India, Israel and the irrelevance of the Middle East

Oh! I managed the GCC
PC: Hindustan Times

The historic visit of PM Modi to Israel is important on many fronts. The first is the dehyphenation of Israel from Palestine. The importance of dehyphenation was discussed widely on TV debates last night. Pro BJP panellists and BJP spokes persons drew analogy from the dehyphenation of India and Pakistan by America and by other western countries. This is important because international diplomacy does not depend on keeping everyone happy. Diplomacy is an act of shrewdness, where the sole aim is self-preservation. But is that the only reason India changed its seventy year old stand?

There are other factors that have led to this change. For starters it is the realisation that the Indian Muslims are not going to go berserk over India’s close ties with Israel. This might sound a bit strange but it is the truth. Read what Al Jazeera has to say on this. In fact all previous governments were probably aware of this misconception. They simply lacked the courage to take the step.

It finally took a non-Gandhi Congress Prime Minister to established full diplomatic ties with Israel, twenty five years ago. That was the time for India to shake away the imagined fear and go ahead with closer ties with Israel. But Political instability and ascend of Sonia Gandhi to the throne dragged India back into its shell. It is hard to imagine why the Congress and the UPA were so scared of taking Indo-Israel relations forward. The loudest pro-Palestinian voices one hears are either from the loony Left or their foot soldiers on Twitter. Majority of Muslims in India are more worried about jobs, education and healthcare like other Indians.

Secondly the politics in the Middle East has changed completely. It was thought that supporting Israel will isolate India in the Arab world, especially the Gulf Cooperation Council (GCC) countries. Millions of Indians work in the GCC countries and remit billions of dollars every year.

The seventy or so years of Palestinian support has not got India anywhere with the Arab world. India, despite its multiple efforts, was not allowed to join the Organisation of Islamic Cooperation (OIC). India never got support from OIC on Kashmir and probably never got any favourable deal on the oil imports. So there was no real benefit to India from its pro Palestine stand.

The other change that happened in the Middle East was the internal feud of the GCC countries. Before the Arab Spring, the only factions in the Middle East were the Sunnis led by the Saudis and the Shias represented by Iran. Their attempts to dominate the Muslim world resulted in regional wars. Post the Arab Spring, things changed and a third country emerged as a power broker. The Qataris sitting on huge gas reserves have the cash to extend influence. In a new three cornered Arab world it is easy to play one against the other. More over the internal frictions often result in extremely favourable oil prices for rest of the world. Saudi Arabia increased its oil output in 2012 only to render the Iranian oil cheaper. Qatar is doing the same today.

Cheap oil is one thing but we all know this will never last. What is, perhaps, prompting India to take the risk of being deprived of gulf oil is its huge domestic market and its increasing shift towards renewables. India is too big to be ignored by anyone, including the oil exporters. OPEC has never been united on oil production and it probably never be. There will always be willing exporters ready to send oil to Indian refineries.

On the renewable front India has made great progress and as much as 17% of its installed capacity supplies clean energy. In fact the actual price of solar energy has gone below the per unit price of thermal energy. So the future belongs to clean energy and not oil. The confidence with which India has adopted 2032 as the year of zero carbon powered cars clearly shows the intent. The only reason the GCC and Iran are relevant to India, may not exist in future.

Thirdly there is Make in India. The western countries have shown their interest and intent but the works that have or may arrive to Indian shop floors are not cutting edge. Chinese manufacturers are bringing in mobile assembly plants and other low tech manufacturing but that can only provide low tech jobs. Israel on the other hand is willing to transfer technology in the high tech sector. That is where the real gains are to be made.

So there might be some extraneous noise on the deepening ties of India and Israel (mostly from the opposition and some attention seeking activists), the ground realities are very different. 

The deal – what it means to India and South Asia

At last

Twenty months of negotiations, threats and diplomacy has led to a deal, which will stop Iran from acquiring weapon grade Uranium. The details of the deal are still trickling in. According to this CNN report, “The deal reduces the number of Iranian centrifuges by two-thirds. It places bans on enrichment at key facilities, and limits uranium research and development to the Natanz facility. The deal caps uranium enrichment at 3.67 percent and limits the stockpile to 300 kg, all for 15 years. Iran will be required to ship spent fuel out of the country forever, as well as allow inspectors from the IAEA inspectors certain access in perpetuity. Heightened inspections, including tracking uranium mining and monitoring the production and storage of centrifuges, will last for up to 20 years. The U.S. estimates that the new measures take Iran from being able to assemble its first bomb within 2-3 months, to at least one year from now”.

 

Three decades of animosity between Iran and the US, due to political intervention of the latter and an unprecedented hostage crisis during the revolution, seems to be thawing. The deal of course means a lot to Iranian economy (the full impact of the deal will only be felt once the sanctions are lifted next year), it also has the potential to influence much of South Asian geo-politics and economy. Iran has the fourth largest proven oil reserves in the world but exported only 2.3 million barrels a day, against 6.2 million barrels a day (2014 data; US EIA) by Saudi Arabia. The sanctions significantly reduced the exports and forced Iran to store millions of barrels of crude in floating tankers in the Persian Gulf.

 

The future – India

Once the sanctions are lifted, Iran will increase production and export. The oil prices already under pressure from a weak demand and oversupply might see a further decrease in prices. Assuming the diplomatic relations between US and Iran will improve progressively and the deal will hold, it is possible that Iran will provide US access to its ports in the Persian Gulf. It may also offer surface connectivity, enabling the NATO to supply its forces in Afghanistan. These two possibilities have the potential to change things for better, for India.

 

With over 80% of its energy needs being imported, India will stand to benefit immensely by cheaper crude prices. India ran a bill of USD 112.7 billion on oil imports in 2014-15 A price drop of even a single dollar per barrel translates into a billion dollars saved. A substantial drop will provide India with a windfall gain, making precious financial resources available for development work.

 

Indian business also stands to benefit from a sanctions free Iran. ONGC Videsh Ltd. discovered a gas filed in the Persian Gulf (Farzad-B) with an estimated reserves of 21.7 trillion cubic feet. The operating contract (with ONGC Videsh owning 60% stake) was never signed due to international sanctions. The situation will change once the sanctions are gradually lifted next year.

 

The future – Pakistan

On the other hand a friendlier Iran may also mean access to US and NATO supplies to Afghanistan. In the past a hostile Iran made Pakistan the sole point of transit for almost all NATO supplies. The heavy dependence on Pakistan lead to billions of dollars being paid to the army and civil administration by America. The money thus paid found its way to funding various terror groups. The fact that Pakistani establishment sponsored terrorism has long been established by both international governments and strategic research scholars. Professor Christine Fair of Georgetown University in her book, fighting to the end gives a well-researched account of Pakistani army, the ISI and past dictators who indulged in funding Jihad.

 

The dependence on Pakistan to serve its goals in Afghanistan, remains a major reason why the US funds Pakistan. Possibility of an alternate route from Iran puts Pakistan in a situation where the American aid dollars might dry up sooner than expected. While cheaper crude will help India fund its poverty elevation programme, a fund crunch in Pakistan might force it to scale down its terror funding.

 

The hope

What really happens is a question that will get answered only in the future, as and when sanctions are removed and how US engages Iran. But there is a clear opportunity for India to scale up its civilizational ties with Iran and turn them into mutually beneficial business relations. A rejuvenated foreign policy and a business friendly government have the potential to make the transition. Hassan Rouhani as a chief guest at Rajpath, for next Republic Day might do India a lot of favour.

India and its oil policy

India’s foreign policy has ruffled a few feathers of late. Largely restrained and reactionary the Ministry of External Affairs has been working overtime to secure India’s energy interests. The global oil markets are going through a rough patch. Iran threatened to close the Strait of Hormuz; South Sudan stopped oil production in early January, loss of Syrian oil because of embargoes, drop in exports from Yemen due to strikes and closure of North Sea rigs due to repairs; all this has lead to a situation of panic in the global oil market. The Economist reported that all these disruptions have shaved off 1.25 million barrels a day of crude output globally. The situation might improve later in the year with most of the production resuming, however this is a clear signal to net oil importing economies that a small disruption in the supply chain can cause serious troubles at home.

India imports 80% of its fuel requirements and offers subsidies on diesel, kerosene and cooking gas. The provisions towards fuel subsidy in the budget of 2012-13 are Rs. 43,580 crores (USD 8.5 billion, at Rs 51.15 for a Dollar). Any increase in crude price will have a huge impact on India’s fuel bill. With a fast growing economy India cannot afford to be caught in a situation where its energy requirements are compromised with. At present India imports a lot of oil from the Middle East, Saudi Arabia being the largest exporter, followed by Iran. Together Saudi Arabia and Iran contribute one third of India’s imports, making India heavily dependent on these two countries. With uncertainty looming large over the region, India has rightly decided to revisit its global oil policy.

To diversify its oil basket India has started exploring other options. There are three instances where India has taken a stand contrary to its established foreign policy. The overseas arm of ONGC has engaged in off-shore exploration in South China Sea. China for long has claimed sovereignty over most of the South China Sea sighting historical evidences. In later 2011 and early 2012, China has raised concerns over Indian expeditions in the region. China also terms the Indian endeavours as provocative and urges restrain. So far the Chinese statements on this matter have been restrained and a direct reference to India is not made. On the other hand Chinese neighbours like Vietnam (which claims the oil reserves to be in its Exclusive Economic Zone), Taiwan, The Philippines, Malaysia, Indonesia, Cambodia and Thailand all have territorial disputes over the South China Sea. Some political commentators describe this region as the most dangerous point of conflict in the region. India’s attempt to seek commercial and strategic foothold in such a region is clearly unprecedented.

In early days of April 2012, India appointed as special envoy for Sudan and South Sudan, again a departure from India’s established foreign policy. For the first time India has categorically mentioned its oil needs as the prime reason for appointing a special envoy. Press statements quote ministry officials saying, "There were three main reasons to send a special envoy - ensure our oil interests are protected, communicate our support for the peace initiative between the two nations and strengthen our technical support to them." India is also challenging the Chinese claims of setting up an alternate pipeline through Kenya in less than two years time.

Lets talk crude

Of all attempts made by India to secure its energy needs the manoeuvres with Iran are the most interesting. International pressure on an Iranian oil embargo is such that it is impossible to pay for Iranian oil through conventional means of bank transfers. The US and EU have banned the payment mechanism in place in Dubai and have delisted all Iranian banks from the SWIFT facility (an electronic funds transfer facility). India as maintained that it will not stop its oil imports from Iran (so have China, Russia, South Korea and Japan). India is now exploring mechanisms to pay for Iranian oil in Rupees. There are technical difficulties in doing so (including many from the Iranian side), however India and Iran are trying to work together to find a solution. In the mean while government of India has announced tax breaks for exports to Iran done in Rupees. The Indian exports will be used to pay for Iranian oil.

These may be considered as bold steps by the Indian government, especially given the fact that they might annoy India’s two largest trade partners, the US and China. But these steps are also testimony to the fact that India is slowly but surely asserting itself in the global geopolitics. The far reaching implications of these actions are not clear as of now, however what is clear is the short term gain. India might get cheap oil from Iran, since less people are buying from it. This might prove to be a breather for a government which is unpopular with masses and high oil price is one of the reasons.  

Too much on my plate

Train tracks in Persia

Afghanistan’s recently rediscovered mineral wealth has attracted many eyes on this restive region for altogether a different purpose. Companies from west and east have bid for the mining rights in Hajigak region. Of the twenty two companies shortlisted fourteen are Indian, including a consortium of a state run company, Steel Authority of India Limited. The mineral wealth of Afghanistan is valued at between 1 – 3 trillion US dollars, more than the valuation of Indian economy at 1.6 trillion US dollars (at nominal prices). The situation looks rosy, with many Indian companies lining up for the contracts a few would definitely get lucky. India’s appetite for commodities will only rise in the future and a source so close to the country will only make things easy. However, on ground the picture is rather bleak.

Proposed train connection between Afghanistan and Iran

Though Kabul is just around 600 km from the Indian border, transporting minerals from Afghanistan to India is a tough task. With no transit agreement in place with Pakistan and Afghanistan being sandwiched between Iran and Pakistan, with no access to the shipping lanes, the only way out is using Iran’s sea ports. India has embarked upon an ambitious plan to link Hajigak with the port of Chabahar in southern Iran by a rail link. This train track will by-pass Pakistan completely and give India the advantage of easy access to Afghanistan. This arrangement will also help Afghanistan reduce its dependence on Pakistan for supplies and trade. However, the track record of Indian state owned companies building large scale infrastructure projects abroad have not been impressive. Construction of a power plant in Sri Lanka has finally started after many years of agreement. It will be interesting to see how quickly things move on this project.

On a multi lateral level the Istanbul conference concluded in Istanbul on 2 November 2011. The joint declaration did not come up with any strategic plan and merely reiterated what every one has been saying so far. However, mockingly though the declaration calls for promoting of tourism activities in the country. India was part of the process this year. Pressure from India and the US has worked and Turkey extended the invitation to India. Still the Istanbul process remains only one of many in a string of conferences being organised across the world.

Pakistan’s Yes – No – Maybe and Iran’s dirty bomb

Pakistan has decided to bestow India with the long pending “Most Favoured Nation” (MFN) status. This is mandatory under the SAFTA (South Asian Free Trade Agreement). The MFN status helps the countries to open up trade and shift to a state of “negative list” from that of a “positive list”. This essentially means that trade under MFN status will restrict only a small number of items mentioned in the negative list, as compared to the positive list system which only allows trade in a few items in positive list. The going has not been easy for Pakistan. It took Pakistan almost fifteen years to reciprocate the status after India granted it in 1996. The recent announcement has lead to a frenzy of activities in the Pakistani defence establishment and there has been going back and forth on the commitment from the civilian government. It is believed that Pakistani military is against any kind of close cooperation with India.

The MFN status in itself will not be enough; it calls for a major overhaul and coordination between the eight member states of SAARC (South Asian Association for Regional Cooperation). A possible integration of roadways, waterways and railways in the SAARC region is being discussed. This might prove to be a path breaking move to boost regional integration and development.

Where will this lead?

With the Afghanistan – Iran rail link and the MFN status offered Pakistan, things should look bright on the bilateral trade front. However, the growing concerns over Iran’s nuclear programme and safety of Pakistan’s nuclear weapons it will be a tough task to achieve all this. A report by the UN agency IAEA (International Atomic Energy Agency) is expected within days this week (7 – 13 Nov, 2011). It is widely believed that the report will say that Iran has reached the critical stage where it can acquire capabilities to induce nuclear chain reaction required for a nuclear weapon. There have been reports of both the US and Israel warning Iran to stay away from developing its nuclear capabilities. It is difficult to guess the outcome of the report, however what is plausible is even stricter UN sanctions on Iran. Given such a situation India will be in a tight spot with its ambitious Afghan – Iran rail link. Getting itself involved in the project might be counted as violation of the UN mandated sanctions and would definitely upset the Indo – US relationships.

Will Jasmine blossom in China?

Another growing concern lies across the eastern borders of India in China. A string of reports suggest that China is undergoing a sort of social movement. In the past China managed to gag media and stop unwanted news items from being shared with people. In recent years that trend has changed. Internet has proved to be much more difficult to control than the traditional media. Micro blogging sites like Weibo have made flow of information swifter. Taking a cue from the Arab spring the Chinese tried to organise a Jasmine uprising, which was brutally crushed before it could blossom. Internet proved to be a handy tool in organising the scattered jasmine protests in the country (despite strict control by the government). State owned media too has started pointing fingers at the government with editorials and news stories in Xinhua (the largest state owned English language daily) and other dailies. Other reports in international media paint a grim economic picture of China. Rising interest rates, increasing labour cost, fleeing entrepreneurs, unpaid construction workers, slumping property prices, crack down on dissidents and forceful land acquisitions by the government are widely talked and discussed.

Ai Weiwei, a celebrity dissident kept in illegal detention,
is now being slapped with a tax fine of 2 million US dollars 

India needs to take some time out to think about the possible fall outs of a revolution in China (which is not unlikely given the situation). Bilateral trade between India and China is expected to reach 100 billion US dollars in the next four years. China is already India’s largest trading partner and any upheaval in China might have serious consequences for Indian business environment.

With too much on the plate the fear is always that some tasty food will get ignored. The current situation might be a little overwhelming for Indian foreign affairs ministry, given the lack of personnel. The way events are developing in India’s neighbourhood, one thing it can not afford is lack of focus. This is a situation where every thing comes at the top of the priority list.

India and its global ambitions

Yes, no, maybe…

The weeks that followed the fall of Mr Dominique Strauss-Kahn as the chief of International Monetary Fund and the subsequent world tour by Ms Christine Lagarde to drum up support for her election to the office, India joined the chorus of developing countries to have adequate representation. The bloc of developing countries (India, China, Brazil, Mexico, etc) was challenging the tradition where IMF was always headed by a European. Briefly Mr Agustin Carstens, governor of Mexico’s Central Bank tried to rally support from developing countries including India. However, none of the developing countries managed to arrive at a consensus and Ms Lagarde, was eventually elected to the office. In the mean while China decided to support Ms Lagarde’s candidature in return of a larger responsibility for China in the IMF.

India is often viewed as unprepared when it comes to multilateral decisions which have global implication. We have seen this in case of the EU-India free trade agreement, WTO’s Doha round and more recently the climate change summit. Long winded processes which seem to take for ever, due to lack of preparedness or vested interests or some time misplaced sovereign pride. India which has done remarkably well on bilateral fronts is severely lacking on multilateral fronts. That being the case, India’s global ambitions are only growing. For the past two decades India has been pressing for a reformed United Nations Security Council (UNSC) with a permanent seat for itself. India along with Brazil, Germany and Japan formed an interest group known as G4 to push for the reform and subsequent expansion of the UNSC. All countries on the permanent council support India’s candidature; however any reform in the near future is a remote possibility.

Running the extra lap

It is a well acknowledge fact that India has arrived on the global scene in the past two decades. It has acquired an enviable position of upholding democratic values and churning out a fast growing large economy from a country which was on brink of sovereign default. Most of the recent global initiatives of India have been largely trade and commerce centred. The world is yet to see India take an assertive and sustainable step in global diplomacy, some thing that the established and emerging world powers have already shown. India has traditionally shied away from any matters which can potentially (some times falsely assumed) upset its diplomatic equilibrium.

In the past India has given the excuse of having its hands full with housekeeping activities and establishing order with in the country. In the past two decades much has changed, both within India and outside. Indian diaspora is now much more active around the world, Indian trade and commerce has spread to once far off countries and Indian views are listened to around the world. India’s inclusion in the G-20 has further raised its profile. India’s contribution towards handling of the recent financial crisis has proved its abilities as a mature economic power to the world. Both the developed and the developing world see India in a different light now. It’s no longer an aid seeking and famine struck country of the 60s.  

The tiger sleeps on

With so many changes, India has surprisingly lagged in international diplomacy. It has always taken a reluctant and meek stand on matters of international importance. The latest being the abstention from the UNSC resolution 1973 approving a no-fly zone over Libya. India’s excuse was that armed intervention should be the last resort after the efforts of UN appointed envoy fail, which was not yet implemented. In a situation where a despot is hell bent on killing his own countrymen an armed intervention is more of a humanitarian effort than military one. People opposed to UNSC resolution can argue that past military interventions (Iraq and Afghanistan) have proved anything but useful. For every person sighting Iraq or Afghanistan there is Rwanda and Srebrenica where armed interventions have brought an end to genocides. No-fly zone over Libya was the best possible action at a time when Mr Qaddafi was killing his own country men. India missed the boat.

On other sensitive issues like nuclear proliferation too India has no consistent stand. India’s concern on nuclear proliferation ends at Indo-Pak border. To some extent India’s reluctance stemmed from sanctions imposed by the west after its operation “Smiling Buddha” in 1974. But in the aftermath of international recognition of India as an official nuclear power (in shape of Indo-US nuclear deal) it should now take a firm stand on the issue. It should have a clear policy on Iran and North Korea. So far nothing has come forth.

One thing that India has failed to leverage to its benefit is its unparalleled achievement in nurturing and maintaining democratic standards. India should play its democratic card at international forum to establish itself as a mature country, which believes in fair play and respects public involvement. This will help it balance against its biggest rival, China. While the Tibetan government in exile has its seat in New Delhi, India does not use it like China uses stapled visas for people living in Indian states of Jammu & Kashmir and Arunachal Pradesh.

Its time India metamorphose itself into a country which has more than just cheap labour, growing auto market and consumers hungry for foreign products. Time has come that it takes on the world stage with confidence. It should stop bothering itself with myopic electoral gains while shaping its foreign policy. India has already lost time in catching up on the lost opportunities. The present reactive policy of India should shift to proactive and a widely thought through policy, which can support India’s claim to international institutions like UNSC, IMF or possibly G6 (G5 + 1). 

The Afghan roadmap

Roles reversed

India has pledged to spend $ 1.2 billion as non military aid in Afghanistan between the years 2002 - 2013. This comes as a surprise for a country which is a major recipient of international aid. One might choose to consider India’s aid as a tool to assert its influence (some like to phrase it as strategic foothold) in Afghanistan. India has involved itself in a big way in rebuilding the war torn country. In past nine years it has got its foot in virtually every aspect of Afghan redevelopment, be it the Zaranj – Delaram road connection on Heart – Kandahar highway, Salma dam power project, setting up schools or building the new parliament. Apart from infrastructure projects India is also running medical care and child nutrition programmes in many Afghan cities. On a small scale India is also providing skill enhancement programmes (mostly vocational training) to Afghan youth to help them get into mainstream economy.  After nine years and pumping in 40% of the pledged aid what does India stand to gain?

Love thy neighbour 

India’s involvement in Afghanistan has not gone down well with Pakistan. It sees Indian presence as a threat in its backyard. Some hawkish institutions in Pakistan also suggest that India’s growing influence in Afghan matters is a long term conspiracy to ‘sandwich’ Pakistan (between India and Afghanistan). What ever the arguments be, India is increasingly seen as a threat by Pakistani establishment. This became apparent when Turkey under pressure from Pakistan did not invite India for the last high profile Afghan summit in Istanbul.

Will India limit itself to creating democratic infrastructure
or will it push for real democratic reforms in Afghanistan? 

A billion dollar plan for reconstruction, while the host country still battles with insurgency and terrorism is a risky proposition. Reports suggest that owing to lack of security apparatus the much talked about Zaranj – Delaram road connection is already under Taliban control. Kabul’s new parliament house being built by India (which it believes is the beacon of democracy in the largely tribal country) will house Mr Karzai (pictured) who is anything but democratic. He is facing allegations of large scale forgery and corruption in last presidential election. Afghans call Mr Karzai “king of Kabul” as the writ of his government ends at the city limits, outside which Taliban and tribal factions hold sway. So what exactly is India doing in such a place?

India sees its involvement in Afghanistan as an attempt to regain its credibility and strategic foothold which it lost after the Soviet invasion in 1979. Then a staunch Soviet ally, India supported the Soviet invasion leaving many Afghans angry. With the expulsion of Soviet troops and later a Taliban takeover, India lost all political contacts with the country. It was only in 2002 after Taliban was ousted from power that India reacted swiftly to fill the vacuum with non military aid. In the following years India once again came to be seen as a friendly country, more and more Afghans started coming to India to attend universities subsidised by Indian government. Bollywood songs could once again be heard in bazaars of Kabul and Afghanistan had its own national carrier. India found its lost neighbour once again.

What does the future hold for me? 

Till now India has made all the right noises in the country. However, the kind of role India is playing at present will not sustain it's presence for long. In a war torn country roads and power plants can be blown apart any time (as has happened in the past), schools can be closed down on whim of Taliban and food supplies can be cut off due to logistic issues (not impossible in a landlocked country). India needs to take up a greater role to rebuild the country.

The CIA world factbook estimates the Afghan GDP at $ 27.36 billion for 2010. Close to a third is contributed by opium trade. Unemployment rates are as high as 35% (2008) and an equal number of people live below the poverty line. The Afghan government collects $ 1 billion in revenues and spends $ 3.3 billion a year. Banking in the country is in a deep mess with recent scandal involving Kabul bank, the biggest bank of the country. With such a fragile situation Afghanistan needs institutions which can prepare it for future.

India should look at taking a larger responsibility of training Afghans to manage their nascent institutions like government finance, international trade and commerce, natural resources, etc. Along with institutional training India should also look at rebuilding the economy of Afghanistan. Recently the Afghan government dusted out a report from 1960s, which gives a detailed account of huge iron ore deposits in Hajigak, 130 km west of Kabul in the Bamiyan province. According to the report the region has approximately holds 1.8 billion tonnes of iron ore. In middle of 2010 the Americans declared that Afghanistan has huge deposits of previously undiscovered minerals worth a trillion dollars. These include copper, iron, cobalt, gold and lithium. 

It is no secrete that both developed and developing economies today are in dire need of natural resources. In the past decade China has extended its reach to a large part of Africa in search of natural resources to power its enviably cheap manufacturing plants. Indian companies too went abroad shopping for natural resources in Latin America, Africa and South East Asia. But the game in Afghanistan is different, especially for India. Being a landlocked country, bringing in minerals to India will be an expensive option, eroding any financial benefits. Geopolitics too will play a crucial role in Afghan-India trade ties. The only way minerals can be shipped to India is by surface transport via Pakistan or Iran to the nearest port or to northern India via Wagha. Given the strained relationship with Pakistan and a direct conflict of interest this option is far from feasible. Iran is reeling under sever international sanctions and India will not be willing to upset its relations with the west by warming up to Iran (whether India should get involved with Iran at the cost of its relationship with west can be another discussion in itself. Let’s leave it for another day).

Out of the box 

The previous article attracted a comment drawing parallels between post war Europe and present day Indian subcontinent. The comment suggested that if countries and individual have business interest then they make an effort to maintain the cordial relationship. Some thing similar should happen between India and Afghanistan.

Merely taking the mineral wealth of Afghanistan away will be extremely myopic and unfair. Exporting minerals (as and when it becomes possible) will contribute billions of dollars every year to the state exchequer, which can then be used for public welfare. However, it will take a long time for the benefits to reach the Afghan society. India should understand this and forge a long term relationship by investing in setting up large scale manufacturing plants in the country. Many Indian companies both state owned and private are interested in investing in the mines, but are held back due to logistic and security concerns. A shift in focus from merely mining to mining and manufacturing can address this problem.

Shipping of finished products directly to export markets will face less logistic challenges than shipping iron ore to India. With the setting up of manufacturing plant other support industries will come up in the region, helping the Afghan people to take up jobs in the factories or set up their own business. It is anybody’s guess what change such a situation will bring to the country. India will keep its strategic foothold in, Indian companies will benefit from high value exports (including some to India), the Afghan people will benefit and above all the Afghan government will benefit.