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Iran-US tensions put India in a bind

Iran emerged as the top buyer of Indian tea last year. The Islamic Republic imported 53.5 million kilograms of tea from India last year, a rise of 74% from 2018. The tea deals were made possible by an Indian rupee-based payment system set up by both countries to circumvent economic sanctions imposed by the US.

“This boost really has come because of the rupee-rial trade arrangement that we have had with Iran,” Azam Monem, a director at McLeod Russel India Ltd., told Bloomberg earlier this week. The company is among India’s largest tea exporters. “India’s diplomacy should allow us to remain a partner to Iran where we supply humanitarian aid, tea, and rice,” Monem said.

Despite this rise in tea exports, an expansion of India-Iran commercial ties has been impeded by tensions in the Gulf region in recent months.

Indian strategic interests at stake

In early January, days after the US killed the head of the Iranian Revolutionary Guard Corps’ Quds Force, Qassem Soleimani, Indian Foreign Minister Subrahmanyam Jaishankar made two urgent phone calls: one to US Secretary of State Mike Pompeo and the other to Iranian Foreign Minister Mohammad Javad Zarif. During his conversations, the Indian foreign minister urged both sides to keep tensions as low as possible.

The Iranian port of Chabahar offers an example as to what is at stake for India in the face of rising tensions between Iran and the US. To expand the port, Iran had joined forces with India and Afghanistan.

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