The deal – what it means to India and South Asia

At last

Twenty months of negotiations, threats and diplomacy has led to a deal, which will stop Iran from acquiring weapon grade Uranium. The details of the deal are still trickling in. According to this CNN report, “The deal reduces the number of Iranian centrifuges by two-thirds. It places bans on enrichment at key facilities, and limits uranium research and development to the Natanz facility. The deal caps uranium enrichment at 3.67 percent and limits the stockpile to 300 kg, all for 15 years. Iran will be required to ship spent fuel out of the country forever, as well as allow inspectors from the IAEA inspectors certain access in perpetuity. Heightened inspections, including tracking uranium mining and monitoring the production and storage of centrifuges, will last for up to 20 years. The U.S. estimates that the new measures take Iran from being able to assemble its first bomb within 2-3 months, to at least one year from now”.

 

Three decades of animosity between Iran and the US, due to political intervention of the latter and an unprecedented hostage crisis during the revolution, seems to be thawing. The deal of course means a lot to Iranian economy (the full impact of the deal will only be felt once the sanctions are lifted next year), it also has the potential to influence much of South Asian geo-politics and economy. Iran has the fourth largest proven oil reserves in the world but exported only 2.3 million barrels a day, against 6.2 million barrels a day (2014 data; US EIA) by Saudi Arabia. The sanctions significantly reduced the exports and forced Iran to store millions of barrels of crude in floating tankers in the Persian Gulf.

 

The future – India

Once the sanctions are lifted, Iran will increase production and export. The oil prices already under pressure from a weak demand and oversupply might see a further decrease in prices. Assuming the diplomatic relations between US and Iran will improve progressively and the deal will hold, it is possible that Iran will provide US access to its ports in the Persian Gulf. It may also offer surface connectivity, enabling the NATO to supply its forces in Afghanistan. These two possibilities have the potential to change things for better, for India.

 

With over 80% of its energy needs being imported, India will stand to benefit immensely by cheaper crude prices. India ran a bill of USD 112.7 billion on oil imports in 2014-15 A price drop of even a single dollar per barrel translates into a billion dollars saved. A substantial drop will provide India with a windfall gain, making precious financial resources available for development work.

 

Indian business also stands to benefit from a sanctions free Iran. ONGC Videsh Ltd. discovered a gas filed in the Persian Gulf (Farzad-B) with an estimated reserves of 21.7 trillion cubic feet. The operating contract (with ONGC Videsh owning 60% stake) was never signed due to international sanctions. The situation will change once the sanctions are gradually lifted next year.

 

The future – Pakistan

On the other hand a friendlier Iran may also mean access to US and NATO supplies to Afghanistan. In the past a hostile Iran made Pakistan the sole point of transit for almost all NATO supplies. The heavy dependence on Pakistan lead to billions of dollars being paid to the army and civil administration by America. The money thus paid found its way to funding various terror groups. The fact that Pakistani establishment sponsored terrorism has long been established by both international governments and strategic research scholars. Professor Christine Fair of Georgetown University in her book, fighting to the end gives a well-researched account of Pakistani army, the ISI and past dictators who indulged in funding Jihad.

 

The dependence on Pakistan to serve its goals in Afghanistan, remains a major reason why the US funds Pakistan. Possibility of an alternate route from Iran puts Pakistan in a situation where the American aid dollars might dry up sooner than expected. While cheaper crude will help India fund its poverty elevation programme, a fund crunch in Pakistan might force it to scale down its terror funding.

 

The hope

What really happens is a question that will get answered only in the future, as and when sanctions are removed and how US engages Iran. But there is a clear opportunity for India to scale up its civilizational ties with Iran and turn them into mutually beneficial business relations. A rejuvenated foreign policy and a business friendly government have the potential to make the transition. Hassan Rouhani as a chief guest at Rajpath, for next Republic Day might do India a lot of favour.