It's Not All Gas

The good news is that the Iran-Pakistan-India pipeline project is very muchalive and kicking -- contrary to the popular impression that it would be shelveddue to US opposition and the shifting of Mani Shankar Aiyar from the petroleumministry. Considering the latter’s unbridled enthusiasm for this proposal,commentators had a field day linking his departure from the ministry to Americanpressure to not go ahead with this $7 billion project. In sharp contrast, hissuccessor, Murli Deora, was perceived as being pro-American in line and lengththat didn’t augur well for the Iranian pipeline.

But such impressions turned out, in retrospect, to have no basis whatsoever.A not-so-well known fact is that coinciding with the recent visit of USPresident George Bush, Iran’s ambassador to India had a meeting Deora. Andthere are no prizes for guessing what was on the agenda for their tête-à-tête.Bush thereafter went to Pakistan where he stated at a press conference: "Ourbeef with Iran is not the pipeline". Not to be left behind, US Secretary ofState, Condoleezza Rice, writes in The Washington Post that civil nuclearenergy will make India less reliant on "unstable sources of oil and gas".

Memories are indeed short. It was none other than Rice who had first made thelinkage between US-India cooperation in civilian nuclear energy and Indiabacking off from the Iran gas pipeline project when she visited India in March2005. She conveyed America’s "concerns" over the project to Pakistan aswell. The US also held out that going ahead with the proposed project mightentail provisions of the Iran and Libya Sanctions Act -- which imposes sanctionson non-US companies investing in oil and gas business worth $ 20 million or morein Iran.

The big question naturally is: How did all of this change to make the 2,135 kmIran pipeline a possibility still? India, Pakistan and Iran engaged in thefirst-ever tripartite official level of talks in Tehran during March 13-15 tofinalise important matters relating to the proposal. Despite all the"concerns" raised by the US, the fact is that three parallel tracks ofbilateral talks between Iran, India and Pakistan went on last year andprogressed to a stage where trilateral discussions are now being held in Tehran.Despite this progress, however, there were grounds to be skeptical about wherethis project was heading.

What made a big difference was the fact that Bush "blinked" to enable itto go through argue US academics like Lloyd Rudolph and Susanne Hoeber Rudolph.But did the US president indeed do so? As noted earlier, Bush did clarify in hispress conference in Pakistan that America’s "beef" was more with Iranacquiring nuclear weaponry than with the Iranian gas pipeline per se. But withPakistan’s gas supplies fast dwindling, he also had to give the impression ofgiving something to it, especially after nixing a civilian nuclear energycooperation agreement -- like the US-India one -- with that country.

Too much, however, need not be read into Bush blinking, if not winking, at theIranian gas pipeline project. Shortly after the US president’s visit to thesubcontinent, his secretary of energy Samuel Bodman visited Pakistan and wasquoted in the Dawn newspaper that his country was still opposed to thepipeline project as Tehran was developing nuclear weapons. "We do notencourage contractual agreement about this gas project," he said, adding thatPakistan should pursue gas proposals with Turkmenistan and Qatar. Is the US"blinking" instead at the Turkmenistan-Afghanistan-Pakistan pipeline?

More than such signals, US’ tacit nod for the Iranian pipeline project perhapshas more to do with the shifting mood within US Congress itself. Especiallyafter the US president delivered his State of the Union address in which hefamously stated that America was "addicted to oil", the mood has shifted toencouraging the US to expand the scope for coordination and cooperation withcountries like India and China to address concerns about the growing globalcompetition for oil and gas. These concerns have surfaced as these sources ofenergy are located in politically volatile regions.

"No one who is honestly assessing the decline of American leverage aroundthe world due to energy dependence can fail to see that energy is the albatrossof US national security," stated Richard Lugar, chairman of the US Senateforeign relations committee. As the debate about Iran’s nuclear ambitionsshifts to the UNSC, he highlighted the dangers of transferring billions ofdollars to unaccountable regimes and warned that economic sanctions against Iranmight not work, according to a story in The Financial Times. Expandingcooperation with India and China was imperative in this regard.

This is the current favourable conjuncture in which the much-vaunted Iraniangas pipeline project might seem to be sailing through -- contrary toexpectation. The focus of the trilateral discussions on this project naturallywas on price and the project structure. According to reports, Iran is asking fora price that is $1-$1.5 mmcmd higher than the actual market rate. A proposalthat has been doing the rounds in India’s petroleum ministry in this regard isto purchase Iranian gas at the border without being involved in the pipelineproject itself, as the regions through which the pipeline is to pass are highlyvolatile.

Security of the pipeline naturally is uppermost in India’s mind consideringthe fact that all the three possible routes for the pipeline pass throughinsurgent Balochistan. Given the ongoing Indo-Pak tensions, India also hasserious concerns regarding its neighbour itself as it fears that transit feeswill fund jehadi terrorism in that country. These concerns will, of course, bethrashed across the negotiating table in Tehran and another trilateralministerial meeting slated for April. The Iran-Pakistan-India pipeline projectthus seems to be taking shape and may not be all gas, after all.

N. Chandra Mohan is a Delhi-based analyst of economic and business affairs