India’s foreign and strategic policies came under challenge on several fronts this month. Notably, in Maldives, a regime change caught India unawares, causing fear that a friendly neighbour and a coveted strategic outpost in the southern Indian Ocean may be drifting out of India’s influence.

Then, the ‘sticky bomb’ attack in New Delhi on an Israeli diplomat’s wife, allegedly by Iranian operatives, brought to Indian soil not just a foreign war, but also the discomfort of having to rethink a long-held and profitable policy of neutrality between Israel and Iran. Being non-aligned as a poor, third world country during the Cold War was fine, but to be a fence-sitting ‘superpower’ is going to be a lot more difficult.

Not taking sides in a conflict between two countries with which you share reasonably good and mutually beneficial relations, is more often than not justified on the grounds of national interests. It is generally also a safe policy to adopt especially if you prefer to ride in as many boats as possible at the same time.

While this policy (some will call it non-policy) requires deft diplomatic manoeuvring to maintain a relationship with two mutually hostile countries without antagonising either of them, it is a balancing act that becomes more and more difficult as relations between the two antagonists deteriorate.

The real problem starts when their conflict starts to play itself out in your country. This then becomes a decision point: do you start taking sides or at least ‘tilt’ in favour of one over the other; or do you stick to your position of neutrality but demonstrate your commitment to not becoming the battleground for other people’s wars by cracking down hard on whichever side stepped out of line in your country without subscribing to any of the specious arguments of moral equivalence; or do you simply close your eyes, act as though nothing serious happened and hope things return to normal?

These options are however only one dimension of the problem confronting India in the aftermath of the bombing of the Israeli embassy car in New Delhi which has caught India in the middle of mutual recriminations between Iran on the one side and Israel and the US on the other.

The other, and in some ways more important, dimension of the problem is that it raises bigger questions about how India will manage its foreign policy in a world where power equations and international relations are changing bewilderingly fast.

India’s ‘interests’ vis a vis Iran, or for that matter Israel, are neither ‘eternal’ nor ‘permanent’ but more in the nature of transactional, tactical and perhaps even transitory.

India’s relationship with Iran cannot be viewed only through the prism of its relationship with Israel or the US. India will also have to weigh in Iran’s relations with the Arab world, keep in view the Shia-Sunni conflict which has implications for India’s domestic politics, take into account the export of radical ideologies to India by both the Arab world as well as Iran, factor in not only its strategic interests in Afghanistan and Central Asia but also the policy of other countries like Russia and China.

Politically and diplomatically, Iran hasn’t exactly done India any great favours. During India’s wars with Pakistan, Iran always supported Pakistan, a fellow Islamic nation, albeit majority Sunni. On Kashmir, except for the support they gave to India on the Human Rights resolution floated by the Pakistanis, the Iranians even questioned Kashmir’s integration in India.

India’s economic relationship with Iran also needs to be re-evaluated. Unlike the Arab world, where Indian expatriates work in large numbers and send billions of dollars in remittances, with Iran the bulk of the trade is one way — Iran exports around $ 11 billion of oil to India and imports just around $ 2.7 billion worth of goods from India.

Given that Iran doesn’t sell oil to India on concessional terms but on purely commercial terms, India could theoretically buy oil from elsewhere. The problem is more of finding a replacement source for around 18 to 20 million tonnes of crude that India imports from Iran as also the rise in the international price of oil if Iranian crude is no longer on the market.

It is important for India not to forget that Iran reneged on a $ 25 billion LNG deal that had been signed between the Iranian and Indian oil majors. The reason? A sudden spike in oil prices. Even on the IPI pipeline, it wasn’t so much the US pressure as the price which Iranians demanded, the gas fields they committed, the over-the-top transit fees being demanded by the Pakistanis that were responsible for India backing out of the project. The bottom line is that India and Iran are dealing with each other not out of altruism but because it is in their mutual interest.

In recent years elements of a possible strategic alignment in the context of Afghanistan and Central Asia have been added to the relationship. Long term sense, there is probably greater alignment of interests between India and Iran on Afghanistan than between India and the US.

While the US would not bat an eyelid in kissing and making up with the Taliban, both Iran and India perceive an existential threat from the Taliban. In fact, this is an equation that will come into play when the US opts out of Afghanistan, leaving India and other countries in the lurch.

Therefore, if India wants to stay relevant in Afghanistan and wants connectivity to Central Asian states, it will have to go through Iran.

On the flip side, closer strategic relationship with Iran could not only impinge on India’s relationship with the West (and Israel) but also with the Arab world. India will have to weigh its $ 14 billion trade with Iran against its $ 50 billion trade with the US and equally big amounts of trade with Europe and the Arab world, take a call on whether the pivotal position of Iran for reaching Afghanistan and Central Asia outweighs the benefits India derives from its relationship with the West and the Arab world.

After all, given its geographical and other limitations, how much can India use Iran to play a critical role in post-US Afghanistan? And is Afghanistan so important for us that we will put all our other relationships on the line for it?

Sushant Sareen is Consultant, Pakistan Project, Institute for Defence Studies and Analyses, New Delhi. This is an abridged version of an IDSA analysis.