FARZAD FALLOUT. A DIPLOMATIC FAILURE ?

Iran’s decision to award the Farzad B gas contract to Russian company Gazprom over indian oil majors comes as a huge blow to indian diplomacy.Considering the fact that the very consortium of Indian firms that was competing for the Farzad B deal is credited for its discovery, the move is disappointing for India in many respects.Iran’s denial to reduce the exorbitant oil prices and not taking a mutually favourable stance over the farzad deal has led to India threatening the resource rich nation with a cut in oil purchases. With Iran being one of India's largest (and in the Iranian ambassador Gholamreza Ansari’s words ‘trusted’) suppliers of oil, the ‘tit for tat’ game that has been going on between the two countries may have major implications for both.

Indo - Iranian relations have always been strong, even in times when Iran was faced with economic sanctions from nations across the world.The two nations have found themselves on the same page on a number of occasions.Be it issues like terrorism emanating from Pakistan,a troublesome neighbourhood shared by both or the need for a peaceful and prosperous Afghanistan.The development of chabahar port in Iran is a well thought out step for India’s access to afghanistan bypassing our ‘uncredible’ neighbour. With growing strains in the Indo-Iranian relationship it is likely for such projects to get affected. The ‘North-South transit corridor’ which is intended to boost trade between India and Russia too needs considerable support from Iran for its smooth progress.Besides, decreased oil exports to India, the second largest importer of Iranian oil, will hit the Iranian economy hard.Already facing isolation over increased calls from USA and other West Asian nations for its ‘containment’, the loss of a major buyer in India will not be easy for Iran’s oil and gas dominated economy.

India may not have any short term fallouts due to decreased oil imports from Iran as the former is not short of options.Each of the countries of the Arabian peninsula enjoys a fairly good share in the Indian crude market. But   with the current turmoil in the peninsula and Qatar(a major supplier of LNG and crude) facing isolation from its neighbours, the situation in the region remains bleak and only time will tell how things will unfurl.

With relations with India losing ground Iran may feel enticed to enhance ties with its largest market(China).This could be a major cause of concern for India as Its sphere of influence in the region will lose its sheen.As believed by many, one of the reasons for choosing Chabahar as the location for the construction of the India-Iran port is to be in close proximity to the Gwadar port being developed by the Chinese in Pakistan(approx. 80 km from Chabahar).In that respect,  growing Chinese influence in Iran may, in the long run, prove to be a nullifying force. 

There is an urgent need for both the countries to bring their ties back to normalcy.India’s case over the Farzad deal is indeed strong.Being the discoverer of the fields, the ONGC Videsh Ltd.(OVL) led consortium does have a fair claim to be a part of its development. Though Gazprom has already clinched the deal, India shouldn’t stop pursuing its interests in the fields.It may not be a bad idea to bring Russia on board in the discussions.A strong Indo-Iranian friendship is in the best interests of Russia, without which the north-south transit corridor may fail to materialize.It is still not late for talks and India must continue pressing for a part in the development of the fields making viable compromises and negotiating to push all the impending issues aside. Bonhomie with Iran should form an indispensable part of the contemporary foreign policy of India.