This is particularly true of
India, which in the pre-sanctions period was one of Iran’s major partners in
energy and security cooperation: Iran was the second-largest supplier
of crude oil to India and both countries propped up the Northern Alliance in
Afghanistan against the Taliban. But this partnership unravelled quickly after
2006 when the United Nations imposed sanctions on Iran and India’s engagement with
the United States began to blossom. While India continued to import
oil from Iran, it progressively cut volume under US pressure.
This downward spiral in
India–Iran relations contrasted with Iran’s dealings with China. As US and
European companies kept away from Iran, China and its companies made strategic investments in Iran,
exporting technologies and providing a cushion from sanctions. Now, the JCPOA
provides an opportunity for China to further push companies, such as Sinopec
and China National Petroleum Corporation, to increase their investments in
Iran. With its One Belt, One Road (OBOR) strategy in place, China will take
steps to plug Iran into this network through multiple projects such as energy
grids, pipelines and highways.
Pakistan, which has already
been enmeshed into OBOR through the China–Pakistan Economic
Corridor and the Gwadar–Nawabshah
pipeline project, stands to gain from this Chinese push in Iran. The
implementation of these projects and their linkages with OBOR will enable
Pakistan to increase its trade with Iran, addressing its persistent energy
woes. But there is also some disappointment
within Pakistan as its political leadership appears to lack the initiative to
seize the opportunities arising from the Iran deal.
For India the economic
implications of the Iran deal are also linked to its energy security and connectivity
plans.
The deal benefits India’s
energy security as it will enable Iran to bring more oil to the market, as much
as 2.3 million barrels per
day, which could portend a general stability in oil prices. This is important
for India who is the world’s fourth largest energy consumer and is critically dependent on oil imports. The
removal of sanctions also does away with multiple constraints to trade with
Iran. India will be able to make payments for Iranian oil imports in US dollars
and insurance companies will now be able to underwrite tankers carrying Iranian
oil. India is also exploring building an undersea pipeline in the
Arabian Sea to import Iranian gas. Additionally, it is developing the Chabahar
port which will enable it to access Afghanistan and Central Asia,
bypassing Pakistan.
But the deal also poses
challenges for India.
While India continued doing
business with Iran during the sanctions regime, it also sought to contain that
engagement due to fears of getting caught on the wrong foot with the West. In
2009 India voted against Iran
at the International Atomic Energy Agency over its uranium enrichment
activities. The Iranians were miffed by this treatment but couldn’t do much
with limited foreign policy options.
Iran now has multiple
options for investment from China, Russia, the United States and Europe. In
these circumstances, Indian policymakers fear that Iran will drive a hard
bargain on various issues. This is already evident in the case of the Farzad-B
gas field, where Iranian media is reporting that the country has turned down India’s
latest offer to develop the gas field after procrastination by
India’s state-owned company, ONGC Vigesh Limited.
Iran’s new attitude will
have an impact on Indian companies that are eying potential openings in a
number of sectors such
as food, pharmaceuticals, transportation, services, banking, information
technology and construction. Iran will also get access to over US$100 billion
of assets frozen abroad,
significantly boosting average Iranian consumption. Here Indian companies face
strong competition from Russian, American, European and Chinese companies,
which have comparatively low costs and advanced technologies.
On security, Iran and India
have explored ways of coordinating their positions on Afghanistan. Joining
hands with Iran gives India a good opportunity to evaluate its options.
Recently, India has felt left out of Afghan dynamics as the ‘Murree Peace
Process’, initiated by Pakistan and China, is gaining traction. Engagement with
Iran will also be important for India in countering the challenge of the
Islamic State, which has announced plans
to target India.
A major foreign policy
challenge for both India and Pakistan will be balancing a prospective
engagement with Iran against their current ties with Saudi Arabia, which has
stridently opposed the Iran deal. Pakistan’s ties with
Saudi Arabia have been uneasy with Islamabad refusing to contribute
to the Saudi-led war effort in Yemen. On the other hand, India’s relationship
with Saudi Arabia has flourished in recent years, particularly on
counter-terrorism matters. An additional dimension to consider is India’s
burgeoning defence ties with Israel, an avowed opponent of the Iran deal.
Only time will tell how
things pan out on the JCPOA. But it is clear that the deal has unveiled new
dynamics for South Asia and the Middle East with fundamental implications for
the regional balance of power as well as India and Pakistan’s engagement with
Iran.
Sameer Patil is Fellow in
National Security studies at Gateway House: Indian Council on Global Relations,
Mumbai. He has previously served on India’s National Security Council
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