On June 11, crediting reductions in Iranian oil consumption, Washington approved 6-month exemptions on its Iranian sanctions to India, South Korea, Turkey, Malaysia, South Africa, Sri Lanka and Taiwan. This development follows the first round of extensions granted to 10 European countries and Japan on March 11.
The US has recently stepped up efforts to pressure Iran to end its nuclear program by implementing tougher financial penalties on countries continuing to trade with the Islamic Republic. Under the National Defense Authorization Act (NDAA), foreign financial institutions that conduct petroleum sales transactions with Iran's central bank will be barred from maintaining associated operations in the US. However, a provision within the bill allows the US to grant temporary waivers on its penalties to countries that have attempted to reduce their imports of Iranian oil.
The selectivity of these concessions reflects not only the US’ ability to wield the sanctions as a deft political device, but also an exercise in restraint. International security is about the stabilization of global trade and commerce just as much as its about the freedom from physical threats.
EU states have extensive cultural, economic and military ties with the US, popularly highlighted by the continued existence of the NATO alliance. Other Asian states like Taiwan, South Korea and Japan require American support counterbalancing the perceived expansionist threats of North Korea and China.
Leveraging the ‘Linchpin’
Beyond the obvious trading partners, India also qualified for sanctions relief, fitting within the wider scope of the third annual US-India Strategic Dialogue on June 13. Designed to warm otherwise cool relations between New Delhi and Washington, these talks focused on broadening mutual defence cooperation through increased technology transfer, intelligence sharing and joint research.
"To grow and prosper, we need open, free, fair and transparent global economic systems. We both seek security and stability in South Asia and the Asia Pacific," stated Hillary Clinton. Over the past few years India has awarded $9 billion worth of defence contracts to American companies. Bilateral trade and investment is up $100 billion this year, an increase of 40% from 2009 when the first US-Indian Strategic Dialogue was launched.
India in turn wants reassurance of the United States’ regional guardianship over the continuing stabilization process in Afghanistan and Pakistan beyond 2014, the deadline for other NATO states to meet timetables for withdrawal. Both countries acknowledged the critical importance of expanding private investment and trade in Afghanistan to achieve this end.
As the largest non-military actor in Afghanistan, India has contributed $2 billion in aid to guarantee stability once NATO fully departs. Reported in the Economist, New Delhi wants to be confident that Afghanistan never again becomes a "Talibanised client of Pakistan", referring to claims that Pakistan funded Taliban and Haqqani insurgents in Afghanistan.
This is an outlay the US is happy to make, so long as it can also earn a return on its investment. Dubbed the "linchpin" of the State Department's re-balancing strategy in Asia by Secretary of Defense Leon Panetta, India is a growing competitor the US needs on its side to check Pakistan, but more importantly counter China’s rising regional influence.
Reaching that position begins by investing sufficient diplomatic capital in India, a channel through which the United States can siphon greater influence into the coffers of the Indo-Asian regional leadership. The US has publicly endorsed India’s Look East policy, but the corollary of that support is greater US encroachment on other exclusively Asian institutions. Commenting on the US-India relationship, Hillary Clinton stated:
Both our countries have significant stakes in the future of the dynamic Asia Pacific region, and we need to expand our work both bilaterally and through multilateral institutions such as the East Asia Summit and the ASEAN Regional Forum to work to build a regional architecture that will boost economic growth, settle disputes peacefully, and uphold universal rights and norms.
Ensuring that the design of this framework will also reflect US economic and political interests can be better assured by contracting a closer partnership with India. As a stronger regional ally, India can provide the gateway to a larger Asian sphere of influence.
"Harnessing Asia's growth and dynamism is central to American economic and strategic interests...Open markets in Asia provide the United States with unprecedented opportunities for investment, trade, and access to cutting-edge technology", reiterated Clinton.
However, barriers to investment in India's economy still aggravate US and other Western companies, which complain of inconsistent policy-making, entry barriers, and stalled reforms leading to market uncertainty and a loss of confidence in India’s formerly favorable "Inc." status. "Things are not happening at the required pace, so that has been the basic problem," commented Soumya Kanti Ghosh, a director at the Federation of Indian Chambers of Commerce and Industry.
Timing is always of the essence. Within two days of bilateral meetings with New Delhi in June, Washington issued a formal waiver to India, Iran's second largest oil importer. Perhaps this diplomatic trade-off can help leverage other economic solutions in India to come.
Brianna MacGillivray is an Economic Policy Analyst and Conference Coordinator at the Atlantic Council of Canada. This article was first published by the Atlantic Council of Canada.