How sanctions-free Iran is a challenge, opportunity for India

  • Jayanth Jacob, Hindustan Times, New Delhi
  • Updated: Jan 18, 2016 13:20 IST
Iran's President Hassan Rouhani gestures at a press conference in Tehran. The implementation of a historic nuclear deal with world powers is expected to pave the way for a new economic reality in Iran, now freed from harsh international sanctions. (AP)

The lifting of sanctions on Iran is good news for India, provided the spat between Riyadh and Tehran doesn’t escalate into a full-blown crisis in the region.

But the new regime also brings along challenges for India that any resource-rich country with options would throw at others.

To begin with, Tehran holds immense strategic significance for New Delhi. It is India’s gateway to Central Asia. Iran is a strategic counter for India to Pakistan in Afghanistan where India, of late, doesn’t have enough friends to count on.

The Chabahar port in Iran, being developed with Indian assistance, will provide port access to landlocked Afghanistan that is now totally dependent on Pakistan for sea trade. Various plans associated with developing the port, railway lines, special economic zones have remained either in the pipelines or made sluggish progress for a long time. The stringent sanctions on Iran have often resulted in Indian projects failing to gather necessary steam. This should change now.

With Iran sanctions gone, India can resume normal trading ties

India-Iran trade is around $15 billion, but Indian export to Iran is less than $5 billion.

This imbalance is natural between India and any country it imports oil from. That, however, does not explain why various efforts at boosting Indian exports to Iran haven’t paid off. Even at the height of sanctions, Iran used to export wheat from the US, whereas Indian wheat didn’t pass the muster of the pest test.

It’s more good news for India as an oil-importing country. Iran has every reason to increase the production, driving down the price of oil further. India has been getting Iran oil on liberal repayment options. If that continues, India would benefit more from falling oil prices. The sanctions had contributed to high shipping costs. With sanctions easing, the shipping charges will come down for goes both sold by and being sent to Iran.

US to pay Iran $1.7 bn in debt, interest: John Kerry

India has been keen on investing in Iran’s oil and gas sector. Tehran now has many suitors to select from. That makes Indian efforts more challenging. Farzad B gas field is a case in point. After investing 100 million in the project since 2008, India has already got a hint from that it is looking at more options to auction the project.

Many European companies have been waiting on the wings to cash in on the opportunities that Iran would present. That makes the competition uneasy for Indian companies, for whom, Iran remained a market many didn’t dare to enter. But then, challenges and opportunities have a unique way of co-existing in international relations.

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