New Delhi, Aug 7: Iran and the P5+1 (the United States, the United Kingdom, China, Russia, France, Germany) recently reached on a framework political deal to curb Tehran’s nuclear programme. For Iranian President Hassan Rouhani, the deal is a key stepping stone towards revitalising the Iranian economy but there is little doubt that India will be one of the big winners of this development.
Iran’s protracted tussle with the West and the subsequent sanctions on Iran’s economy have been inconvenient to India. Iran has been India’s second-largest supplier of crude oil, but in the face of economic sanctions India had to look elsewhere – primarily Iraq, Kuwait and the UAE, besides Saudi Arabia – for its imports. The lifting of sanctions will have significant implications for Delhi, which hopes to reinvigorate its economic and strategic engagement with Tehran.
However, there are concerns among Indian businessmen that Iran may now play hard to get, or even turn to more
competitive international players. Current bilateral trade between India and Iran is about $14bn (£8.96bn) with the
balance of trade heavily in favour of Tehran.
India has been exporting automobile components, tools, motors and chemicals to Iran, but in the post-sanctions scenario, businessmen are concerned that some areas will be hit hard, as Indian exporters will have to compete with Eastern European manufacturers who produce low-end products.
Since the value of the euro has depreciated in the last few years, Indian companies will face a stiff competition from
European manufacturers. Besides, an assertive Iran will drive a hard bargain as it will have more diversified customers and partners from around the world.
A few developments have given Indian businessmen ample reason to restrategise for future dealings with Iran. Indian companies explored and discovered oil and gas in Iran’s Farzad B gas field in 2008, investing around $100m to develop the facility but production was stalled due to sanctions. After dragging its feet for years, New Delhi rushed in a delegation to discuss the project, as Tehran reportedly rejected India’s proposal and decided to auction the site
If there is a tender process, it will be difficult for Indian companies to compete with French, American and Chinese oil firms who will come in with abundant resources and the latest technology.
India had also signed a $233m contract to supply a more than 150,000 tonnes of rail tracks to develop Iran’s railway
network, but the latter wants to renegotiate the deal to bring down the price as the Euro has declined against the
However, it’s not all doom and gloom for Indian businessmen. Exporters say Indian companies may lose out in the short- term, but will certainly gain in the future.
India is Iran’s top rice supplier and it can also increase its exports of other agricultural products such as sugar and
soybeans. India’s pharmaceutical and IT companies can also boost their business.
Earlier, big Indian pharmaceutical and textile companies were reluctant to deal with Iran due to sanctions, but they can now deal with Iran freely and invest there. It will be a big boost for Indian exports.
As a gateway to Central Asia, Iran’s strategic location is likely to provide India a foothold in the region. Both the
countries signed a deal to develop the Chabahar port in southern Iran. The port will open up a trade route to Central
Asia and Afghanistan, and will also help India to send goods through road and rail networks to those countries.
The nuke deal also comes at a time when Afghanistan is at a critical juncture. Both Iran and India have an interest in
ensuring that Afghanistan does not revert to the Taliban-controlled Pakistan client state that it was in the 1990s.
The strategic location of Chabahar deep-water port will make it a critical transit point for trade between not only
India, Iran and Afghanistan, but also provide connectivity to Central Asia and Europe, via the International North South Transport Corridor (INSTC), which is estimated to be 40 per cent shorter and 30 per cent less expensive than trade via the Red Sea-Suez Canal-Mediterranean route.
With India already having built a 200-km road linking the Iranian town of Zaranj to Delaram in Afghanistan, Chabahar presents an economical opportunity for both India and Afghanistan to pursue trade than most current options that utilise transit routes through Pakistan.
Iran, which has the fourth-largest oil reserves in the world and after Saudi Arabia, has been the second-largest
producer of oil with at least 30 million barrels sitting in tankers at sea. It will need to invest billions to bring
this oil into the market.
As cheaper oil generally puts more money in the pockets of consumers, the cascading effect may be witnessed on lowering of airline tickets, cheaper synthetic fabrics and the decline in price of all plastic products. The underlying price decline in this key commodity will bolster the weak recovery in the U.S. and Europe, but it will benefit China the most.
The economic prospects aside, the deal continues to generate political controversy. It has raised alarm not just in
Israel, but also some Arab states, including Saudi Arabia.
Newly re-elected Israeli Prime Minister Benjamin Netanyahu has warned that a final accord would lead to Tehran getting nuclear weapons which will “inevitably lead to a nuclear war”.
The deal is also exposing a deepening divide within the American Jewish community that could have long-term implications for Israeli influence in the US. It has also exposed a rift between the government in Israel and the majority of American Jews, who appear to back the deal.
A lasting settlement would become a focal point for Republicans to attack Democrats in the 2016 US presidential
election, leaving open the possibility that President Obama’s successor will probably revisit the issue.