The recent development that Iran has contracted the Farzad-B Gas Field to Petropars, a domestic gas producer, marks an unfortunate downturn for India’s energy relations with Iran. In 2008, ONGC Videsh Ltd (OVL), an Indian company, discovered this gas field, and has since been a significant player in its development. This move by Iran raises several concerns for India, including China’s rising influence, threats to India’s energy security, and potential disruptions to India’s role in the regional landscape.
Farzad-B Gas Field: Background
Situated in the Persian Gulf, the Farzad-B Gas Field was part of an exploration contract signed in 2002 by an Indian consortium, encompassing ONGC Videsh, the Indian Oil Corporation and Oil India. The contract expired seven years later in 2009, following the declaration of commerciality based on the discovery of more than 19 trillion cubic feet of gas reserves. Despite approximately USD 100 million invested by the ONGC, ongoing efforts continue to secure a contract for the field’s development.
The main points of contention between India and Iran surrounding the project were two proposed pipelines and the sum to be agreed upon in the development plan. By May 2018, around 75% of the agreement had been established; however, the US withdrew from the nuclear deal and declared sanctions on Iran, complicating matters further. In January 2020, Iran informed India it would develop the field independently for the time being but might include India at a later stage.
Recent Developments
In light of Iran’s dwindling rupee reserves with Indian banks, Indian traders have largely refrained from entering new export contracts with Iran. Another significant blow to India-Iran ties was Iran’s decision in 2020 to decline India’s USD 2-billion offer for the development of the Chabahar railway link (Chabahar-Zahedan Railway Line) and proceed independently.
Concerns for India
The recent agreement between China and Iran on a 25-year “strategic cooperation pact”, which includes political, economic and strategic components, can pose an obstacle to India’s entry routes into Afghanistan through Chabahar. While Iran has not indicated any disruption to such projects, India must remain vigilant.
India’s energy security is also at stake as the country has ceased buying Iranian oil, which used to account for nearly 90% of its imports from Iran. Geographically, Iran is the closest to India among the Persian Gulf nations and remains a viable gas source. The Farzad-B Gas Field could have potentially nurtured India-Iran relations which have been strained due to US sanctions.
The ability to juggle relations with Iran and foster new relationships with Saudi Arabia and Israel is essential for India’s policy in West Asia. Chabahar not only facilitates maritime connections between India and Iran but also provides access to Russia and Central Asia, bypassing Pakistan – which had blocked Indian aid and trade over land to Afghanistan.
However, India must tread carefully considering the emerging Iran – Pakistan – China alliance in Afghanistan’s vicinity, which has potential terror groups at its disposal.
Way Forward
For India, maintaining amicable relations with major suppliers in the Middle East – including Iran, UAE, Qatar, and Saudi Arabia, along with Iraq – is crucial due to its reliance on the region’s oil and gas. India must walk a tightrope between the US and Iran. With global connectivity becoming the new currency, India’s inability to capitalize on these projects could lead to gains for another nation, notably China.
