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Delhi's pipeline
dilemma
By Siddharth Srivastava
NEW DELHI - The first visit of US
Secretary of State Condoleezza Rice to India was
along expected lines. Rice said the right things
about India-Pakistan peace and was suitably vague
about any imminent US decision to supply F-16
fighter aircraft to India or Pakistan. But she had
been clearly briefed about one issue that is the
focus of US attention at the moment - Rice made it
abundantly clear to the Indian establishment that
Washington does not want New Delhi to have
anything to do with Iran.
US concern
relates to the proposal of a natural-gas pipeline
that will run through Pakistan from Iran. Indian
Petroleum Minister Mani Shankar Aiyer, with the
support of the top echelons of the Indian
government, is pushing for the Iran-Pakistan-India
oil pipeline, a US$4.5 billion project designed to
transfer gas from Iran to India through Pakistan.
Negotiations on the 1,600-kilometer pipeline began
in 1994, but no headway had been made until last
year because of inimical relations between
Pakistan and India and the project's massive cost.
The United States has no diplomatic
relations with Iran and wants to exert every
international pressure to prevent Tehran from
espousing any nuclear ambitions and to engender
democratic reforms in the country. Tehran on the
other hand refuses to renege on its nuclear
program, which it says is to generate electricity,
while the US fears it could easily turned into a
full-fledged nuclear weapons-program, given the
overbearing presence of Israel in the region.
Progress in the peace process between
India and Pakistan which began in January last
year has led to the unraveling of several
differences that were considered insurmountable
just a few months back, including such matters as
a bus service between Indian and Pakistan
administered Kashmir. With the bus service in
place, the gas pipeline is seen as the first big
ticket breakthrough, moving far beyond
confidence-building measures, such as the removal
of travel and transport restrictions between India
and Pakistan, that are more symbolic in nature.
However, given its apprehensions about
Iran, the US opposes the implementation of the
pipeline. Last week, US Ambassador to India David
Mulford told Aiyar, who is leading the talks for
the gas pipeline, that Washington faced serious
difficulties with Iran because of its nuclear
program, and there appeared to be no immediate
solution.
This was the first time the US
has formally conveyed its reservations about the
long-running proposal to build the pipeline,
referred to as the "peace pipeline" given the
synergies it is expected to generate. It was
widely expected that Rice would likely reiterate
her concerns over Iran to Indian leaders during
her first tour of the region, and that's how it
turned out.
In New Delhi, Rice said
Washington will focus on an energy policy,
including building new power plants, between the
two countries, given India's strong economic
growth that was spurring demand for greater energy
supplies. "We need to look at the broader question
as to how India meets its energy needs over the
next decade. We believe that a broad energy
dialogue should be launched with India because the
needs are there," she said. However, she
emphasized that Washington has already expressed
opposition to an agreement last month between the
foreign ministers of India and Pakistan to go
ahead with a $4.5 billion pipeline linking Iran's
South Pars gas field to India via restive
southwest Pakistan.
According to sources
who spoke to Asia Times Online, Rice made it clear
to her Indian counterpart, Foreign Minister Natwar
Singh, that if India proceeds with the pipeline,
it could invite US ire under the Iran-Libya
Sanctions Act (ILSA), which empowers US President
George W Bush to order punitive measures against
any international company that invests more than
$20 million a year in Iran's energy sector. The
ILSA disallows any move that would aid Iran's
economic expansion, as the US considers the
country a "safe haven for terrorists".
India to resist
It is, however,
also certain that India will put up quite a
resistance to US pressure to lay off Iran. After
his meeting with Rice, Natwar Singh made it quite
apparent that India will not back off from the
pipeline discussions. "There are one or two items
on which we don't agree, but our relations have
now reached a maturity where we can discuss these
things freely and frankly," Singh said. "We have
no problems of any kind with Iran," he added,
clearly underlining India's intentions.
Although the US may not have been able to
put the diplomatic kibosh on the project, the
pipeline has already hit an economic snag, with
India threatening to pull out over the price of
natural gas, saying Tehran has to price the fuel
at rates affordable to industry in India.
"We will not buy gas from Iran if we
cannot sell it in India ... If they say they have
[alternative] markets in the US, China and Japan
[who are willing to pay a higher price] then I
might as well ask them to tap them," Aiyar said.
Iran wants a price equivalent to that of
liquefied natural gas (LNG) for the natural gas it
plans to sell to India by the pipeline. LNG costs
twice as much as domestically produced natural
gas.
But observers have been saying that
it will be very difficult for India to stop
negotiations on the oil project, given the warming
of ties between India and Pakistan. Indeed, the
pipeline is seen as a win-win situation for the
three countries concerned. For Iran, which holds
the world's largest gas reserves after Russia,
India is as important as the European market -
which it hopes it will access through a pipeline
across Turkey.
India sees the pipeline as
a boost to its rising competition with China for
energy resources. India, which imports nearly 70%
of its annual energy needs, has been using ships
to ferry LNG from Iran because it fears a gas
pipeline running through Pakistan could be
targeted by militants. However, with the peace
process in place there is a visible change in
approach now. "India and Pakistan have recognized
the importance of available energy resources in
the region," Pakistani Foreign Minister Khurshid
Kasuri said recently, after meeting with Aiyar.
"Officials from our ministries of petroleum and
gas will be meeting over the next few months to
discuss issues of multifarious dimensions," he
added.
India is of the view that the oil
pipeline, accompanied by the riches of revenue,
will create a constituency within the Pakistan
establishment that will root for normal relations
with India and could over time usher in further
economic cooperation, rival the vested interests
in the Pakistani army, which clamors for funds and
importance in order to promote anti-India
militancy.
"If our security concerns are
adequately addressed, this project could turn out
to be the economic bedrock which could buttress
many more economic cooperation proposals," a
spokesperson for the Indian Foreign Ministry said.
"The economic gains for Pakistan, estimated at
between $600 million and $800 million annually in
transit fee alone, are a reasonable guarantee
against sabotage," the official added.
To
make the proposal viable, India has offered to
meet the entire diesel requirements of Pakistan by
laying a pipeline from Jalandhar (in Indian
Punjab) to Lahore. In turn, India wants Pakistan
to help in laying the gas pipeline from Iran to
the Indian state of Gujarat. Pakistan currently
imports 4.5 million tons of diesel every year from
Kuwait and other Middle Eastern
countries.
Pakistan has said that it may
review its ban on imports of diesel from India to
try to reduce its dependence on Middle Eastern
supplies. India's largest refiner, Indian Oil
Corp, which has pipelines running close to the
Pakistan border, has submitted a proposal to
export surplus diesel to Pakistan.
With
such synergies expected from the peace pipeline,
India faces a challenge to wriggle out of the
piquant situation created by the US, which also
has to be kept on the right side of things, given
its eminent position in the global order.
Siddharth Srivastava is a New
Delhi-based journalist.
(Copyright
2005 Asia Times Online Ltd. All rights reserved.
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