The removal of sanctions on Iran has significant implications on commercial and trade relations between India and Iran. Discuss.
Published: March 2, 2016
Globally, the removal of sanctions will allow Iran to increase its crude oil exports by 5,00,000 barrels per day. This would further reduce the global oil prices which are already at historic low due to oversupply in the market. Iran is the 4th largest oil producer in the world. However, Iran’s return as an oil supplier could trigger a price war with its rival Saudi Arabia, which is protecting its own markets by selling oil at below market price.
India and Iran are good trading partners since the first decade of the twenty-first century. The trade was dominated by exports of hydrocarbons from Iran to India. Indian companies were also interested to invest in Iran’s oil and gas fields.
After 2010, commercial relations between India and Iran became more complicated with imposition of sanctions. India continued its trade with Iran by importing Iran’s oil but the share of Iran in India’s oil imports decreased.
The removal of sanctions on Iran has significant implications on commercial and trade relations between India and Iran. India stands to gain from Iran’s extra oil production. Development of Farzad-B gas field, investment in Chabahar port, and an undersea gas pipeline could potentially increase the mutual cooperation.
There would also be cheaper oil for India from Iran. Lower oil prices in the global market from Iran’s increased production would boost India’s economic growth. India can also fill its strategic oil reserves to avoid future price escalation if any. The lifting of sanction on Iran could also provide an opportunity for India to renew its interest in investing in Iran’s vast gas sector.
The ending of sanctions on Iran would expect to have a mixed result on relations between Iran and India. India stands to gain from increased crude oil supplies from Iran. The commercial relations are also expected to resume their normalcy. However, by terminating the Rupee based payment mechanism, India is set to lose its market in Iran. While India has been slow of its commitments in strategic economic projects in Iran, China has emerged as Iran’s strategic commercial and largesttrading partner.
Model Questions Category: 055 - Developed Versus Developing Countries Indias Interests