Impact Of Iran Nuclear Deal On Relations With India: For The Better?
India and Iran
LONDON: The historic nuclear deal signed between Iran and the P5+1 (namely China, France, Russia, the United Kingdom, and the United States, plus Germany) is likely to go down as US President Barack Obama’s greatest diplomatic achievement.
The historic deal changes everything. Iran -- crippled by years of sanctions -- will now be exporting everything from rugs and pistachios to oil and gas. The deal also marks a dramatic shift in the Middle East, as evinced by Israel’s reaction to the deal, with Israeli Prime Minister Netanyahu condemning it as a “historic mistake.” As reactions pour out from across the world, India -- which has been cosying up to Israel recently -- is likely to benefit majorly from the Iran deal.
That benefit has already accrued, as India is a major importer of Iranian oil, and oil prices have declined in recent days, driven largely by expectations of more Iranian crude hitting the market. According to India’s Foreign Ministry, India saves nearly $1 billion in import costs for every dollar drop in global crude prices.
India has been one of the few countries doing billions of dollars of trade with Iran, despite the sanctions having been in place till now. Current bilateral trade between India and Iran is about $14bn with the balance of trade heavily in Tehran’s favour. Indian exports to Iran were around $4.2bn last year.
India primarily imports oil from Iran, and the sanctions placed on the country have impacted this because India has had to pay Iran in Indian rupees, with the money kept in an Indian account. High shipping costs driven by sanctions have been an additional factor weighing against India.
As Iranian oil exports increase and prices drop, India is set to benefit because many of its refineries are designed to receive Iranian-grade crude oil.
In terms of infrastructure, India has been involved in Iran's Farzad B gas field, where Indian companies explored and discovered oil and gas in 2008. India has already invested $100m to develop the facility, but production was stalled because of the heavy sanctions.
In an attempt to seize the opportunity once progress started being made on the Iran deal, New Delhi rushed in a delegation to discuss the project. Iranian media, however, reports that Tehran rejected New Delhi’s proposals and will move to auction the project. If true, that may not be good news for India as it will then have to compete with oil firms from across the world, and Russia and China -- which have been supportive of Iran’s position in world forums -- may try and convert the goodwill into business opportunities.
India has also invested in developing Iran’s railways, with a $233m contract to supply more than 150,000 tonnes of railway tracks. This project too seems to have run into trouble with reports stating that Iran wants to renegotiate the deal to bring the price down. A recent report, however, noted that India has agreed to to finance the entire scheme under a special mechanism.
India and Iran have also signed a deal to develop the Chabahar port in southern Iran. Indian firms will lease two existing berths at the port and operationalise them as container and multi-purpose cargo terminals. "In the absence of a land route through Pakistan to Central Asia, a road and rail network via Chabahar port is important for India. It will open up a trade route to Central Asia and Afghanistan. The port will help India to send goods through road and rail networks to those countries. India didn't have this kind of access in the past," the BBC quoted Tanvi Madan of Brookings Institution in Washington saying.
On the export side, India has been exporting automobile components, tools, motors and chemicals to Iran. India is also Iran’s top rice supplier, and can move into exporting other agricultural products. Pharmaceuticals is another area that India can capitalise on export gains. "Many of the big Indian pharmaceutical and textile businesses were reluctant to deal with Iran because they were afraid of the sanctions. Now they can deal with Iran freely and invest there. So it will be a big boost for Indian exports," the BBC quoted Ajai Sahai, Director-General of the Federation of Indian Export Organisations saying.
Therefore, India is sitting on a timely opportunity, which -- if played right -- it can convert into gains for itself in the Middle East, both economically and politically/strategically.
It makes sense, hence, that Israel is concerned. Israeli envoy to India Daniel Carmon outlined this concern on Wednesday, saying that he was sure India’s partnership with Israel was going to continue. “Our Indian friends are aware of Israel’s and its neighbours grave concerns about the deal,” the Israeli envoy told an Indian newspaper. "Throughout the years, India and Israel have developed a strong partnership for the benefit of both countries and I'm sure it will continue.”
India, however, will have to walk a tightrope between the two countries. Its intention to do so is perhaps evinced by a few recent developments. Whilst India abstained from a UNHRC resolution referring Israel to the International Criminal Court for alleged war crimes, it voted along with other BRICS nations in Russia to oppose the "continuous Israeli settlement activities in the Occupied Territories, which violate international law and seriously undermine peace efforts and threaten the concept of the two-state solution".
Further, as PM Modi is soon to become the first Indian Prime Minister to visit Israel, he also met with Iran President Hassan Rouhani for the first time on the sidelines of SCO and BRICS summits. The Indian Prime Minister reportedly told the Iranian President that he was looking forward to visiting Tehran. In fact, the meeting was described by the Indian foreign ministry as an advancement in a significant relationship.