,” implying that it is willing to pick up the cudgel of military action in the event Tehran fails to engage diplomatically. Yet this threat always had an air of unreality, given how armed hostilities in the Persian Gulf region – the epicenter of the world’s petroleum lifeline – would have calamitous economic consequences.

And now the saber-rattling option is ringing more and more hollow by the month, in view of the political consensus that is quickly growing in Washington in favor of reducing the country’s strategic commitments. Acknowledging that the U.S. military establishment is “exhausted,” just-retired Defense Secretary Robert Gates pointedly cautioned against launching any new conflicts in the Middle East.

Of course, the American focus on a nuclear Iran will not flag entirely.  New unilaterally formulated and enforced sanctions are certainly possible and these could come to ensnare Indian firms.  But the lack of viable alternative options will compel Washington’s acquiescence were Iran to develop a strategic arsenal, affecting in turn the demands that it places on allies and partners.

Indeed, the real challenge for Indian policymakers these days seems to lie more in Riyadh than in Washington. The simmering rivalry between the Shiite theocracy in Iran and the Sunni monarchy in Saudi Arabia is once again coming to a boil. A senior member of the Saudi royal family has reportedly warned that Riyadh is preparing to employ all of its economic, diplomatic and security assets to blunt Tehran’s regional ambitions. India may well get caught in the crossfire. If it does, satisfying the demands of its principal suppliers of crude oil will be South Block’s next balancing act.