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India-Iran gas pipeline: A transit challenge

January 22, 2003


A 'Transit' challenge.

That was the phrase used by Iran's deputy foreign minister for economic affairs Mohammad Hossein Adeli to describe the main roadblock to an overland gas pipeline from Iran's South Pars gas field to India -- through Pakistan.

Adeli was in New Delhi last week as Iranian President Mohammed Khatami's special envoy. Khatami will be chief guest at India's Republic Day celebrations on January 26. The minister brought with him a pipeline deal India will find hard to reject. 

First,  2.5 million tons of LNG per annum at half the international prices. Payable after delivery.

Second, to allay India's fears that extremists in Pakistan could sabotage the line at will, Tehran suggested the pipeline be owned and operated by an international consortium of bankers and oil companies, which would buy the oil from Iran and sell it to India. The argument being such a deal would ensure India does not need to deal directly with Pakistan,  and remove Pakistan's motivations to disrupt supplies. 

Third, it suggested the spigots (or taps) on the pipeline be based only in Iran and India, so that Pakistan could not turn off the supply without actually blowing it up or destroying a section, thereby hurting its own supplies. 

Adeli, who urged India not to miss the opportunity, pointed out that Khatami traveled to Islamabad in December to get an ironclad guarantee from President Pervez Musharraf on the pipeline.

He also felt economic gains -- Pakistan is expected to get $600 to $800 million annually in transit fees alone -- were a reasonable guarantee against sabotage by Pakistan.

'We conveyed Iran's point of view to India regarding the land and sea routes of the Indo-Iran gas pipeline as well as the technical and economic studies of these routes,' he told journalists. The sea route would be costlier, both to make and for the end user of gas, while the land route does not have any technical problem and has only 'one transit challenge,' he said.

The idea of a gas pipeline from oil-rich Persia and Central Asia to India is certainly not new. Apart from the obvious economic benefits for all concerned, such a pipeline is seen by many, including Khatami, as a 'pipeline of peace.'

It could turn out to be the economic bedrock which not only buttresses regional stability but actually nudges the impending 'clash of civilizations' into a 'dialogue of civilizations,' they argue.

'It is clear India and Iran are two countries that complement each other in the field of oil and gas. While Iran has vast reserves of oil and gas, India is forever energy hungry and both can provide each other's needs,' Annamalai Chidambaram Muthiah, president of the Federation of Indian Chambers of Commerce and Industry, told IRNA recently. 'Given the geographical proximity of India to Iran, India is a natural market for the Iranian gas and oil sector...'

Despite Iran and India having signed a memorandum of understanding on this pipeline in 1992, the turbulence in Central Asia, Afghanistan, and South Asia ensured these plans for a pipeline remained just that, though hopes have been raised and dashed regularly reflecting the political temperature in the subcontinent. 

In the euphoria before and just after Prime Minister Atal Bihari Vajpayee's February 1999 Lahore visit, jubilant media reports predicted that an Iran-Pakistan-India pipeline deal was the next thing on the agenda.  Then came Kargil. Similar hopes were also raised just before the doomed Agra summit.

Then came 9/11 and the subsequent rout of the Taliban, which radically changed the strategic balance in the neighbourhood. Though Tehran and Islamabad maintained formal friendly relations, there were conflicts of interest over the Taliban in Afghanistan. With the Taliban out of the way, the decks were cleared for better relations between the neighbours.

In February last year, Pakistan and Iran signed a memorandum of understanding to pursue the pipeline project from Iran to India. This was done without any Indian involvement. Meanwhile, the continuing lack of central governance in Afghanistan ensured that any pipeline that traversed through it would be at the mercy of the whims and fancies of various warlords.

So India proposed a deep sea pipeline which, though far more expensive, would skirt Pakistan altogether. Proposals for a shallow sea route which went through Pakistan's territorial waters were also rejected.  

'Any pipeline which involves construction through the territorial waters of Pakistan (12 nautical miles into the sea), restricts India's association with any such initiative,' a business daily quoted a senior officer as saying.

A deep-water pipeline option, beyond Pakistan's exclusive economic zone, would mean going beyond 220 nautical miles into the sea. Apart from the lack of adequate technology, the cost would be six or seven times that of the land route, which is expensive enough at an estimated $4 billion.

But there are other factors at play. American sanctions imposed after the hostage crisis of 1979 prohibits foreign investments above $20 million in Iran, though this is flouted by France, Russia, the UK and other nations.

The Pars gas field is being developed by Russian energy major Gazprom, Total of France and Petronas of Malaysia.  The Americans, who project Iran as one of the 'three axis of evil' (Iraq and North Korea are the others), are unlikely to be happy with this since they do not have control over the project.

Yes, despite different political and ideological systems, Iran and India share a mutually beneficial relationship. India's assistance to Iran's space programme is being watched warily by Washington, which fears this could boost Iran's missile programme. 

Yes, Iran has allowed India access to Afghanistan, Central Asia, Russia and mainland Europe through the proposed North-South road corridor, allowing India to build a road barely miles from the Iranian border with Pakistan. Once fully operational, this would cut travel time to almost half that taken by the other route, via the Suez Canal.

Yes, a gas pipeline would be of immense benefit to both nations.

The problem is, at a time when the relationship between India and Pakistan has touched rock bottom, agreeing to this proposal would not only give Islamabad a huge economic boost, it would give Musharraf's regime a certain respectability, both within Pakistan and without.  

It would also send out the message that despite Musharraf's inability to check terrorist infiltration into India, New Delhi was willing to trust his guarantees on the pipeline's security. 

So when Khatami comes calling, India needs to tell him politely but firmly that perhaps it could use its influence with Islamabad to talk to India without setting the resolution of the Kashmir issue as a precondition. And that the gas pipeline cannot be the only economic connection between India and Pakistan, which has refused to reciprocate India's offer of Most Favoured Nation status despite the SAARC charter which demands this.

Until then, Pakistan will remain what it always was to the pipeline project.

A transit challenge.


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