Clogging The Pipe Line

Washington

A top Democratic congressman on Thursday introduced legislation that wouldsanction any country, including India, which finalises energy deals with Iran.If eventually signed into law by President George W. Bush, it could create astumbling block for the India-Iran gas pipeline at a time when India needscongressional support for its civilian nuclear deal with the U.S.

Congressman Tom Lantos' spokeswoman pointed out that the California Democratwas never in favour of the India-Pakistan-Iran gas pipeline. "Any furtherprogress on the pipeline would send the wrong signal at the wrong time,"Lynne Weil told Outlook.

U.S. laws ban domestic oil and gas companies from investing in Iran's energysector. These laws also prohibit foreign oil companies from investing more than$20 million annually in Iran. U.S. presidents have been reluctant to imposesanctions on firms that are based in countries allied to Washington. Mr. Lantos'bill—the Iran Counter-Proliferation Act of 2007—seeks to strip the presidentof his authority to waive sanctions against foreign companies that invest inIran's energy sector. It will also declare the Iranian Revolutionary Guard Corpsa terrorist group.

Mr. Lantos, who is the chairman of the House Committee on Foreign Affairs,said on Tuesday, "Until now, abusing its waiver authority and otherflexibility in the law, the Executive Branch has never sanctioned any foreignoil company which invested in Iran. Those halcyon days for the oil industry areover."

"If Dutch Shell moves forward with its proposed $10 billion deal withIran, it will be sanctioned. If Malaysia moves forward with a similar deal, ittoo will be sanctioned. The same treatment will be accorded to China and Indiashould they finalize deals with Iran," he said at a full committee hearingon "The Iranian Challenge."

Bush Administration officials privately oppose the measure.

Lisa Curtis at the Heritage Foundation told Outlook Mr. Lantos' bill"would likely give pause to Indian plans to move forward with negotiationson the proposed India-Iran-Pakistan gas pipeline."

In the past, Indian government officials may have not taken Washington'sstatements of concern on the pipeline issue seriously because of U.S. lack ofenforcement of sanctions contained in the Iran Sanctions Act of 1996, she said."Congressman Lantos' bill demonstrates, however, the direction U.S. policyis heading regarding sanctions enforcement on companies that invest in Iran'soil and gas industries and would need to be taken into account by both India andPakistan," she added.

Mindful of U.S. opposition to the gas pipeline, India has been treadingcarefully so as not to derail a civilian nuclear agreement with the UnitedStates. The International Oil Daily reported this week that India andPakistan may have found a way to circumvent possible U.S. sanctions and buildthe long-projected $7 billion, 2,100 kilometer gas pipeline.

"Setting up an international consortium in the usual way — comprisingstate companies from the three countries plus international firms — for theconstruction and operation of the project could be a nonstarter because ofmounting political and legal opposition from the U.S.," the daily notes.Instead the three countries will each lay only the section of pipeline thatcrosses their territory, an Indian Petroleum Ministry official toldInternational Oil Daily.

With the three countries separately constructing the pipeline on their ownland, the project would be protected from U.S. sanctions and may even enableAmerican consultants and contractors to participate in parts of the project, theofficial said.

However, lawmakers opposed to business deals with Iran are concerned aboutIran gaining financially from these ventures. Under the pipeline project, Indiawill be buying gas from Iran.

Mr. Lantos warned that if a nation aids Iran's nuclear programme, it will notbe able to have a nuclear cooperation agreement with the United States. Askedwhether India could lose Mr. Lantos' support for the civilian nuclear deal if itwere to go ahead with the gas pipeline, Ms. Weil said that was a"hypothetical situation."

Mr. Lantos has been a key supporter of the nuclear deal and an architect ofthe bill that won overwhelming support in Congress. According to sources, it wasat Mr. Lantos' insistence that a non-binding clause was introduced in the billensuring Indian support for U.S. efforts to curb Iran's nuclear programme. Theclause has caused much consternation in India.

Both the House of Representatives and the Senate must vote in support of a123 Agreement before the civilian nuclear deal can be implemented. The agreementis the term for a peaceful nuclear cooperation pact with a foreign country underthe conditions outlined in Section 123 of the Atomic Energy Act. U.S. and Indiannegotiators have been engaged in tough talks to iron out differences over the123 Agreement.

Walter Andersen at the Johns Hopkins School of Advanced International Studiessaid the bill "partly reflects the concerns of those who are sensitive toIsrael's well being." But he pointed out India has very good ties withIsrael, "something that could be used to its benefit in the U.S. shouldthere be any difficulties."

Explaining the urgency for his bill, Mr. Lantos said, "The reason forthis all-encompassing approach — and for its urgency — is that we have solittle time. Iran is forging ahead with its nuclear programme, in blatantdefiance of the unanimous will of the UN Security Council and the InternationalAtomic Energy Agency. Before it is too late, we must try to persuade others tojoin us in increasing the diplomatic and economic pressure on Iran."

Mr. Andersen didn't think Mr. Lantos' bill would be of immediate concern toNew Delhi. "The Iran-Pakistan-India pipeline is many years away for avariety of reasons, not the least is the price that Iran is demanding, higherthan either Pakistan or India are willing to pay. So the question at present ishypothetical and is likely to remain so for some time," he said.