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Opportunities and fears

 MPost |  2015-09-24 22:59:30.0  |  New Delhi

The Iran-US nuclear deal has been hailed as a historic moment in global diplomacy by Western commentators. For India, however, the impact is a lot more immediate and urgent. The deal has brought significant strategic autonomy as far as India’s foreign policy is concerned. This is because India has vital trade and other important strategic links with both Iran and the USA. 


With the conclusion of this deal, India can now resume its purchase of oil and natural gas from Iran and even seek to make investments in lucrative oil fields. On Wednesday, reports emerged that Iran has offered to supply natural gas at $2.95 per million British thermal unit (mmBtu) for a urea plant that India will set up at Chabahar port on the Persian Gulf, but New Delhi wants rates to be lowered. 

“Iran is offering gas to India at $2.95 per mmBtu to set up urea plant at the Chabahar port in Iran. India is negotiating the gas price and has demanded it at $1.5 per mmBtu rate,” Union Transport Minister Nitin Gadkari said. The good news is that Iran has offered its natural gas at a rate less than half at which India currently imports natural gas from the international spot market. Moreover, if the deal goes through India will see a major decline in its Rs 80,000 crore subsidy for nitrogenous fertilizer. 

Currently, India imports 8-9 million tonnes of the soil nutrient, crucial for its agricultural sector. Despite being offered what seems like a good deal, India wants to lower the asking price. The rationale given by the Indian establishment is that back in 2011, Iran had offered natural gas at a price of $1 per mmBtU. What New Delhi has not taken into account is that back then Iran was under severe economic sanctions by Western powers. After the conclusion of the Iran-US nuclear deal, however, these sanctions have been lifted. Therefore, Iran has opened itself up to other potential buyers, especially Japan and the European Union. On the <g data-gr-id="33">geo-strategic</g> front, however, New Delhi has pledged to invest close to $85 million in developing the Chabahar port off Iran’s southeastern coast. The port, experts argue, will open up a sea-land access route for India to Afghanistan, bypassing Pakistan. 

Before we get our hopes up, it is imperative to remember that these deals are still being negotiated. It would be presumptuous to arrive at any conclusion at this point. Both India and Iran have an annual bilateral trade of about $14 billion. The balance of trade, however, is skewed against India, since it has been unable to settle the $8.8 billion sum due to Iran, as a result of the erstwhile sanctions. With the sanctions lifted, India can now resume its oil imports and more importantly settle the amount due to Iran. However, New Delhi does have certain concerns it must address. There could now be a fierce competition for natural resources, as Western companies will now rush to Iran. 

According to recent figures, Iran was India’s second largest supplier of oil but has now slipped to the sixth position. The Iran-US nuclear deal has opened the floodgates to India. However, with the potential gains, there are certain concerns that the Indian establishment has to address before it can make any serious gains.

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