BackIran, six world powers clinch breakthrough nuclear deal
Pact to curb nuclear work seen aiding India's oil imports, though sanctions still remain on Iran's crude sales
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Geneva: Iran and six world powers reached a breakthrough deal early on Sunday to curb Tehran’s nuclear programme in exchange for limited sanctions relief, in what could be the first sign of an emerging rapprochement between the Islamic state and the West.
Aimed at ending a dangerous standoff, the agreement between Iran and the US, France, Germany, UK, China and Russia was clinched after more than four days of negotiations in the Swiss city of Geneva.
Halting Iran’s most sensitive nuclear work, it was designed as a package of confidence-building steps to ease decades of tensions and confrontation and banish the spectre of a West Asian war over Tehran’s nuclear aspirations.
However, Iran’s crude oil sales will still be limited to about 1 million barrels a day under international sanctions that remain in force as part of the nuclear accord reached in Geneva on Sunday, according to the White House.
In June 2012, there were 23 importers of Iranian crude. Today, only six remain—China, India, South Korea, Japan, Turkey and Taiwan, according to US officials. Since July 2012, the European Union (EU) has also banned oil imports.
Foreign policy analysts in India welcomed the news of the breakthrough in nuclear talks.
“If the sanctions are reversed down the line, India will be able to purchase (Iranian) oil in larger quantities," said Vivek Katju, formerly joint secretary in India’s foreign ministry dealing with Iran, Pakistan and Afghanistan. “It will have a good impact on India-Iran relations."
India is the world’s fourth-largest oil importer and a major customer of Iran’s 1.7 million barrels per day of oil exports. It needs to import fuel as domestic sources are limited.
India’s dependence on imports is as high as 80% for crude oil and 25% for natural gas. The country’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) now to around 1,500 mtoe, according to the oil ministry.
The Indian government has had to drastically cut its energy imports to comply with international sanctions targeting Iran’s financial and oil sectors. Iran has been replaced by Iraq as the second-largest supplier of fuel to India, after Saudi Arabia, as the sanctions have targeted financial institutions through which oil payments are routed.
The situation is unlikely to change significantly in the next six months as Iran and the world powers move towards a permanent solution, former foreign secretary Kanwal Sibal said.
“The landscape will change when Iran will have room for diplomatic manoeuvre and the existing reliance on Russia, China and India naturally getting reduced," Sibal said. “India could then face much greater competition when it comes to the energy sector in Iran,"
The lifting of a European Union ban on insuring tankers carrying Iranian crude as part of a nuclear deal reached in Geneva will ease the process of importing the Persian Gulf state’s oil, Indian refiners said.
While officials from Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd said the removal of restrictions on shipping cover will enable them to purchase contracted volumes more easily, they said they don’t intend to buy more than previously planned.
“We can go ahead and import the contracted volume for this year," said Rajkumar Ghosh, the director of refineries at Indian Oil, the country’s largest processor. The company has a deal to buy 1.2 million tonnes of Iranian oil in the year ending 31 March, of which 0.5 to 0.6 million tonnes have been imported since April, he said. West Asian suppliers sell the bulk of their crude in long-term contracts.
The end of the European ban is part of a first-step agreement that will give Iran as much as $7 billion in relief from economic sanctions over six months. In return for limiting its nuclear programme, the interim deal provides for the release of $4.2 billion in frozen oil assets and will let Iranian oil exports continue at current levels, rather than requiring continued reductions by buyers, according to a White House statement. It won’t mean an increase in shipments after they were cut by 60% since 2012, the US administration said.
The insurance restrictions affected about 95% of the global tanker fleet because the ships are covered under rules governed by European law. Carrying Iranian oil would invalidate ships’ insurance against risks including spills and collisions, according to the International Group of P&I Clubs. The Japanese government started providing sovereign cover for its tanker operators while India was due to consider a ₹ 2,000 crore fund to help cover imports.
“This is a precursor to overall easing of Iran sanctions," P.P. Upadhya, the managing director of Mangalore Refinery and Petrochemicals, said.
“We are importing about 500,000 tonnes every month since August, so we should reach our 4 million-tonne plan by March."
“India’s crude imports from Iran are expected to total 11 million tonnes in the twelve months ending 31 March, a drop of about 15% from the previous year," petroleum secretary Vivek Rae said on 8 November.
“HPCL plans to import 0.8 million tonnes of Iranian crude by March if it can begin shipments next month," B.K. Namdeo, director of refineries at India’s third-largest state-run refiner, said on Sunday. “The country’s processors are unlikely to exceed their targets in the current financial year," he said.
“We will be able to start importing Iran crude even without the government’s insurance pool," Namdeo said.
Meanwhile, Iran’s arch foe Israel denounced it as a “bad deal" and said it would not be bound by it.
EU foreign policy chief Catherine Ashton, who has been coordinating talks with Iran on behalf of the major powers, said it created time and space for talks aimed at reaching a comprehensive solution to the dispute.
“This is only a first step," Iranian foreign minister Mohammad Javad Zarif told a news conference. “We need to start moving in the direction of restoring confidence, a direction in which we have managed to move against in the past."
Hard-pressed by sanctions, many Iranians were elated by the easing of and prospect of economic improvement.
US President Barack Obama said that if Iran did not meet its commitments during a six-month period, the US would turn off sanctions relief and “ratchet up the pressure".
UN secretary-general Ban Ki-moon welcomed the interim agreement and urged the governments concerned “to do everything possible to build on this encouraging start".
But Israel was unhappy. “This is a bad deal. It grants Iran exactly what it wanted—both a significant easing in sanctions and preservation of the most significant parts of its nuclear programme," an official in Prime Minister Benjamin Netanyahu’s office said.
Israeli officials however stopped short of threatening unilateral military action that could further isolate the Jewish state and imperil its alliance with Washington, saying more time was needed to assess the agreement.
The West fears that Iran has been seeking to develop a nuclear weapons capability. The Islamic Republic denies that, saying its nuclear programme is a peaceful energy project.
The US said the agreement halted progress on Iran’s nuclear programme, including construction of the Arak research reactor, which is of special concern for the West as it could yield potential bomb material.
It would neutralize Iran’s stockpile of uranium refined to a fissile concentration of 20%, which is a close step away from the level needed for weapons, and calls for intrusive UN nuclear inspections, a US official said.
Iran has also committed to stop uranium enrichment above a fissile purity of 5%, a US fact sheet said. Refined uranium can be used to fuel nuclear power plants—Iran’s stated goal—but also provide the fissile core of an atomic bomb if refined much further.
Diplomacy with Iran was stepped up after the June landslide election of Hassan Rouhani, a relative moderate, as Iranian president in June, replacing bellicose Mahmoud Ahmadinejad.
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