India, caught unawares by an earlier-than-expected lifting of economic sanctions on Iran by the US, has welcomed Washington’s announcement, saying that it is a significant success for patient diplomacy. India believes that the move will open a new chapter of peace and prosperity in West Asia.


As sanctions on Iran were lifted on January 17, the Indian External Affairs Ministry said in a statement that New Delhi is looking forward to strengthen its economic ties with Tehran. As far as bilateral ties are concerned, India is concentrating mainly on energy and regional connectivity.

Although Tehran has always held immense strategic significance for New Delhi, the Indian strategic experts are not sure if the lifting of sanctions will be beneficial for the energy-hungry South Asian country. They are of the opinion that India may have to pay a high price for lost opportunities, in case Iran turns hawkish on negotiations on economic collaborations delayed by India.

According to experts, India will certainly enjoy the freedom to purchase as much crude oil as possible from Iran, but it may also face difficulties while negotiating the price of petroleum products in the coming days. After analysing the current political landscape in West Asia, experts have come to the conclusion that the lifting of sanctions on Iran brings good news to India, provided the spat between Riyadh and Tehran doesn’t escalate into a full-blown crisis in the region.

Senior Indian foreign policy expert Rudroneel Ghosh opines that Saudi Arabia has made a mistake by considering the Iranian nuclear deal as a blank cheque to Tehran to carry out a covert nuclear weapons programme. Riyadh’s recent decision to execute Shia cleric Nimral-Nimr has triggered a series of events that could have disastrous consequences for West Asia, according to Ghosh. Tensions between Saudi Arabia and Iran have not only been escalated over ongoing wars in Syria and Yemen, but also over the name of Mediterranean Sea. Is it the Persian Gulf or the Arabian Gulf? While Tehran insists that it be called the Persian Gulf, the Arab nations push different parties to use their preferred term – Arabian Gulf.

Keeping in mind the Saudi-Iranian power game, India should consider Iran as its ideal strategic partner in the region. Iran is not only India’s gateway to Central Asia, but also a strategic counter for it to Pakistan in Afghanistan. The Chabahar port in Iran, currently being developed with Indian assistance, will provide port access to landlocked Afghanistan. Currently, Afghanistan is fully dependent on Pakistan for sea trade.

In a press release issued on January 14, Mumbai-based Indian think-tank ‘Gateway House’ stated that as Iran has emerged on to the world stage after 36 years of isolation, India should double up its diplomacy and commercial engagement with the West Asian country and move boldly beyond the curtain of ‘civilisational’ ties. For New Delhi, it is time to put that natural advantage to good commercial use through a vigorous private sector engagement with Tehran, read the release. According to Gateway House, the Persian culture is so embedded in the language and culture of India, Iran is hardly a foreign country for us.

As Iran opens a new chapter in its ties with the world after sanctions were lifted under its historic nuclear deal with global powers, Indian experts are trying hard to properly understand the deal. The US will no longer sanction foreign individuals or firms for buying oil and gas from Iran. Even the European Union (EU) has okayed trade and investment in petrochemicals, metals, shipping, shipbuilding and other Iranian transport industries, as well as banking, insurance and other related services. Most importantly, Iranian banks can buy and sell dollars, but cannot use the American banking system.

However, the American trade embargo is still in place, as limited business activities have been allowed, like selling or purchasing of Iranian caviar, pistachios, saffron and carpets and American commercial aircraft and their parts. The US and other world powers have not allowed Iran to work on ballistic missiles designed to deliver nuclear weapons for eight years. There will also be no transfer of nuclear technology to Iran for peaceful purposes for a decade. There will be curbs on entities, such as Iran’s Revolutionary Guards, which are accused of sponsoring terrorism or allegedly linked to it.

For India, it is important to closely monitor Iran’s next steps. At current prices, the lifting of sanctions means that Tehran can increase its revenue from oil exports by USD 10 billion by the end of 2016. The lifting of banking sanctions will allow USD 30 billion of foreign reserves (frozen in accounts around the world) to be brought back to Iran. The International Monetary Fund (IMF) has said that the US’ move would help Tehran boost its GDP growth to around 5% in 2016-17 from the current 0%. It means that Iran can save USD 15 billion per year in cheaper trade.

Meanwhile, Tehran plans to increase oil sales by 500,000 barrels and hike total exports to around 2.5 million barrels within 2017. The move will certainly push oil price downwards, as the international market is already flooded by cheap oil. Iran also plans to offer discounts on prices that are already the lowest in 11 years. However, the proposed move could trigger a bigger price war between Iran and Saudi Arabia. Such a war could be beneficial for India and other countries, as they will get an opportunity to purchase oil at cheap rates.

Koushik Das, based in the Indian capital of New Delhi, is a senior news editor with more than 15 years of experience. He also runs a blog - Boundless Ocean of Politics. E-Mail: [email protected]