No more sanctions in Iran – what does this mean for India & NRI workers?
Vienna-based International Atomic Energy Agency, a UN based nuclear watchdog, cleared Iran’s commitment to cut down on its nuclear program on Saturday evening. This report has paved the way for the Iran nuclear deal, and as a result, the P5+1 or the permanent members of the UN Security council lifted international sanctions on Iran.
This landmark move has opened up trade with the country for the first time in almost ten years. It was in 2006 that the US had imposed fresh sanctions on Iran as it refused to curtail its nuclear armament and enrichment program. With this move, India is free to transact and import or export from Iran, which has the fourth largest oil reserves in the world.
Until now, India had been importing oil from Iran but due to the global sanctions, it was paying for the oil in rupees with the money saved in an Indian account. But from now on, India can start paying in dollars for the same oil. What with oil prices falling to below 30$ a barrel and with an excess of supply currently in the global markets, it remains to be seen if the opening up of Iran’s oil market will help or harm the global oil trade. One thing that’s certain is, with the lifting of sanctions, shipments will be easier, now that they are not prohibitively expensive.
While the Middle Eastern markets tumbled on the news of the UN lifting the sanctions against Iran, because of the oil price impact, Iran is not just an oil and gas economy. It also boasts of industrial sectors like transport, shipping, automobile, aviation and construction. All of these are likely to see a huge uplift now that Iran is open for business. However, India will have to compete with Russian, Chinese, European as well Middle Eastern firms for tenders.
India already had a $233 million agreement with Iran to supply rail tracks to develop their Railways which is now under renegotiation. India is also looking to pitch to build the Chabahar port in southern Iran as well as develop the Farzad B gas fields that we helped Iran discover.
The bright side of all this construction activity means that there is now employment opportunity closer home. After the 2008 slowdown, the constricted job market in the Middle East was causing Indian blue and white collar migrant workforce to flee in search of better jobs. If India applies and wins tenders in core sectors in Iran, employment opportunities for migrant labourers and skilled workers may surge in this part of the world. The Gulf employees who were boosting the Indian economy with their foreign currency remittances can seek work in Iran instead.
The caveat is that this will be easier said than done. Russia and China have maintained better relations with Iran even during sanctions, unlike India which had to balance its friendliness with Israel against its support of Iran. A more assertive free market in Iran may also lead to greater competition for bids with Iranians demanding higher compensation. India with its own weakening currency, and with the declining euro against the dollar, may not be able to compete on a level playing field. However in fields like IT and pharmaceuticals as well as banking, skilled workers may find a favourable market as Iran looks to set up shop post sanctions.
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