The lifting of sanctions on Iran, leading to fall of oil prices to a record below $28 a barrel has come a great relief for India. Officials in the Ministry of Petroleum, Economic Affairs and External Affairs were busy on Monday making calculations and chalking out policy frameworks and guidelines, as well as deliberating on modalities for making payments to Iran now directly, which were stuck over past many years.
Keeping in view the thaw in ties between Iran and the US, India’s security establishment also wants to recover the ground it had given up under American pressure. “We want Iran to regain its share of India’s oil imports and we expect Iran to also make efforts to help promote participation of Indian companies,” said ministry of external affairs spokesperson Vikas Swarup.
The decision to lift sanctions against Iran came on Sunday after the international nuclear watchdog, the IAEA, said Tehran complied with a deal designed to prevent it from developing nuclear weapons.
Officials here believe that lifting of sanctions on Iran, which means adding half a million barrels more oil per day, could help India to keep fuel prices and inflation low in the coming months in the run up to the budget-making exercise. But the flip side is that it will affect Iran-bound, farm produce and pharmaceuticals as they will now face competition from Europeans.
Anticipating lifting of sanctions and return of Tehran as global player, national security adviser Ajit Doval and foreign secretary S Jaishankar are believed to have visited the country over the past three months. The country forms an important cog for India’s strategic interests to combat the return of the Taliban in Afghanistan as well as to confront challenges thrown by the Islamic State. Through the 1990s, India and Iran jointly backed the Northern Alliance under Ahmed Shah Massoud against the Taliban.
Indian traders have been charging a premium of up to 20 per cent over global prices from the Iranian buyers of basmati rice, sugar, barley and meat. There could be competition also in auto components, steel and textiles and the depreciation of the euro could work against India. Indian refiners owe $6.5 billion in hard currency to Iran. Earlier, due to sanctions since February 2013, India used to pay in rupees to UCO Bank 45 per cent of their payment due on purchase of crude oil from Iran. The remaining has been accumulating, pending finalisation of a payment mechanism. Iran was also paid in terms of agriculture commodities.
Last month, the petroleum ministry in a missive to refineries had asked them to be ready to pay in hard currency in the eventuality of lifting of sanctions. India had to cut down oil imports from Iran to 11 million tonnes in 2013-14 and 2014-15 from over 18 million tonnes five years back as sanctions choked the financial transaction channels.
Both the ministry of external affairs and oil ministry now also see a possibility to participate in the development of oil fields and also revive the Iran-Pakistan-India gas pipeline. Before sanctions the ONGC-Videsh was involved in the development of the Farzad-B gas filed in the Persian Gulf. But it later shied away from investing nearly $7 billion because of the sanctions. The field has reserves of 12.8 trillion cubic feet of gas. The development will also put the development of Chabahar on the Gulf of Oman, near Iran’s border on faster pace. It is seen as a reply to Pakistan’s much-talked-about Gwadar port.
Former Indian envoy to Tehran K P Fabian maintains that India was one of the few countries, which did business with Tehran even during sanction regime. The State Trading Corporation had obtained a contract for the supply of steel worth $2.5 billion – the largest export contract for India – and a certain quantity was sent to Iran. But, Iran delayed payment and a dispute arose which is yet to be resolved.
Fabian further says that confrontation between Tehran and Riyadh will also test India’s diplomatic skills. Saudi Arabia and Israel, both nations which Modi will visit over the coming few months, are unconvinced about the nuclear deal that global powers led by the US struck with Iran. Ahead of external affairs minister Sushma Swaraj’s visit to Israel and Palestine, Israeli ambassador to India Daniel Carmon didn’t mince words, when asked about India’s growing relations with Tehran. He described Iran as a sponsor of terrorism in the region, by helping Hamas and Hizbollah. “When we talk about there are no good or bad terrorists, those targeting our country should be also taken as terrorists,” he said.