India-Israel Ties Complicated by Iran Opening, Shifting Defense Priorities

The differing reactions in Israel and India to the recent six-power agreement with Iran highlight the only point of strategic divergence between the two long-time partners: the nature of engagement with a potentially nuclearizing Iran. While Israel has condemned the preliminary agreement and the potentially broader international rapprochement with Iran it signals, India has welcomed it with cautious optimism. More generally, while Israel perceives Iran’s nuclear posture as an existential threat, India sees it more as a geopolitical hindrance to increasing New Delhi’s strategic profile in Tehran.

In recent years India and Israel seemingly agreed to compartmentalize these divergences, as Washington’s continued pressure on Iran left India’s interaction with the latter stunted. Now, however, with Western pressure on Iran beginning to ease up, the level of India’s dealings with the Islamic Republic could become a matter of much bigger concern for Israel. India would argue that the increased geo-economic leverage resulting from engagement with Iran will only help nudge Tehran toward a more definitive settlement of the status of its nuclear program, as opposed to the temporary suspension that it has presently agreed upon.

But it remains to be seen if increased India-Iran ties impact Israeli-Indian defense cooperation. Israel has long been one of India’s primary sources of arms and technology, but India’s success at diversifying its defense partnerships has altered the dynamics of the relationship in recent years. Ironically, Israel’s ability to play the “Iran card” in New Delhi will depend to some degree on the extent of technological cooperation that develops between India and the United States.

The two sides have not always managed to brush over their differences on Iran’s nuclear program, which has replaced the Palestinian statehood question as the principal driver of tensions in the bilateral relationship. Spelling out the vexation felt in Israel over India’s approach toward Iran, Israeli President Shimon Peres in June overtly asked India “to stop being neutral” on the Iranian nuclear question. India has not quite welcomed the possibility of nuclearized Iran—it voted twice at the IAEA to refer Iran to the U.N. Security Council for noncompliance on the nuclear issue. But New Delhi has always felt that an excessively punitive approach would not really deter Teheran’s nuclear push. Now that a Washington-led West seems to have added carrots to a previously “stick only” policy, India will naturally allow the logic of its regional geostrategic concerns to drive its Iran policy.

That logic stems from the push by Indian industry to create a North-South transit corridor that will allow India to link up with the Russian-led Eurasian Customs Union while tapping energy resources in Iran and Central Asia. Both logistically and politically, the Indian establishment also perceives Iran as central to securing Indian interests in Afghanistan in the aftermath of the U.S. withdrawal in 2014. And even during the recent period of American financial sanctions on Iran, the Islamic Republic continued to be India’s third-largest source of crude oil, a position that might be improved upon in the coming months.

Obviously this broad Indian strategy is at odds with Israel’s more immediate concerns about what it sees as a threat to its future survival. Israel would therefore look to temper the pace of India’s anticipated expansion of ties with Iran by leveraging its own bilateral military and intelligence cooperation with New Delhi. Although just behind Russia in dollar value as a military supplier to India, Israel has served as a key source of high technology for India’s military modernization, often with U.S. approval, as for the Indian purchase of Israeli-made Phalcon AWACS, for example.

Israeli leverage will be undermined, however, by the fact that the U.S. is now looking to engage India directly in a high-end defense relationship, which includes the co-development of weapons systems. Indeed, Washington’s courtship of New Delhi is already beginning to impact India’s defense relationship with Israel. For instance, India has deferred a decision on buying Israeli-made Spike anti-tank missiles on account of an American offer to co-produce and co-develop the next generation of Raytheon’s Javelin missile. Additionally, Israel has also been losing out on Indian contracts in recent years because of delays and cost escalations. For instance, a decision to source two additional Phalcons from Israel has been delayed essentially on account of cost considerations.

The recent visit to India by Israel’s army chief is believed to have been aimed at ironing out such wrinkles in the bilateral defense relationship, as well as for sharing views on the emerging strategic picture in the neighborhood. Truth be told, while India has benefited from being able to source certain military requirements from Israel, its purchases have also served to underwrite many of Israel’s research and development projects, especially in the missile defense arena. So Israel will itself suffer from downscaling relations with India beyond a certain point just to put pressure on New Delhi regarding the Iranian front.

Nevertheless, though the pace of strategic defense cooperation may be recalibrated on both sides, business-to-business and people-to-people contacts continue to grow. While bilateral trade currently stands at $5 billion, the two countries aim to double that figure within the next five years. Particular sectors for continued and deepening cooperation include clean technologies and water productivity, burgeoning fields in both countries. Indians will also seek to tap into Israel’s world-renowned innovation economy with greater industrial and academic collaboration.

However, Israel’s status as an incubator of next-generation technologies and services is also of immense interest to the Chinese, who may now be able to offer their own leverage over Tehran in order to build a deeper economic partnership with Israel. China may also look to benefit from Israel’s niche defense capabilities, as it did in the 1990s before Washington put a wrench in the works.

India will obviously watch Israel’s relationship with China with some interest, even as it seeks to exploit the openings resulting from Iran’s newfound conciliatory posture to position itself as a nonaligned facilitator of trade routes connecting Asia’s western reaches to the subcontinent.