India Signs New Deals with Russia and Iran

Newly-signed agreements to buy military equipment from Russia and oil from Iran put India straight in U.S. diplomatic cross-hairs.

Indian Prime Minister Narendra Modi and Russian President Vladimir Putin at a meeting in June 2016. Photo: Narendra Modi, CC

At the close of two days of meetings by Russian President Vladimir Putin with Prime Minister Narendra Modi this past week, the two countries inked major agreements in a variety of categories.

In infrastructure and new technologies, the two leaders publicly disclosed Russia will be involved more in railroad, nuclear power, and space-based systems in India.

In private, India signed an agreement to buy over $5.2 billion worth of Russian surface-to-air missile systems from the country. Despite that this does involve a contract to buy weapons from an American adversary, this ordinarily might not have raised eyebrows so much in the United States. India historically has been buying most of its military hardware from Russia, with the U.S. being its number two provider in that category – with $15 billion of arms sold there over the last ten years.

This time, however, India is running afoul of the U.S.’s Countering America’s Adversaries through Sanctions Act (CAATSA). This unilateral law is the reason why China’s signing a recent deal to buy Russian fighter jets caused the U.S. to impose sanctions on the companies and management on the companies involved – in China. The company and CEO involved in that case was blocked from future contracts with the U.S. and also prevented from securing any visas for travel to the U.S.

Russia is under sanctions from the U.S. for multiple issues, including its meddling in the 2016 U.S. Presidential election and its alleged active trading of fuel supplies for North Korea.

With India, this gets complicated mostly because India is seen as such a strong ally of the United States. It’s also complicated because India has been buying arms from Russia for some time, so for India at least this transaction is no different than others. So when the U.S. was notified of the recent agreement for India to buy Russian missile system, instead of reacting with sanctions aimed straight at India, its response was more muted. U.S. embassy officials handled communications on the issue, saying that any sanctions they might consider were intended as a penalty for “malign behavior”. The officials went on to say that sanctions waivers, which it sounds like might actively be under consideration by the U.S., would be handled “on a transaction-by-transaction basis”. Sanctions, they said, were never intended to “impose damage to the military capabilities of our allies and partners”.

While the Russian sales to India will likely proceed with mostly some back-door-channel finger-waving at India, a second international agreement that was just announced from New Delhi will likely be more difficult for the U.S. to accept. That was the deal reported on October 5 that Iran has agreed to buy 9 million barrels of oil from Iran in November.

The problem with this one is that U.S. sanctions against the Iranian oil industry go into effect on November 4. Those sanctions are tied to the U.S.’s unilateral pullout from the JCPOA agreement signed by the U.S., the EU, and Iran, among others, to encourage Iran to stop its nuclear development plans in the country. The U.S. pulled out of the JPCOA on its own but has announced it will go after any nation which might seek to undermine those sanctions. Iran’s sales of oil to India does just that.

India also has other strategic partnerships with Iran that are raising other concerns with both India and the U.S. One is the Chabahar port development project on the Gulf of Oman, a project India is partnering with Iran to make happen. India has so far invested $500 million in the project and has no intention of backing out. But U.S. sanctions against Iran could make it very difficult for Iran to carry out its future parts of the project. This is especially difficult to deal with as the Chabahar port gets closer to its planned 2019 operational launch date.

How the U.S. handles India on both the new Russian military supply contract and the new oil purchases from Iran is going to be a diplomatic challenge for the White House. If it comes down too tough on India, Prime Minister may have little choice but to seek even stronger relations with Russia and Iran. Yet if the Trump administration is seen as treating ally India very differently on both issues, it may embolden others to find other ways to undermine what are seen broadly as unilateral U.S. dictates. The effect of all could be to weaken U.S. influence in the region even further than it has already been weakened under Trump’s “America First” policies.