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Iran Nuclear Deal: What It Means for India


July 14, 2015

July 14, 2015

WASHINGTON: Iran on Tuesday reached a historic nuclear deal that is likely to result in easing of sanctions in exchange for curbs on Tehran's nuclear programme. Oil prices tumbled more than a dollar as news about a nuclear deal surfaced. India imports nearly 80 per cent of its energy requirements, so falling oil prices will benefit the economy.

The lifting of sanctions in Iran is likely to benefit domestic pharmaceutical, IT and commodity firms, according to trade ministry officials. However, the Iran nuclear deal could spell troubles for many Indian companies, analysts say.

Here's how the easing of sanctions in Iran could hit India:

1) Thousands of exporters in India have enjoyed a three-year run because India did not back sanctions against Tehran. India's exports to Iran doubled to $5 billion in 2013-14, helping to halve its bilateral trade deficit. Now, Indian companies will face more competition at a time when exports have dropped 20 per cent because of global slowdown in trade, analysts say.

2) Farmers may also take a hit from the easing of sanctions in Tehran as Iran is a big buyer of basmati rice, soymeal, sugar, barley and meat. Under sanctions, Iran paid a premium of up to 20 per cent over global prices to buy from India.

3) Indian companies will have to compete for consumer products ranging from clothing to cars, and big-ticket contracts like the Tehran metro with global firms.

4) The oil ministry fears that Iran could award the right to develop its giant Farzad B gas field to Europeans who can deploy the latest technology and commit billions of dollars to modernising the country's oil-and-gas infrastructure. State-run ONGC is currently in contention to get development rights of Farzad B field.

5) Indian refiners are unlikely to get cheaper oil from Iran as Tehran will be able to do business with any other country when sanctions are lifted. Indian refiners will also have to pay past dues of $6.5 billion (over Rs 40,000 crore) in hard currency that they have not been able to settle due to the sanctions.

Courtesy: Reuters