Lifting sanctions on Iran to benefit India

The recent interim deal with Iran and the western powers has given the country a chance to come out of its economic isolation. Tehran has been facing a series of sanctions imposed by the UN Security Council since 2006 on the basis of IAEA reports relating to its non-compliance with its safeguards agreement under the Nuclear Non-Proliferation Treaty. Further sanctions were imposed by the European Union and the US.

Though the broad parameters of the recent deal between Iran and P5 1 (US, UK, France, Russia, China, Germany) at Lausanne in Switzerland on April 2, this year, the devil lies in the details for implementation which is slated to be finalized by July 1.The lifting of the sanctions imposed and thereby ending its economic isolation is likely to help Tehran repair its shattered economy, but also benefit India in terms of oil imports on 90-day credit terms and at a discount.

New Delhi is Iran’s second biggest buyer of oil after China and after sanctions are lifted, Indian can source any amount of oil from its nearest neighbour. Sanctions have caused oil payments to Iran difficult. While India deposited rupees in an Indian bank by way of payments, Iran used these funds to pay for imports from New Delhi. Previously India used to route its payments through a Turkish bank or by following the Russian route. These complications caused delays in trade.

Last year, India imported 276,800 bpd of Iranian oil, being 42% more over 2013 levels – this caused Washington to raise its eyebrows. Iran emerged as the seventh largest oil supplier to India in 2014. Till 2006, Iran was India’s second largest supplier of crude oil, but later dropped to the seventh rank on the impact of sanctions imposed.