Tehran Dividend
Once Iran is out of America’s bad books, India shouldn’t waste opportunities to invest in, and trade with, it
People look for omens in hard times. That US and Iran signed their MoU for peace two days early – Wednesday rather than Friday – seems like one. Does it mean peace is inevitable? One hopes so, but with Trump saying, “We’re going to bomb the hell out of them if they violate the agreement,” bets may prove premature. Besides, Trump’s warning defies the MoU’s first point: “To refrain from the threat or use of force against each other.” There are other triggers – Israel’s strikes on Lebanon, for example – that could derail a deal. But for the moment, at least, peace has a chance, and India should plan ahead for opportunities in a rehabilitated Iran.
Despite decades of sanctions, Iran is not poor – its per capita GDP in 2024 was roughly double India’s. It’s also large and populous, and has ancient cultural ties with us. Yet, even before the war, our exchange with it had dwindled. Our main export, rice, was down to $698mn, from $1.2bn in 2018. As for our imports, we had completely stopped buying oil and gas from Iran in 2019, under threat of US sanctions. But, before that, Iran used to be among our top three energy suppliers. Now that the MoU promises to lift sanctions on Iranian oil and gas, we should resume imports. There’s a cost advantage in this, as Iran is our closest Gulf neighbour. But there’s also a strategic benefit. If Hormuz is ever closed again, Iranian energy can continue flowing to India via the southeastern port of Chabahar.
India proposed to develop Chabahar in 2003, as its gateway to Iran, Afghanistan, Central Asia and Russia, bypassing Pakistan, but has been stymied for various reasons. We should see the project through this time, and aim to be part of the $300bn reconstruction and development plan for Iran, mentioned in the MoU. Beyond that, Iran’s under-funded hydrocarbon sector is an opportunity. We need oil and gas – Iran has the third and second largest reserves, respectively. What it lacks is infra to extract them. Saudi can produce 12mn barrels of oil per day, Iran’s capacity is just 3.7mbpd. Indian PSUs had discovered its Farzad-B gas field in 2008, and were expected to develop it, but that opportunity slipped away. Now, India must pursue its interests with greater determination. But only after the US-Iran deal is done and dusted, hopefully by Aug.
https://www.reuters.com/world/middle-east/14-point-draft-us-iran-deal-2026-06-17/
Disclaimer
Views expressed above are the author’s own.
