With sanctions gone, India and world will gain
With almost all international sanctions on Iran having been lifted, after the UN's International Atomic Energy Agency certified that Tehran had fulfilled its commitments under the nuclear deal it signed with the P5+1 nations in July 2015, the Persian powerhouse is now back in business. Its assets worth nearly $100 billion have been unlocked; several bans and freezes on key individuals and entities have been removed; restrictions on trade and related activities such as shipping and insurance have been lifted; and the country will be re-incorporated into the global banking system.
The most perceptible impact of this will, of course, be on the oil market. Iran has some of the world's largest known oil reserves and there is no doubt that it will soon resume its place as a major player. There is currently an oversupply of oil in the market, and the addition of Iranian crude is expected to further bring down prices, which are already at an historic low, having dropped 70 per cent since 2014, to below $30 a barrel. However, Iran will not be able to return to pre-sanctions level of oil production overnight. It will be able to ramp up production to about 4,00,000 to 5,00,000 barrels a day over the course of this year; anything beyond that will require new investments and technology.
From India's perspective, Iran's return to the oil market is good news. Traditionally, Iran has been India's biggest oil supplier and the two continued to legally trade in oil through much of the sanctions period. However, the quantum was diminished and there were many issues over payments. In fact, India reportedly owes Iran $6.5 billion for crude oil purchases, and it is hoped that with the sanctions having been lifted, these issues will be resolved quickly.
Additionally, India also hopes to increase its general trade with Iran, seriously pursue new projects such as India-Iran oil pipeline through Oman, and see progress in old projects such as the Farzad-B gas field and the Chabahar port upgradation. Notably, European and Chinese players have been working with Tehran for quite some time now to ensure that they get a significant part of the Iranian pie once the market opens up — and some believe that India, in comparison, hasn't done enough groundwork to take full advantage of the opportunity.
India had made initial investments in the Farzad-B gas field and the Chabahar port project, but it wasn't able to see them through because of the sanctions. Now, it is having to compete with other players who are interested in these projects. With regard to the Farzad-B gas field, which India had helped discover in 2008, New Delhi is trying to persuade Tehran for the development contract. The matter was discussed at length last year when Petroleum Ministry officials visited Iran in April and during the India-Iran Joint Commission meet in December, but progress has been slow. On Chabahar, more than a dozen memorandums of understanding have been inked, and now they must show result.