India loses Farzad-B gas field: US sanctions dull New Delhi's sharpness in diplomacy with Tehran

India took a blow on Monday when it lost the ONGC Videsh Ltd-discovered Farzad-B gas field in the Persian Gulf after Iran awarded a contract for developing the giant gas field to a local company.

"The National Iranian Oil Company (NIOC) has signed a contract worth $ 1.78 billion with Petropars Group for the development of Farzad B Gas Field in the Persian Gulf," the Iranian oil ministry's official news service Shana reported. "The deal was signed on Monday, 17 May, in a ceremony held in the presence of Iranian Minister of Petroleum Bijan Zangeneh in Tehran."

While the setback to India was significant, it was not wholly unexpected.

After all, this project has been beset with issues: after the discovery of the gas field in 2008, a Development Service Contract (DSC) was negotiated till November 2012, but could not be finalised due to difficult terms and international sanctions on Iran.

In April 2015, negotiations restarted with Iranian authorities to develop the Farzad-B gas field under a new Iran Petroleum Contract (IPC). This time, NIOC introduced Pars Oil and Gas Company (POGC) as its representative for negotiations. From April 2016, both sides negotiated to develop the Farzad-B gas field under an integrated contract covering upstream and downstream, including monetization/marketing of the processed gas.

However, negotiations remained inconclusive.

But it seems the final nail in the coffin was the imposition of sanctions on Iran in November 2018 by the Donald Trump administration after it pulled out of the 2015 nuclear accord.

Which made it impossible for India to conclude technical studies on the project — a precursor for commercial negotiations.

This comes just a year after Iranian government in  July 2020 decided to go it alone in the Chabhar railway project which was being discussed between the Iranian Railways and the State-owned Indian Railways Construction Ltd (IRCON).

The project was meant to be part of India’s commitment to the trilateral agreement between India, Iran and Afghanistan to build an alternate trade route to Afghanistan and Central Asia. Tehran, for its part, cited funding delays on the part of New Delhi as the reason behind its decision.

But The Hindu reported that despite several site visits by IRCON engineers, and preparations by Iranian railways, India never started the project ostensibly due to concerns about US sanctions.  While Washington had provided a sanctions waiver for the Chabahar port and the rail line to Zahedan, officials told the newspaper it was difficult to find equipment suppliers and partners due to worries they could be targeted by the US.

In 2019, India stopped importing oil from Iran after the American waivers expired.  New Delhi, given a choice between Washington and Tehran, at the time had no real choice but to fall in line.

Now, with President Joe Biden at the helm, India would be hoping that the US and Iran can somehow engineer a resuscitation of the Joint Comprehensive Plan of Action.

Which would allow New Delhi to resume its oil diplomacy with Tehran.

With inputs from PTI