What US-Iran deal means for India

AFter months of watching the economic system existence come to by disruptions in vitality supplies through and through the Strait of Hormuz and maintaining a balance between the various sides involved in the West Asia conflict, the peace deal between Iran and the US will provide relief to India though concerns remain about the long-term viability of the arrangement.After more than three months of hostilities, Iran and the US on Sunday agreed on a memorandum of understanding (MoU) during talks brokered by Pakistan and Qatar. The deal, scheduled to be signed in Geneva on Friday, will end the US blockade of Iranian ports and reopen the Strait of Hormuz, which was used to transport almost half of India’s oil imports till the conflict began in February.Prime Minister Narendra Modi joined other world leaders on Monday in welcoming the peace deal but emphasised the need to restore peace and stability in West Asia and ensure unimpeded commerce. Within hours of the deal being announced, the tanker Disha, managed by a consortium led by the Shipping Corporation of India, transited the Strait of Hormuz and headed for Gujarat with a cargo of 62,370 metric tonnes of LNG from Qatar.Despite this breakthrough, shipping firms are watching developments with caution and experts said the restoration of normal traffic through the vital waterway can take weeks, even months, given lingering concerns about the peace deal holding because of the sharp differences between Iran and the US.For India, which relies heavily on West Asia for energy supplies, the deal promises relief from high oil and gas prices, pressure on the rupee and inflation risks that intensified during the conflict, said Ajay Srivastava, founder of the economic think tank Global Trade Research Initiative (GTRI).The conflict also exposed India’s over-dependence on West Asia, from where it sources about 50% of its crude oil, around 70% of LPG supplies and almost 90% of LNG imports, and forced refiners to seek alternative supplies from distant markets such as Venezuela, Srivastava said.As ASSOCHAM President Nirmal K Minda hailed the Iran-US arrangement as a “major breakthrough” for the benefit of the whole world, commerce secretary Rajesh Agarwal echoed the lingering concerns when he said many trade-related challenges can “ease significantly if the peace deal holds and remains sustainable”.India has had to resort to a delicate balancing act since the start of the conflict on February 28, given its close ties with the US and Israel – Modi visited Israel days before the start of hostilities – and its historic and long-standing relations with Iran and Arab states. Iran was also among the country’s top three energy suppliers till India was forced to stop Iranian crude purchases in 2019 because of US sanctions imposed by President Donald Trump in his first term.While emphasising a return to dialogue and diplomacy to end the conflict, India also denounced Iranian drone and missile attacks on West Asian states such as Kuwait, Qatar and the United Arab Emirates that are home to millions of Indian nationals. The government mounted a concerted outreach to key energy suppliers – with Modi himself visiting the UAE last month – to ensure uninterrupted oil and gas supplies, though reports from the region suggest it may take months for some energy facilities targeted by Iran to come back online.A long-term deal between Iran and the US, including the ending of American sanctions on Iranian oil sales, will be crucial for New Delhi resuming energy purchases from Tehran and continuing with the development of Iran’s Chabahar port, which is central to India’s plans for the International North-South Transport Corridor. A US waiver on sanctions related to Indian operations at Chabahar port ended in April, creating uncertainty about New Delhi’s long-term plans for the strategic facility.Srivastava argued that the larger lesson for India is strategic. “The US didn’t embrace peace out of goodwill, it did so because the costs of war became too high. Tehran’s ability to disrupt energy supplies, raise global oil prices and impose economic and military costs forced Washington to negotiate,” he said.“India should draw a clear lesson from this outcome – engage the US as an equal partner, not a subordinate one. Whether in trade, technology, energy or foreign policy, India must reject arrangements that undermine its interests,” he said.