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Spurred by Beijing, New Delhi moves to raise its profile in Iraq

by Harsh V. Pant

LONDON — After seven long years, the Indian government has decided that the time has come to make its presence felt in Iraq by naming an envoy to the country. The previous ambassador to Iraq was withdrawn in 2004 when the security situation in the country was spiraling out of control.

Even as the situation stabilized in Iraq with largely peaceful elections last year and the U.S. decided to withdraw its forces completely by the end of this year, New Delhi took its time to come to terms with the rapidly changing ground realities. After all, when it comes to the Middle East, inaction is the preferred mode of action of the Indian foreign policy establishment.

India and Iraq have enjoyed long- standing political and cultural ties rooted in millenniums-old civilizations. Iraq had emerged as one of India’s closest allies in the Middle East by the 1970s. Not surprisingly, therefore, New Delhi not only opposed the use of force against Iraq in 1991 but also vehemently denounced the imposition of U.N. sanctions on Saddam Hussein’s regime.

Saddam reciprocated by strongly backing India on the issue of Kashmir and on the 1998 nuclear tests. But Iraq’s global isolation meant that India’s economic ties with Iraq suffered significantly even though India tried to use the Oil-for Food program to expand trade with Iraq.

By the time of the second Persian Gulf war, India’s foreign policy priorities had changed dramatically. Though it publicly opposed the 2003 U.S.-led invasion of Iraq, New Delhi came very close to sending troops to “postwar” Iraq in support of the United Nations Security Council’s resolution to help maintain security in the country.

Lack of domestic consensus prevented that from happening. Still, India has contributed $10 million toward the International Reconstruction Fund Facility for Iraq in addition to $20 million for assistance to the Iraq people under the United Nations framework.

India has been training Iraqi government officials under the Indian Technical and Economic Cooperation Program, and the Indian Oil Corporation Ltd., the largest importer of crude oil from Iraq, has been training Iraqi oil-sector officials.

Iraq is the third largest supplier of crude to India after Saudi Arabia and Iran. Despite this, there has been no larger strategic restructuring of Indian foreign policy toward Iraq.

India’s response to the hanging of Saddam underscored the continuing salience of domestic political imperatives in shaping Indian foreign policy. When the death sentence against Saddam was announced, India denounced it as “victor’s justice.” When he was hanged, India declared it an “unfortunate event.”

Both reactions were aimed at assuaging India’s Muslim community, which has been agitated over the Indian government’s perceived dalliance with the U.S. Beyond that, there was no attempt by India to engage the new political dispensation in Baghdad — despite the fact that the Iraqi government had invited India to step in and help in Iraq’s reconstruction with its technology and management expertise.

Iraq is slated to become the world’s biggest oil supplier by 2015, and Indian companies have been looking forward to operating there.

Iraqi businesses are also exploring opportunities for joint ventures with their Indian counterparts in the field of cement, petrochemicals, hotels, and oil and gas (upstream and downstream projects). But the lackadaisical attitude of the Indian government has prevented a deepening of India-Iraq economic engagement.

Compare this with China’s growing profile in Iraq. In the past three years, Chinese companies have walked away with stakes in three of the 11 contracts the Iraqi Oil Ministry has signed in its bid to increase crude output by about 450 percent over the next seven years.

China has also renegotiated a $3 billion deal that dates to when Saddam was in power. It has agreed to cancel 80 percent of the $8.5-billion debt it is owed by Iraq even as the two countries have entered into trade deals valued at $3.8 billion over the last two years.

In response to China’s growing demand for oil, the Iraqi government decided to boost Iraq’s crude shipments to China from about 144,000 barrels per day to 300,000 in 2010.

Since the 2003 war to topple Saddam, Chinese oil companies have been among the most eager to help to develop Iraq’s oil reserves with the state-owned Chinese oil firm China National Petroleum Co. (CNPC) clinching some of the biggest deals in the Iraqi oil sector. China has secured a second deal to help to develop one of Iraq’s largest oil fields — the estimated 4.1-billion-barrel Halfaya field in southern Iraq — as well as the rights to develop Rumaila, Iraq’s largest oil field, alongside BP.

It is also helping to restore production at al-Ahdab oil field. Sinopec, another Chinese oil group, has a strong position in northern Iraq following its $7.9 billion acquisition of the London Stock Exchange-listed Addax Petroleum, which has been exploring for oil in the autonomous Kurdish region.

Not surprisingly, BP and its partner CNPC will be the first companies to be paid back by the Iraqi government for developing Iraq’s supergiant Rumaila oil field as part of the service contracts Iraq signed with the firms.

Baghdad has to start paying back the costs of developing these fields and remuneration fees when they achieve a 10 percent increase in production.

India will have to seriously think about its role as a new Iraq emerges in a new Middle East. Delhi has an expanding set of interests in the region, and Baghdad can once again emerge as a reliable partner if ties with it are nurtured carefully.

Appointing an ambassador is a good, albeit modest, start.

Harsh V. Pant teaches at King’s College London.