Historic Iran Deal Set to Open Doors for Energy Hungry India

With Vice President Joe Biden, President Barack Obama makes remarks on nuclear deal with Iran in the East Room (White House)

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Washington, DC – After 18 days of continuous talks, a comprehensive deal on Iran’s nuclear program was reached on July 14, 2015 in Vienna, paving the way for Iran to enter the oil market which is good news for energy hungry India according to political pundits. Immediately after the announcement that a deal had been made, oil prices fell globally.

President Barack Obama early morning at 7 am Tuesday welcomed the deal as a triumph of US diplomacy, saying the agreement met the goals he had in place throughout negotiations.

“Today after two years of negotiation the United States together with the international community has achieved something that decades of animosity has not: a comprehensive long-term deal with Iran that will prevent it from obtaining a nuclear weapon,” Obama said from the East Room at the White House, with Vice President Joe Biden at his side. “This deal is not built on trust. It’s built on verification,” Obama said.

Iranian President Hassan Rouhani also praised the deal, speaking after Obama finished, as televisions in Iran broadcast the US President’s statement live, translated into Farsi. “Negotiators have reached a good agreement and I announce to our people that our prayers have come true,” Rouhani said in a live address to the nation following Obama.

Commenting on what the lifting of sanctions could do for Iran’s oil exports, and it’s significance for India, Amit Bhandari, fellow for energy and environment studies at Gateway House noted that the nuclear deal, and a subsequent lifting of sanctions, would allow Iran to return to the energy market. At its peak in the 1970s, Iran could produce over 6 million barrels of oil a day. Iran currently produces nearly 2.8 million barrels of oil a day, which is nearly half of its peak production in the 1970s.

Iran can produce an extra 700,000 barrels of oil per day at short notice. This additional supply will extend the window of low oil prices globally. Iran also has the world’s second largest natural gas reserves, which will come into the market once investments in gas fields and infrastructure have been made. More gas in the international market will also keep prices low.

“India imports close to 70% of its oil supply; it also has 23,000 megawatts of gas-fired power plants which are currently operating at very low capacity because of low fuel availability. Cheaper gas will enable these multi-billion dollar investments to become productive again,” stressed Bhandari.

Pointing at the new opportunities for India, Bhandari said, “Market values of many small and mid-size oil and gas firms abroad have fallen by 60-70% in the past 12 months. Indian companies should seize this opportunity to acquire oil and gas fields to sustain low prices for an even longer period. In the meantime, India can purchase oil in the futures market and guard itself against short term spikes.”

HDFC Securities, in a note looked at the deal as “augurs well for India,” while adding that an additional 5,00,000 barrels of oil could hit the market within a month of signing the deal, and another 10,00,000 barrels after six months.

Dhruva Jaishankar, fellow at German Marshall Fund tweeted, “#IranDeal is excellent news for India. Enables cheaper energy, better cooperation on Afghanistan, and more diplomatic space in West Asia.”

As the news was absorbed across the globe, much remains to be done in the US Congress about the Iran deal as many Republican lawmakers declared it as a bad deal. US Congress has 60 days to review the agreement and potentially block it. Obama has vowed to veto any attempt to do so.

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