Economy, Business And Markets

New Opportunities for India

New Opportunities for IndiaNew Opportunities for India

As Iran emerged from years of economic isolation over the weekend when key countries lifted crippling sanctions in return for the Islamic Republic complying with a deal to curb its nuclear ambitions, analysts said the development presents India with new opportunities.

The UN atomic watchdog announced late Saturday that Iran had complied with the terms of last July’s landmark deal aiming to scale down its nuclear program. The IAEA said Tehran had put in place all nuclear measures required under the deal reached with six world powers.

“This is certainly a positive development for India,” said C.U. Bhaskar, an expert with the New Delhi-based Society for Policy Studies think tank, wrote Indian newspaper Mint.

“The Iranian rapprochement with the Americans and the international community has made India’s options, shall we say less brittle.”

Iran has always been an important country in India’s geopolitical and economic calculus.

For starters, Iran is seen as a key energy partner in India’s neighborhood given its huge fuel reserves, with some estimates suggesting that Iran holds 10% of the world’s proven oil and 15% of gas.  India, Pakistan and Iran have been looking at a natural gas pipeline from the Islamic Republic to Asia’s third largest economy.

Despite US-led international sanctions that forced India to cut its oil imports from Iran, India has remained one of the main buyers of Iranian crude.

Of the 189.43 million tons per annum of crude oil sourced by India in 2014-15, 109.76 came from West Asia. Of this, Iran supplied 10.95, making up 5.78% of Indian crude oil imports.

India, the world’s fourth largest energy consumer, imports 77% of its energy needs. Its energy import bill of around $150 billion is expected to double to $300 billion by 2030.

The lifting of sanctions on Iran will benefit India with lower oil prices and more opportunities for trade, according to Indian newspaper Te Hindu.

Apart from Iranian oil, India will also benefit from the removal of restrictions on payments to Iranian companies that the sanctions had imposed.

“With the removal of sanctions, we won’t have difficulties in reaching our payment dues. As a result, we can go ahead and sign commercial deals with Iran since payment is no longer an issue. The lifting of sanctions means we can invest in Iran, which we could not do earlier,” PR Kumaraswamy, professor on the Middle East at Jawaharlal Nehru University, said.

India reportedly owes Iran $6.5 billion for crude oil purchases, the payment of which has so far been held up due to the sanctions.

One of the major construction projects in Iran that India has taken an interest in is the development of Chabahar Port. Now Indian companies will be able to get contracts for this project.

“One area of interest is construction and there the Chabahar Port becomes important. But even then, that port will be more important for Iran than for India. India’s total trade with all these (Central Asian) countries is less than $1 billion,” Prof. Kumaraswamy said.

"The real benefit will be that we were able to build a port in a foreign country in the face of international competition. This would be the first time India would be attempting this."

With the road now clear for direct banking relations between Iran and India after the lifting of global sanctions on the former, finance costs are expected to decline for bilateral trade, business and retail transactions.

India also sees Iran as a gateway to landlocked Afghanistan and Central Asia.

According to Ashwini Mohapatra, a professor who heads the Center for West Asian Studies at the New Delhi-based Jawaharlal Nehru University, the lifting of a range of sanctions on Iran meant huge opportunities for India’s private sector.

“There is great scope for Indian private sector investment in Iran in the areas of information technology, petrochemicals and infrastructure development. Iran is also a huge market for Indian exports. The country has been in economic crisis due to the sanctions and India should be looking at investing in Iran as well as trading with Iran. There is potential for skilled Indian labor in Iran to build up various sectors,” he said.

In geopolitical terms, Iran’s long coastline and its geographical location at the conjunction of Afghanistan, Central Asia, West Asia and Turkey presents India with huge opportunities, Mohapatra said.

“There have been plans for the evacuation of gas from Central Asia through Turkey but with the sanctions against Iran being lifted, there are chances for a pipeline through Iran. Iran can very well develop into a great energy hub,” he added.