Iran inks deal with Russian firm

Iran has signed a basic agreement with Russian energy giant Gazprom for development of Farzad B gas field, discovered by a consortium of Indian state-run companies, in an apparent retaliation against India's bid to pressure Tehran for a formal deal by cutting purchase of Iranian oil. This is likely to strain ties between the two countries as it can potentially hit India's ongoing participation and investment in development of oil and gas sector in Iran. The agreement with Russia comes on the back of India's failure to finalise a commercial contract for Farzad B with Iran despite the optimism expressed by PM Narendra Modi and President Hassan Rouhani.

Iran's oil minister Bijan Zanganeh recently told Argus, the top global energy market information provider, that Farzad B field was among three such agreements signed with Gazprom. The other two fields are North Pars and Kish gas fields.

Zanganeh's announcement, made in an interview to Argus publication, follows his threat to replace the Indian consortium led by ONGC Videsh, the overseas acquisition arm of flagship explorer ONGC, in Farzad B.

Indian Government officials downplayed Iran's preliminary deal with Gazprom and said they were positive about a formal deal. But there are others who see the Gazprom deal as Tehran's willingness to play hardball and let commercial considerations guide relations with India.

Farzad B negotiations have been in a stalemate since the field's discovery in 2008. The two sides have missed several deadlines to even after oil minister Dharmendra Pradhan's visit to the country last year. India has blamed Iran's flip-flop over the terms of the delay , while Tehran holds the Indian consortium's offer as “unsatisfactory“. Miffed with the delay , New Delhi asked its refiners to reduce oil imports from Iran by a fifth. India is Iran's key oil buyer. Iran hit back by reducing the payment window from 90 days to 60 days for Indian refiners. National Iranian Oil Company also cut the discount on ocean freight it offered to Indian buyers.

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