Context: Recently, the Ministry of External Affairs (MEA) has confirmed that India is no longer involved in the Farzad-B gas field project of Iran.
Further, it said that India has not received any response from Iran since December 2019 on the future of the Chabahar-Zahedan railway project as well.

• It cited policy changes by the Iranian government, Iran’s uncertain finances, and the USA sanctions situation as the reasons behind the decisions on Indian infrastructure projects in Iran.

Farzad-B Gas Field

• It is located in Persian Gulf (Iran).
• The contract for exploration of the field was signed in 2002 by Indian consortium comprising ONGC Videsh, Indian Oil Corporation and Oil India.
• The contract expired in 2009 after declaration of commerciality of the field, based on the gas discovery.
• It has gas reserves of more than 19 trillion cubic feet.
• ONGC has invested approximately USD 100 million.
• Since then, the consortium has been trying to secure the contract for development of the field.
• The major dispute between India and Iran was over setting up of two pipelines, and also over money to be quoted on the development plan.
• Around 75% of the deal was finalised by May 2018, when the USA unilaterally withdrew from the nuclear deal and announced sanctions on Iran.
• In January 2020, India was informed that in the immediate future, Iran would develop the field on its own and would like to involve India appropriately at a later stage.

Concerns for India

• Iran’s growing proximity to China.
• Further, Iran seems to be sceptical of India’s diplomatic ties with the USA.

Farzad-B gas Field

• India needs gas and Iran remains one of the best options as geographically, Iran is closest to India of all the countries in the Persian gulf region.
• Further, it could have improved India-Iran ties as the crude oil import from Iran remains impacted due to the USA sanctions.
• Chabahar is not only a key to maritime relations between both the countries, but also provides an opportunity to India to reach Russia and Central Asia.
• Further, it allows India to bypass Pakistan which had blocked Indian aid to Afghanistan and all trade over land.

Road Ahead

• India needs to play a balancing act between the USA and Iran.
• Further, India needs to closely watch the space created by its exit.
• In a world where connectivity is seen as the new currency, India’s loss on account of these projects can become gain for some other country, especially China.