During his recent visit to India, Iranian President Hassan Rouhani offered to resume negotiations with India for the development of his country’s Farzad-B gas block, after being lukewarm to Indian offers to develop the same for quite some years now. Rouhani also conveyed an Iranian desire for more Indian participation in Iran’s strategic connectivity projects, something that has also not seen as much movement as India would have wanted, despite the agreement related to Iran’s Chahbahar Port. Now the question is, is this enhanced Iranian receptivity to Indian economic overtures a result of Tehran’s need to cement a multifaceted geo-economic relationship with India amidst domestic economic discontent and an unstable regional geopolitical environment? We would argue that it certainly appears to be so.
Being the largest ever overseas find by an Indian company, since it was discovered by an ONGC Videsh Ltd (OVL)-led consortium in 2008, Farzad-B has long been a priority for New Delhi. But till Rouhani’s recent vist, Iran had been stalling on the conclusion of a deal for the development of Farzad-B, estimated to hold reserves of some 12.8 trillion cubic feet (tcf) of recoverable natural gas. Even Indian Petroleum Minister Dharmendra Pradhan’s April 2016 visit, during which he would assure the Iranian leadership of India’s plan to invest up to $20 billion in Iran’s energy sector, failed to move Tehran. In fact, Iran would actually snub India the very next year, by signing an initial pact with Russia’s Gazprom for the development of Farzad-B, something that was was confirmed by Iran’s Oil Minister Bijan Namdar Zanganeh himself in an interview to a London based media outfit in June 2017. Unhappy with Iran’s decision, India would go on to cut oil imports from Iran by almost a fifth in 2017.
Today, however, with Iran’s domestic economy being in the grip of both high unemployment and inflation simultaneously, and facing the prospect of the imposition of a fresh round of US-led sanctions, Tehran is far more keen to entertain Indian economic offers. Speaking to journalists after his talks with Pradhan, Zangeneh who formed a part of Rouhani’s entourage to India, said that Indian public and private sector oil companies would buy 500,000 barrels of Iranian crude per day during the fiscal year 2018-19. Zangeneh also said that he was optimistic about the signing of an agreement for Farzad-B gasfield with OVL.
Iran watchers in India say that while a worsening domestic economic situation is a factor for the abrupt turnaround in Tehran’s position on Farzad-B vis a vis India, New Delhi’s ever growing relationship with various members of the Gulf Cooperation Council (GCC) including Iran’s regional rival Saudi Arabia has also played a significant role. The GCC today is India’s second-largest trading partner and a major destination for Indian investment. As per a data provided by India’s Ministry of External Affairs, around 7 million Indian expatriates living in the GCC remitted $35 billion to Indian shores in 2017 alone. Oil for a strategic reserve in Mangalore on India’s Western Coast is set to arrive from the United Arab Emirates soon. Meanwhile, India has already secured access to Oman’s naval facility at Duqm which will is being seen as a counter to China’s naval presence in Djibouti and prospective presence in Gwadar, Pakistan.
India’s ever warming ties with Israel, which might soon include an energy relationship in addition to a deep defence partnership, are also playing a role in Tehran reconsidering its obduracy on key issues of relevance to India. Meanwhile, the very real threat of a US President Donald Trump’s reviewing the nuclear deal reached with Iran by a US-led coalition in 2015 is also weighing heavily on the Iranian mind.
There is actually a fear now in Tehran that the US, under the pretext of renewing the deal, may impose fresh sanctions on the country. In the midst of all this, it is not altogether surprising that Iran has rushed to sign a plethora of long-delayed agreements with India and seek its assistance in navigating its continuing exchange rate woes. Iran is still facing banking and payment challenges and this has hampered Indian investments. During the Rouhani’s visit, both sides agreed to resolve their currency problem through a Rupee-Riyal mechanism and thereby also stimulate bilateral investments. However, it is still not clear whether India’s plan to connect Chabahar port with Zahedan on the Iranian border with Afghanistan via a will be undertaken through a new Rupee-Riyal mechanism. Nonetheless, the Iranian President’s outreach to India suggests that he has done this in a bid to rekindle ties with India at a time when his country faces a fluid geo-strategic situation that can deteriorate quite quickly. After all, India, despite voting against Iran on the nuclear issue, stood by Tehran economically, throughout its years of isolation.
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