KOLKATA (miningweekly.com) – The Indian government has asked domestic companies to exercise caution in proceeding with projects in Iran amid rising tension between the US and the Persian Gulf nation.

Projects that may be impacted by the government advisory include the Farzad B offshore gasfield project proposed by ONGC Limited, an aluminium smelter project planned by National Aluminium Company Limited (Nalco) and a fertiliser plant at the Chabahar free trade zone.

Government officials said the External Affairs Ministry had been keeping track of mounting tensions between the US administration and the Iranian government and had cautioned Indian companies not to risk existing contracts with western companies while implementing projects in Iran.

The External Affairs Ministry has noted with concern statements by leading US armed forces generals that Iran is a "destabilising force in the region". The Indian government is concerned that the deal struck between Iran and western countries under former US President Barack Obama's administration, which led to the lifting of sanctions against Iran, are at risk of failing.

It was pointed out that with the Iranian presidential elections ahead, the political stance of both Iran and the US was expected to harden and that Indian companies should slow down their project implementation and adopt a "wait and see" mode, Indian government officials said.

The Indian government has observed that, with Iran also imposing sanctions against several US companies, there are risks to Indian companies that have existing relations with US companies securing visas to Iran.

Rashtriya Chemicals and Fertilizers has been directed not to go ahead with the selection of an Iranian partner for a fertiliser project at Chabahar, as announced last year.

However, the biggest impact of the External Affairs Ministry's advisory would be further delays in the signing of a definitive agreement between India and Iran on the proposed development of ONGC Limited’s $3-billion Farzad B gasfield project.

The two countries have missed several deadlines to sign agreements for the development of the gasfield project, and a new deadline for reaching an agreement has been set for September or October.