Iran is feeling the pinch. Its currency has nearly halved in value. Prices of grain and other food items, mostly paid for by oil exports, have risen. Most telling, oil exports are down by as much 40% in volume from the average last year. Tehran has been partly compensated by an increase in the price of oil. But the futures market shows little expectation of a crude price surge. Oil production is at a global high even as demand is slumping as recessionary winds blow across the world. However, none of this economic pain is near enough to force Iran to give up its nuclear ambitions.
Iran has multiple reasons for wanting the bomb: surety against an invasion, a belief that nuclearisation will make it top dog in the Persian Gulf, and simple nationalist sentiment. The West is right to argue that Iran must talk seriously about its programme. But it perhaps needs to recognise that Iran cannot be forced to go back to square one on the nuclear front. A compromise, perhaps one where Tehran agrees to non-weaponise its nuclear capacity, should be considered. There is evidence that political battles within Iran are partly being driven by moderate and extreme positions about the nuclear issue. The sanctions, combined with a softer negotiations stance, could help tip the balance inside Iran in favour of reason.
India should draw some lessons of its own from the Iran saga. It has learnt that as long as the rupee is non-convertible, it will always be vulnerable to financial sanctions. But it has learnt it can absorb a surprising degree of volatility in global energy prices. The Persian Gulf is geopolitically unstable. India is in the difficult position of being unable to afford to alienate any major player in the Gulf.
Therefore, it needs to think innovatively about how it can contribute to restoring stability to a region that is its prime source of oil, largest source of remittances and main regional trading partner. It cannot afford to remain passive about events that have major repercussions on its future.