Iran and India have a long history of trade. However, this relationship hasn’t been in the best possible state since the United States imposed sanctions on Iran and curtailed trade to a great extent. The biggest casualty has been the Oil & Gas sector. However, ties between the two Asian Countries are on the mend. Iranian Foreign Minister Mohammad Javad Zarif traveled to New Delhi recently to revive ties with India and to unravel issues that have constrained Indo-Iranian relationships. Zarif noted on Feb. 28, “The two countries are intent on minimizing wrongdoings and overcoming interferences.” His two-day visit covered various regional and international issues, including developments in Afghanistan, combating extremism and, above all, increasing economic ties and crude oil exports to India.
Iran’s energy supplies to India:
India is the fourth-largest energy consumer in the world after the United States, China and Russia. It is also the fourth-largest consumer of crude oil and petroleum products after the United States, China and Japan. India’s oil imports have increased from 40% of its demand in 1999 to more than 70% in 2011.
Mukesh Ambani’s Reliance Industries Limited (RIL) has been a major supplier of gasoline to the Islamic Republic of Iran for some time now. Iran, a major oil producer in the energy-rich Central Asian belt was a major importer of refined products. In fact, 40% of its refined products were imported, particularly gasoline. Iran would sell its crude oil to RIL, and then would purchase about 25% of its imported refined petroleum products from RIL. This amounted to roughly 10% of Iran’s total gasoline consumption in 2008. Reliance, through its subsidiary, Reliance Petroleum Limited (RPL) has ties with Chevron India Holdings which is owned by Chevron Corp.
In 2009 though, RIL stopped gasoline sales to Iran. This was because the United States imposed sanctions on Iran. This was largely due to the threat and fear of the suspension of the assistance the US Export-Import Bank was supplying to RIL. The bank, which provides supports to US exporters, approved $900 million in loan guarantees to expand the RIL-owned Jamnagar oil refinery.
Energy Demand:
India is growing fast. New industries are coming up and the energy demand is high. As a result, India’s increased energy demands mean that Indo-Iranian ties could be revived. A huge reason for this is the new regime in place in Iran. The largely anti-western Ahmadinejad is no longer at the helm of Iran; a moderate Hassan Rouhani has showed a more conciliatory approach toward the West over its nuclear program. If an agreement is reached with countries like the USA or a large body like the EU, India could benefit immensely. Under these circumstances, Iran not only could have an important role in supplying energy to Indian, but also could be an investment market for Indian energy companies.
Boost for Petroleum:
Indian petroleum companies, particularly RIL could be beneficiaries of trade to Iran. This comes on the back of Iranian officials announcing that they are going to increase their gasoline imports up to three times, about 10 million to 11 million liters per day in the next Iranian calendar year (starting March 2014).
In the meantime, Iranian energy officials are busy revising their investment regulations to increase profit and reduce risks for international investors. They are also traveling and meeting with numerous refinery owners, and seeking new marketing strategies to regain their lost shares in the broader global energy market.