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India moves fast on Iran pipeline

Last updated on: December 08, 2006 13:25 IST

The first reverberations of the Iraq Study Group report headed by former US Secretary of State James Baker III are being felt in New Delhi sooner than expected.

The petroleum ministry in New Delhi has moved swiftly to reconcile the differences in pricing that had hitherto stalled the progress of the LNG project.

In what has been described by the media as a 'U-turn', India's petroleum ministry has reopened the gas contract with Iran, and has now agreed to buy gas at a higher price.

India had concluded a gas deal with Iran in June 2005 for the annual supply of 5 million tonnes of Liquefied Natural Gas for a 25-year period.

The petroleum ministry has reportedly approached the Indian Cabinet for political clearance for its "volte-face" and for India's acceptance of the revised Iranian offer conveyed to Delhi by visiting Iranian Foreign Minister Manouchehr Mottaki last month.

Mottaki offered that Iran will supply LNG at a price pegged to crude oil level of $55 per barrel.

Currently, the crude price is above $60 a barrel. The Indian government evidently welcomed Mottaki's offer as a "sweetheart deal".

The political ramifications of the Indian decision cannot escape attention.

It comes on the eve of the consultations by the US Undersecretary of State Nicholas Burns in Delhi on the Indo-US nuclear deal.

The indications from Washington are that Burns will be attempting to allay Indian apprehensions over certain stipulations of the upcoming US legislation regarding nuclear cooperation with India.

The bill, which is currently being reconciled by the two houses of the US Congress, contains a specific provision that Washington will expect Delhi to harmonise its policy toward Iran with the current US policy of containment of Iran.

The stipulation has caused disquiet among sections of Indian opinion, especially the Left parties, as an unacceptable intrusion into India's foreign policy.

During the past several years, the US has maintained a policy of enforcing sanctions on foreign companies that cooperate with Iran's oil and gas industry.

The Indian gas deal with Iran forms part of a massive project within which Indian companies will also be involved in the exploration and development of certain sections of Iran's huge Yadavaran fields.

Iranian Foreign Minister Mottaki had revealed to that during his meeting with Prime Minister Manomhan Singh in Delhi last month, Iran had offered to double the size of its gas deal with India from the negotiated 5 million tonnes annually.

Mottaki exuded confidence that the gas pipeline deal would be finalised this year.

According to the Iranian minister, there is a "serious will and flexibility" on the part of the Indian officials vis-à-vis the pipeline project.

Mottaki added that Iran took India "very seriously" as an economic partner given the high growth and expansion of the Indian economy. He said Iran would take into account the projected need of India to import 80 percent of its energy needs by 2030.

Iran has the world's second largest gas reserves.

The government decision to speed up collaboration with Iran coincides with the growing indications of a dramatic shift in the current US thinking toward Iran.

The Iran Study Group has unequivocally stressed the importance of the US constructively engaging Iran and jettisoning its current policy of isolating the regime in Tehran.

New Delhi evidently anticipates that unless it moves fast in repairing the damage to its relations with Iran following India's controversial vote at the International Atomic Energy Agency in Vienna last year over Iran's nuclear issue, India will be left behind in the fast-moving diplomatic scenario in which Tehran will increasingly figuring as a pivotal capital for ensuring peace and stability in the strategically vital Persian Gulf and Middle East region.

"It is prudent that the government is moving fast to mend fences with Iran and trying to close the gas deal, which has been, regrettably, progressing like a slow motion movie so far," said former Indian diplomat M K Bhadrakumar who previously headed the Iran/Pakistan/Afghanistan divisions in the foreign ministry.

"India must always factor the geopolitical reality that Iran is a major regional power in our neighbourhood. It is plainly in our national interest to safeguard our traditionally close and mutually beneficial cooperation from being damaged by the presumptive interference from third countries that may be having difficulties with Tehran," he explained.

However, it remains to be seen how India's manifest keenness to recapture the momentum of its traditionally close ties with Iran, will be viewed on Washington's Capitol Hill dominated by the Democrats who have traditionally prided themselves as "friends of Israel".

The Indian government's unfolding Iran policy has kept in view the country's national interests with a medium and long term perspective.

Indian Ambassador to Iran Manbir Singh has been quoted by the Tehran Times on Thursday as saying that India's stance on the Iran nuclear issue will remain "crystal clear" insofar as Iran is entitled to use nuclear energy for peaceful purposes.

The Indian ambassador has expressed the hope that the issue will be resolved at the IAEA peacefully through discussions.

A visit by Manmohan Singh to Iran was also discussed during last month's consultations with Mottaki. The Iranian foreign minister revealed that he had handed over a formal invitation from President Mahmoud Ahmedinejad to the prime minister.

Iran has been dragging its feet on a Pakistani proposal to go ahead with the gas pipeline project even without Indian participation, a senior Iranian diplomat told

The diplomat said Islamabad was showing keenness to have an Iran-Pakistan-China gas pipeline project which would fetch Islamabad an estimated transit fee of $1 billion annually.

The visiting Iranian foreign minister had told a press conference at Delhi last month that "great projects lead to great friendship and rapid development of the region" and that's why Tehran was keen on Indian participation in the pipeline project. 

Sheela Bhatt in New Delhi