P5+1 negotiations and Iran nuclear deal - Benefits for India

P5+1 negotiations and Iran nuclear deal – Benefits for India

Question - The P5+1 negotiations and the Iran nuclear deal are a major step forward for world peace. Discuss the benefits of this deal for India.

A framework for a nuclear deal has been formulated between Iran and P5+1 world powers.
The plan has created a foundation for the deal

About the Deal

• Lausanne has seen a historic moment on April 2nd, when Iran and P5+1 announced the initial agreement on the Iran nuclear programme. P5+1 includes United States, Russia, Germany, China, Britain and France.

• Agreement is in progress and final deal will be scheduled on June 30th

• The international strategic landscape will undergo the change with the deal

• Deal will also limit the scope of the nuclear programme of Iran with massive reductions as far as installed enrichment centrifuges, size of uranium stockpile and other aspects are concerned

• Iran will also have to turn the second enrichment facility Fordow into a physics research centre and cease all enrichment activities

• Tehran will also provide greater access to the IAEA for inspecting facilities deemed suspicious

• Sanctions levied internationally and bilaterally will be lifted once Iran complies with the deal

• As per this deal, Iran will lower the number of centrifuges for enriching uranium from 19,000 to 6,104; this does not impact Iran’s nuclear capabilities to produce a weapon if it needs to

• The breakout time or the time Iran requires to acquire adequate fissile material for a single weapon will rise to one year from the presently estimated 2 to 3 months

• International Atomic Energy Agency will also access all of the nuclear facilities of Iran and investigate covert enrichment facilities or suspicious sites; the provides for intrusive IAEA inspections which is a new step forward for Iran

• Iran will also be prevented from continued sanctions if the IAEA has made the verification that Iran is abiding to its commitments; Sanctions will only be lifted when Iran adheres to the deal

• The Joint Comprehensive Plan of Action proposed will provide Iran relief from sanctions and ensure it has sufficient time to build strength

Benefits for India

• South Asia, specifically India will be greatly affected by the final deal as progressive sanctions had forced India to reduce oil imports from Iran

• In December 2010, the RBI closed the Asian Clearing Union which is a regional payment mechanism

• India will now pursue complex payment routes to purchase Iranian oil unless the nuclear deal is pushed through

• OPEC mandated production cutbacks will not be affecting Iran and this may also see a plunge in oil prices thereby impacting India’s economy

• Once sanctions are removed, Western firms may also rush to Iran but India can also capitalise on it as an investment destination

• The development of the framework for the Iran nuclear deal has been hailed as a significant step forward for India

P5+1 nuclear accord will benefit the nation in the following ways:

A. Less Political Pressure

• A fall in the hostility between Iran and the US will lighten the load on India; earlier, following the Indo-US civil nuclear deal, India had to maintain a distant relationship with Iran.

• India’s vote against Iran in the IAEA and inability to proceed with the Iran-Pakistan-India pipeline will remain the past as Iran and India now embark on a cordial relationship without creating issues for the US

B. The Afghanistan Question

• The economic and political revival of Afghanistan will be needed for India as it is the strategic and geopolitical convergence centred on the future of Afghanistan

• President Ghani is currently striking a balance between domestic and global concerns, and China as well as Pakistan are playing a major role here.

• Iran and India convergence on Afghanistan will open new pathways for partnership and collaboration between the concerned nations.

• India will also be able to access Afghanistan through Pakistan through the Chabahar-Milak-Zaranj-Dilaram land route from Iran to Afghanistan.

• The Chabahar port will also improve India’s land and sea access to Afghanistan.

• The 3 concerned nations have already signed a deal for providing Indian goods preferential treatment and tariff reductions at Chabahar. India and Iran can cooperate to stabilise Afghanistan.
• This has a positive implication for New Delhi as the relations between the nations will improve as a result of this.

C. More Energy Engagement with Iran

• A successful deal between Iran and P5+1 will install more rigour in the Indo-Iranian oil trade

• It has huge oil and gas reserves along with geographical closeness to India

• Currently, India receives the second highest oil exports following China

• So far, India has not been able to trade oil with Iran without reservations, but the nuclear deal will ease tensions between Iran and the Western world and resolve this situation

• India had earlier been unable to deposit dollars/euros in foreign banks due to sanctions to pay for Iranian oil supplies

• As a result of these sanctions, India has to pay Iran through Turkey and then in rupees which have limited international acceptance

• Foreign insurance companies refused to cover refineries using such oil supplies from Iran or even insure ships taking cargo to and fro from Iran creating problems for India’s oil related trade with Iran

• India’s oil related trade with Iran had earlier been hampered due to this; India had slashed its oil imports from Iran by 26.5% and did not import oil from Iran in March 2015

• Easing of sanctions has facilitated energy related trade and insurance of oil cargo by European firms for India

D. Progress on Crucial Projects

• India will gain tremendously through progress on stalled or delayed Indo-Iranian projects

• India will improve participation in operationalisation of strategically pivotal port of Chabahar in Iran

• 2 countries will also rework the deal between GAIL and NIGEC and Bharat Petroleum Corp Ltd following the lifting of sanctions; if this is finalised, the project will allow India to purchase 5 million tonnes of LNG from Iran each year; This will ensure energy security in India

• Another stalled project which will also move forward is the offshore Farsi block of Iran; Indian consortium of OVL, IOC and OIL was awarded this block in 2002 from National Iranian Oil Co following successful bidding

• Block bears reserves of close to 21.68 trillion cu.ft(tcf) with recoverable reserves close to 12.8 tcf.

• This consortium may not possess ownership rights but it was to be paid 15% return on the investment when awarded the Farsi block; Iran will now be able to honour this commitment

• Another important venture which will also receive fresh impetus is the deep water pipeline linking Oman to India and transporting LNG for the next 2 decades

• Government is also looking to increase natural gas in the energy mix and it will secure and ensure future energy requirements for the nation

E. Advantages for the Indian Economy

• Stability in global oil prices will also ensure greater supply of the same from Iran to world markets including India

• International prices of oil will become stable and benefit the economies of energy consumers such as India

F. Increase in Political Engagement

• Framework nuclear agreement between Iran and the P5+1 nations will also be towards enhancing political engagement with resource rich West Asian nations

• India can connect with Afghanistan without involving Pakistan if Iran is on the mend and sanctions are readily lifted

G. Development of Consistent Policy towards Iran

• This deal will also enable India to finally develop a consistent Iran policy

• India is one of the largest importers of crude oil from Iran

• Lifting of sanctions will inject fresh life into Indo-Iran relations

• Following the lifting of sanctions, Iran will open up its hydrocarbon resources and assist global energy giants such as OVL in India

H. Security Benefits

• Iran has also agreed to stall its nuclear weapon plans and roll back bomb related programmes; this will benefit the global security situation in many ways and prevent escalation of an arms race in the region

• If Iran continues on the path towards nuclear disarmament, chance of nuclear conflict with Israel or Arab nations cannot be ruled out

Facts and Stats

• Middle East now constitutes 60% of Indian energy supplies

• Close to 7 million Indians work for livelihood in these nations

• Last year, India imported 2,76,800 barrels per day of oil and condensate from Iran up 41% from 2013

• India has imported close to 77% of energy resources and has good ties with Iran; its energy import bill amounting to USD 150 billion will double by 2030