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Defence And Strategic Affairs Blog

Knocking on APEC’s Door

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India’s absence from APEC is a serious omission for the organization. Its entry should be on the agenda of the upcoming APEC Summit in Honolulu.


apecHaving made the calculation that America’s security and prosperity would be enhanced by partnership with India, the United States over the last decade has promoted New Delhi’s admission into global governance structures. For the Bush administration, this meant doing the heavy lifting required to enroll India into the Nuclear Suppliers Group, an informal cartel governing the global nuclear regime whose original purpose of existence was to exclude New Delhi from its ranks. The Obama administration similarly helped usher India into the Group of 20 forum on the international economy and, most recently, endorsed its long-standing bid for permanent membership on the United Nations Security Council.

The time has now come for Washington to sponsor New Delhi’s entry into another international institution from which it has been barred for much too long.  India for decades has desired formal involvement in the Asia Pacific Economic Cooperation (APEC) forum, which engages over half of world gross domestic product and a large fraction of global trade. But its application has continuously been passed over due to a lack of consensus inside the grouping, which currently numbers 21 members. Some APEC countries have expressed concerns that the institution is too unwieldy as it is and cannot accommodate India or the dozen other interested countries lined up at its door. Others argue that India is not really a Pacific Rim country and is therefore outside of APEC’s geographic parameters.

But with India poised to become one of the world’s top economies in the years ahead, its absence is a serious lacuna for the organization. New Delhi already participates as a full member in regional leadership groups like the East Asia Summit (EAS) and the Association of Southeast Asian Nations (ASEAN) Regional Forum, both important venues for political and security discussions. It is also a full ASEAN dialogue partner.

Southeast Asia has historically been an area of deep Indian trade and cultural influence but was neglected diplomatically during much of India’s independent existence. Seeking to make up for lost time, New Delhi launched the “Look East” policy in 1992. It has proved to be a very successful initiative, paving the way for significant and rapidly-growing economic and diplomatic linkages in the region. The ten member-countries of ASEAN now constitute India largest export market. Southeast Asia takes in more than half of Indian exports, up from around 40 percent just a decade ago.  Indeed, India’s total trade volume with East Asia now exceeds that with the United States or the European Union. And New Delhi’s trade diplomacy has been on a tear recently in Asia, with major economic agreements being signed with Japan, South Korea, ASEAN, Singapore, Thailand and Malaysia. It has commenced negotiations with Indonesia to boost the $12 billion in trade the two countries conducted in 2010.

India has also emerged as a major security player in East Asia and is fast becoming a key factor in the region’s geopolitical calculus. A landmark India-Japan security accord was signed in 2008, and important strategic partnerships have been established with Australia, Indonesia, Vietnam and Singapore. Indeed, Tokyo and Singapore lobbied for New Delhi’s membership in the EAS, over Beijing’s objections, in order to counterbalance Chinese influence in the organization. The United States and India now hold regular consultations on Asia-Pacific policy and a trilateral US-India-Japan security dialogue will be instituted next month in Tokyo.

The Indian navy has been conducting exercises with its U.S. and Japanese counterparts for a number of years now in the Pacific Ocean, and as the brief encounter two months ago between the INS Airavat, an amphibious warfare vessel, and the Chinese navy off the coast of Vietnam demonstrates, the navy is becoming a regular presence in the region’s waters.

APEC’s membership moratorium expired last year. With Washington currently holding the forum’s chairmanship, the Obama administration should be preparing the diplomatic groundwork to place India’s admission on the agenda of the APEC Summit that will take place in mid-November in Honolulu. To avoid interminable negotiations about whether other countries should be let in at the same time, the U.S. might repeat its persuasive line about New Delhi’s entry into the global nuclear order: India is simply so important that it merits a special dispensation.

As a previous post argues, New Delhi’s membership in APEC should be part of an overall agenda for advancing US-India economic engagement. But it would also pay major strategic dividends. In his address to the Indian parliament last November, President Obama urged India not only to “look East” but also “to engage East” for the sake of enhanced security and prosperity throughout Asia. Secretary of State Hillary Rodman Clinton underscored this theme in her visit to India two months ago. Speaking in Chennai (formerly Madras), a port city that has significant economic ties with Southeast Asia, Clinton urged India to take on a larger role in shaping the regional architecture for the Asia-Pacific. Reiterating Mr. Obama’s formulation, she stated that “we encourage India not just to look East, but to engage East and act East as well.”

India-US Relations Blog

Back to Basics

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With the intergovernmental drivers of the US-India partnership now in a period of languor, it is time for the economic relationship to return to the forefront. This is the moment for business leaders in both countries to once again step forward.

As earlier posts have argued, relations between Washington and New Delhi – which not too long ago seemed destined to reach for the stars – are now feeling the heavy tug of gravity. In place of soaring rhetoric and high-profile undertakings, ties between the two capitals are weighed down by bureaucratic inertia and small-bore ideas.

Image back to basicsTwo recent episodes confirm this downward trajectory. The annual US-India economic and financial partnership talks took place this past June in Washington, though few beyond the personal staffs of Treasury Secretary Timothy Geithner and Finance Minister Pranab Mukherjee took any notice. The anodyne communiqué that was issued highlighted the deepening of “institutional relationships” as a major achievement of the talks, but the lack of specific commitments contrasted unfavorably with the detailed work plan that emanated from the US-China economic dialogue occurring just six weeks earlier. Indeed, the Washington-Beijing nexus has a way of upstaging US-India economic exchanges. When Geithner traveled to New Delhi in April 2010, for the launch of the bilateral economic partnership, all of the media attention was focused on whether he would fly off on a spur-of-the-moment trip to China, to engage in talks over the relative value of the yuan. (To nobody’s surprise, he subsequently did end up in Beijing.)  Similarly the US-India Strategic Dialogue that took place six weeks ago in New Delhi was an exercise in modest output and mutual frustration.

Given the serious domestic problems diverting the attention of both capitals, it is difficult to imagine how the government-to-government relationship can be advanced significantly in the next few years.  Nonetheless, the outlook for bilateral affairs is not entirely dim.  One exceedingly bright spot is the accelerating pace of economic engagement.  A decade ago, then-U.S. ambassador to India Robert Blackwill lamented that the volume of bilateral trade was as “flat as a chapati.” But trade levels have risen markedly in the years since.  Indeed, even with the global economy in the doldrums and the torpor in official ties, 2010 was a banner year for the trade relationship, with two-way goods exports surging nearly 30 percent to $48.8 billion. Merchandise exports are also up significantly in the first half of 2011 compared to the same period last year. All told, India is now America’s 12th largest good trading partner and the country constitutes one of the fastest-growing destinations for U.S. exports.

It is true that the economic relationship is very far from achieving critical mass and that US-China trade flows eclipse the US-India figures many times over. Still, the trend lines are quite hopeful and they illuminate the vital role that economic engagement plays in securing the growth of a resilient partnership over the long term.  This last point is persuasively set out in a new book, The Eagle and the Elephant, by Raymond E. Vickery, Jr.  A former U.S. Assistant Secretary of Commerce in the Clinton administration and now a leading figure in the US-India Business Council, Vickery argues that “economic engagement is fundamental to the ability of the United States and India to cooperate politically.” He demonstrates in great detail how over the past decade the private sectors on both sides forged the foundation for the diplomatic rapprochement that eventuated in the path-breaking civilian nuclear accord and an ever-closer security relationship. (Importantly, too, the book illustrates how mismanaged episodes of economic interaction can have far-reaching negative impact, such as the Dabhol debacle in the mid-1990s that continues to impede bilateral cooperation on energy and environmental matters, as well as impairing India’s international credibility as a respecter of contractual rights.)

So how can policymakers in Washington and New Delhi leverage the vitality of the economic relationship in order to re-energize the overall partnership? Two of the usual answers – concluding a broad-based free trade agreement and an investment treaty – are problematic, at least for the next few years. Considering that the two countries are at loggerheads in the Doha Round of multilateral trade negotiations, plus the neuralgic agricultural issues that must be dealt with, the prospects for a comprehensive trade accord are well off in the distance. And although U.S. and Indian policymakers recently agreed to accelerate discussions over an investment treaty, its full value is really contingent upon additional reforms within India – such as liberalizing foreign direct investment in the retail and financial sectors, deregulating labor markets, regularizing the land acquisition process, and dramatically addressing infrastructure bottlenecks. With decision-making in New Delhi all but paralyzed these days, it is anyone’s guess when these key reforms will be enacted.

There are several initiatives that have more promising prospects, however. As spelled out in earlier posts, Washington and New Delhi should aim to build upon their striking record of engagement in the innovation economy sectors by crafting a free trade mechanism relevant to advanced technology products and drafting an immigration accord that allows high-skilled Indian professionals to work in the United States. Both undertakings would capitalize on important economic complementaries and would build up economic capacities that are so significant to the long-term prospects of both countries.

Continuing to think outside the box, negotiators also might explore whether India would be willing to address manifold U.S. concerns about its regime for protecting intellectual property in exchange for a totalization agreement covering Indian technology workers posted to the United States on temporary assignments (as Derek Scissors suggests, or for the special restoration of trade privileges (amounting to $3.5 billion in value in 2010) that expired when the U.S. Congress failed to reauthorize the Generalized System of Preferences at the end of last year.

Finally, taking page from its successful campaign several years ago to bring India into global nonproliferation institutions, the United States should use the upcoming APEC Summit, which takes place this November in Honolulu, to lobby for New Delhi’s admission into the group.  Given that India is poised to become one of the world’s top economies in the coming years, its absence is a serious lacuna for the organization.  (My next post will deal with this issue in greater detail.)

With the intergovernmental drivers of the US-India partnership now in a period of languor, it is time for the economic relationship to return to the forefront.  This is the moment for business leaders in both countries to once again step forward.

Defence And Strategic Affairs Blog

Defense Dysfunction

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The MMRCA decision illustrates the deep problems besetting the Indian defense establishment.

Much of the commentary about India’s elimination of the Boeing and Lockheed Martin bids from its hotly-contested, highly-lucrative Medium Multirole Combat Aircraft (MMRCA) competition has focused on its meaning for US-India relations.  The air force is the largest beneficiary of the country’s burgeoning military budget and a number of foreign companies were looking to snap up the $11 billion MMRCA contract. The Americans were also expecting that the diplomatic capital they assiduously built up in New Delhi in recent years would turn the decision to their favor. Instead, New Delhi opted to reject the U.S. entrants and shortlist for final selection the Typhoon aircraft produced by the four-nation Eurofighter consortium (composed of British, German, Italian and Spanish defense companies) and the Rafale offered by France’s Dassault Aviation SA.

MMRCA_ImageMany interpret the decision as an emphatic rebuff of Washington’s overtures for closer security links. John Elliott, a long-time observer of the Indian scene, views the move as an effort at “keeping the U.S. firmly in its place.”  Others see it as a sign that lingering doubts still reside in New Delhi about the reliability of the United States as a defense supplier. Bruce Riedel, an informal Obama administration adviser on South Asia, argues that “there is a belief that in a crisis situation, particularly if it was an India-Pakistan crisis, the U.S. could pull the plug on parts, munitions, aircraft – precisely at the moment you need them most. Memories are deep in this part of the world.” Stephen P. Cohen, the dean of U.S. South Asianists, concurs: “India would have given the order to a U.S. firm if it had been assured that the United States would back India politically thereafter.  Since this guarantee was not available, and awarding a U.S. firm the contract would increase Washington’s ability to influence New Delhi, the United States was a not a good choice politically as a supplier.”

According to Ashley J. Tellis, one of the most insightful and well-informed observers of US-India affairs, both perspectives are wrong, however. In a superb review of the decision, he argues that it represents less an omen about bilateral ties than a sui generis episode involving the Indian air force’s rigid application of technical desiderata. The bottom line, Tellis says, is that New Delhi selected the European contestants for no other reason than they were adjudged the better flying machines.

Some Indian commentators are of the view that, with bilateral ties now so multi-dimensional and mature, Washington’s sense of letdown will dissipate quickly. This is likely to prove wishful thinking, given how aggressively the Obama administration lobbied on behalf of the American bids. But Tellis’s account at least reassures that the decision did not entail a repudiation of the US-India strategic partnership.

Less heartening, including to those in Washington who want to see New Delhi become a more capable global power, are the serious problems in the Indian defense establishment that are highlighted by the MMCRA selection process. Aiming to ward off charges of graft and extraneous influence that have plagued big-ticket military contracts in the past – Rajiv Gandhi’s government collapsed in 1989 due to the corruption scandal involving the Bofors heavy artillery pieces – Defense Minister A.K. Antony crafted a selection process that relied solely on narrow technical assessments that reportedly encompassed some 500 criteria. Relevant strategic, political and financial factors were purposively excluded from consideration. Following extensive field trials, the air force concluded that the two European finalists possessed superior aerodynamic capabilities relative to their American competitors.

Tellis agrees that, on the basis of narrow technical assessments, the Typhoon and Rafale represent the best choices and that the selection procedure was free of corruption. But if the process was clean, it was not in his view a rational or even well thought-out one. By making such a major procurement decision without examining other attendant considerations, the defense ministry, in Tellis’s view, runs the risk of misallocating precious resources, thereby undercutting India’s larger national security interests. Giving due weight to important non-technical factors, he contends, would have cast the American entrants, particularly Boeing’s F/A-18 E/F Super Hornet, in a more favorable light. As he sees it, the Super Hornet is a truly cost-effective choice once issues like unit piece, technology transfer, offsets, production lines schemes and possibilities for strategic collaboration are assessed.

This specific judgment might be contested within the Indian air power community, but the post-mortem Tellis provides about this particular acquisition decision has larger institutional implications. He reveals, for instance, that the financial details of the bids were not examined prior to the short-listing. If they had been, evaluators might well have asked whether the marginally superior performance offered by the Typhoon and Rafale are worth their markedly higher price tags ($125 million and $85 million, respectively) compared to the Super Hornet’s $60 million. And even if Indian officials decided they were still getting their money’s worth, it would have behooved them to include the U.S. plane on the shortlist in order to enhance their bargaining leverage vis-à-vis the European companies.

It is also striking that only after the shortlist was announced did the defense ministry turn to consider important questions about technology transfer, offset arrangements and production efficiency. India’s defense industrial sector remains conspicuously immature, certainly in contrast to other world powers. (As Stephen P. Cohen and Sunil Dasgupta maintain in their new book, the well-funded military R&D system is remarkably short of accomplishment.) Yet Tellis points out that the European aircraft selected have a more limited capacity to transform the country’s technology base than their American counterparts. This, too, would seem to be an important matter to assess, yet it was deliberately excluded from consideration.

Geopolitical considerations were similarly absent from the decision, especially the issue of whether New Delhi should leverage the opportunity to enhance military-technological ties with the United States. With President Obama’s personally intervening with Prime Minister Manmohan Singh, the lack of integrated decision-making all but guaranteed negative diplomatic fallout. As Tellis notes:

“In its zeal to treat this competition as just another routine procurement decision falling solely within its own competence, the acquisition wing of the ministry of defense communicated its final choice to the American vendors through the defense attache’s office at the U.S. Embassy in New Delhi without first informing the ministry of external affairs. This action put the latter in the embarrassing position of not knowing about the defense ministry’s decision a priori and, as a result, was unable to forewarn the United States.”


The upshot, according to Tellis, is that the thoughtless manner “in which these results were conveyed did not win New Delhi any friends in Washington, a process that Indian government officials now recognize and ruefully admit was counterproductive.”

New Delhi has now announced that a blue-ribbon commission is being formed to examine the deep problems besetting the defense establishment, including those in the areas of strategic planning, resource allocation and systems acquisition. A good point of departure would be considering the woeful institutional lessons offered by the MMRCA case.

India-US Relations Blog

Readout of a Readout

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One of the useful things about summit level meetings such as the Strategic Dialogue is that they provide occasion for a vast cornucopia of information on bilateral relations to come into the public domain, there are pre and post summit briefings, factsheets on various aspects of the Dialogue, press conferences, and the all-important Joint Statement. But, as has been the case increasingly in recent years, there is much less coming out of the Indian side, either because they are so short-staffed or because the various departments are unable to give intelligible inputs, or for some other reason. There was a pre summit briefing to the press (with no questions taken, apparently), but nothing after the summit. In contrast, the Assistant Secretary of State for South and Central Asian Affairs gave a speech on India U.S. relations at a think tank after the summit, and also made himself available to the Press after his return to Washington. At a time when glasnost has spread to foreign policy establishments around the world, the reticence from South Block is unfortunate and ends up with only one side of the story being told.

So, what did Blake have to say about the summit? To paraphrase the more interesting parts of his press conference, much of it in response to questions, Secretary Clinton was as taken in by the voluminous factsheets produced by her Department as everyone else and pointed to them as proof that the Relationship had achieved an irreversible momentum. At the same time, even if the stalemate over nuclear liability was not yet an irritant, it had the potential to become the Damocles Sword of the relationship.

The decision to resume technical discussions on a bilateral investment treaty was highlighted as one of the key deliverables of the visit even though as a journalist present pointed out, a model treaty had been worked out by the U.S. side some time back, and even an interagency review undertaken after which it had been put back in the deep freeze.

On the long-pending Totalization Agreement, as Blake made clear in his remarks, this did not even come up for discussion. According to Blake, this can realistically be taken up only when there were as many Americans working in India as Indians in America. Blake also chided the Indian government for repeatedly raising the issue of H1B visas, noting that Indians had received over 65% of the H1Bs issued last year and that if anything, the Indian government should be “praising” the program.  On the Tri-Valley University issue, Blakes said that it had nothing to do with the American government, implying that the students were at fault for not doing their due diligence before applying in these universities.

Blake was also at pains to point out that the Dialogue was not about deliverables, but more about assessing progress of the many joint Initiatives   entered into and proposing new areas of partnership. This was a bit rich, considering, that at the last Dialogue, the Secretary of State was hell-bent on achieving at least one deliverable and the Indian side was virtually brow-beaten into signing the Technology Support Agreement and the End User Monitoring Agreement (EUMA) after demurring from signing other agreements such as the Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation (BECA), the Logistics Support Agreement (LSA) and Communications Interoperability and Security Memorandum of Agreement (CISMOA).

On Afghanistan, he clarified that Washington was supportive of India’s plans to pour more money into Afghanistan and invest in its infrastructure and private sector development while India was supportive of Washington’s vision for Afghanistan as a gateway into Central Asia and the integration of the South and Central Asian economic blocs.

Reading between the lines of Gates debrief, one get the sense that there is increasing exasperation that the strategic relationship is not moving forward according to the American script. In fact, it is cooperation in areas such as science and technology, education, and renewable energy  that has picked up momentum but remains confined to the factsheets since the U.S. focus is on the strategic and economic aspects of the relationship.  A debrief on the Indian side would give officials a chance to put forward their perspective of the relationship, and quell the disquiet over a presumed downtick in relations.

Tailpiece: The only indication that the Consular Dialogue announced for July 25 did indeed take place was the official photograph from the State Department. Other than that, nary a word from either side about what was discussed. Perplexing, especially when another fake University has been discovered on American shores.

Defence And Strategic Affairs Blog

Iran Imbroglio?

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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.