GRM 2010 GRM 2011

Abstract Details

Family Name:
Tanvi Hooda
First Name:
Title of Paper:
Iran’s Post Deal Balancing Act in Asia
Paper Proposal Text :
Smart sanctions have worked well to stop Iranian nuclear program by weakening Iran’s capability to freely navigate in the global economy and isolating it completely. With sanctions lifted, Iranian economy and energy geo-politics is in the process of rapid overhaul. Iranian oil will compete with its oil producing neighbours who also happen to be its sectarian and strategic rivals for a long time. An immediate post sanction scenario may help Iran increase its oil revenue by $10 billion in 2016. Iranian assets abroad worth $160 billion have already been unfrozen and Iran can easily access $50 billion held in foreign banks. With these optimist prospects, IMF projects Iranian growth to increase by 5%. International investors from all over the world have flocked to Tehran to find their investment a better chance.

This optimist scenario notwithstanding, there are two major challenges Iran’s effort to reshape energy geo-politics in its favour: one, steep and sustained decline of oil prices have not only made Iranian oil export less competitive, it has also made the energy market far more uncertain as this decline is mostly manufactured to pressurize by its rivals. Second, increased international interest to invest in Iran, through a recently held investment conference in Tehran, will translate into the real opportunity only when there is a favourable domestic and regional political environment. Most evident was the visit of the Chinese President to Saudi Arabia prior to his main visit to Iran which many think was to signal the message that Chinese relations with Iran will not be at the cost of any other country. Similar messages have been sent by almost all major investing countries. In recent weeks, Iran too has approached Turkey and asked for negotiation with Saudi Arabia over regional issues. Iran’s important oil consumer India has been effectively working on finding a balance between Iran and its Gulf friends.

This paper will look into the questions about Iran’s ability to offer such a balancing act as well as a favourable political environment both in its domestic and regional politics. In a recent announcement, Iran has promised for a tit for tat action by flooding the market with extra production and supply of oil by 500,000 bpd, though unrealistic and unsustainable according to experts. The opening up of the Iranian economy in the present context begs a question to be answered- how different would it be for China to take Iran as a serious trading partner, with no
sanctions in the picture?

Iran’s development imperatives require a greater degree of pragmatism and abandoning rhetoric against Israel, while securing its strategic depth in Syria and Iraq require confrontation with its immediate neighbours including Saudi Arabia and Turkey. Iran’s exclusion from the recently formed Islamic Military Alliance is one such situation which many in Iran would have liked to avoid. Similar pressures will come from European markets had Iran to be allowed greater access. As a result, this deal has brought Iran to an important economic as well as political crossroads from where confrontational policy would likely be abandoned in order to be part of global economy.

This paper will argue that Iran’s energy relations with its Asian partners including India and China will be defined more favourably to the balancing act, rather than to confrontational regionalism. Hence Iran’s quest to diversify its energy and trade relations beyond Asia should be seen within both commercial and political tactics it may and may not play. This paper will be premised on evolving energy scenario and Iran’s re-engagement into the global economy. That Iran’s strong return, particularly in the energy market, is largely dependent on its ability to develop close coordination with its neighbouring oil producing countries to which they require a reconfiguration of their regional and domestic policy discourses.