US intensifies pressure on India to scrap plans for pipeline from Iran

May 06, 2005 02:00 AM

The United States, determined to isolate Iran, is intensifying pressure on India to scrap plans for a $ 4.5 bn gas pipeline from Iran across Pakistan that is seen in Delhi and Islamabad as the peace pipeline that will bring the two long-time nuclear-armed adversaries together, and hopefully eliminate one of the major flashpoints in the world.
But sabotaging the pipeline project is only part of a much grander exercise in strategic US planning that is aimed at preventing an alliance between India and China who between them have two-thirds of the world's population that could threaten US dominance.

The Indians, determined to achieve great power status in the coming decades, have been uncharacteristically muted in their public response to US pressure to scrap the pipeline project. The reason is this: a pledge by US Secretary of State Condoleezza Rice to help India become a major world power in the 21st century. That is not something India can afford to turn its back on if it expects to achieve regional superpower status.
In the meantime, China, which the Americans see as their strategic rival in the coming decades, is also wooing India, its onetime enemy. China's Prime Minister Wen Jiabao made his first-ever visit to New Delhi in early April to counter the growing US influence with offers of trade agreements and security pacts between the aspiring Asian superpowers.

The Bush administration relies heavily on Pakistan, India's traditional rival, in the war against terror and in March announced the sale of F-16 fighter jets to Islamabad along with $ 3 bn in economic aid. Here, too, the Indian response was surprisingly muted and the reason was the same.
The United States, according to the International Institute for Strategic Studies in London, has clearly placed its biggest bets on India, expecting that transformed bilateral relations would assist the expansion of Indian power in a way that would ultimately advance America's own global interests with respect to defeating terrorism, arresting further [nuclear] proliferation and preserving a stable balance of power in Asia.
The Indians, it seems, are waiting to see whether the Americans are as good as their word in helping them to greatness by providing liberal access to advanced technologies, such as nuclear energy, satellites and state-of-the-art industrial equipment required for rapid economic growth.

The 2,700 km pipeline from Iran's South Pars gasfield in the southern Gulf would be a breakthrough in security between India and Pakistan, and would be of immense economic benefit to all three countries. But the Americans seem prepared to wreck the scheme because of Iran, even though India and Pakistan are now key allies in the war against terrorism.
India, now emerging as a major economic force with a rapidly expanding population, is desperate for new energy sources to fuel its growth and sees the pipeline as a boost to its rising competition with China for energy resources. Iran has the world's second largest natural gas reserves after Russia an estimated 26.6 tcm and is eager to develop new markets in energy-hungry Asia, including China.

Elbow room.
The growing links between India and Iran -- the former is a nuclear power and the latter aspires to be -- has caused deep concern in Israel, not to mention Beijing and Washington. Hindu India and Islamic Iran began moving toward each other in the early 1990s, India hoping to isolate Pakistan, Iran simply trying to elbow its way out of the isolation imposed on it by the United States. Iran had been looking eastward since the 1979 Islamic Revolution that shattered the Shah's pro-Western policy. In 1993, Indian Prime Minister P.V. Narasimha Rao got the ball rolling by visiting Tehran.
In April 1995, Iran's then President Ali Akbar Hashemi Rafsanjani, made a three-day, high-profile visit to New Delhi, the first Iranian leader to do so in 16 years. He signed a range of agreements on economic cooperation, but a less publicized aspect of his groundbreaking visit was todevelop military links with India, particularly between their navies in the Arabian Sea and Indian Ocean, key oil and gas tanker routes. Tehran and New Delhi signed a strategic military agreement on January 19, 2003, that dramatically altered the political landscape in South Asia, impeding the Bush administration's Middle East strategy.

On a more strategic level, the unusually warm welcome Rafsanjani received -- much to US chagrin -- opened up a trading corridor to Central Asia for India and extended its efforts to develop new political and economic links with the states ringing Pakistan, and this has continued with major Indo-Iranian road and transportation projects thrusting into Central Asia. Both want access to that region's mineral wealth.
In the late 1990s, after the Pakistan-backed Taliban took power in Afghanistan, Iran and India found themselves standing together against a common adversary. Shi'ite Iran saw its security interests threatened by the Taliban and predominantly Sunni Pakistan and this hastened efforts to develop close ties with India.

The Americans are pressuring Islamabad as well to drop the pipeline scheme because if it materializes it would undermine prospects for reviving a US-backed 1,800 km trans-Afghan pipeline project from Turkmenistan in Central Asia to a new deepwater Pakistani port on the Indian Ocean at Gwadar that China is building.
Many still see that project, first mooted in the 1990s, as a raison d'etre for US intervention in Afghanistan. US objections to the pipeline of peace may stem in part from Washington's preference that India import natural gas from Afghanistan, rather than Iran, part of Bush's axis of evil.

A new axis.
Despite US’ unease at the prospect of close Iranian-Indian relations, many in the region and beyond see the Delhi-Tehran relationship as a stabilizing influence and possibly even part of a wider alliance between India, Iran, China and Russia. India's new ties with Iran make it more, not less, valuable to Washington, accordingto Stanley Weiss, chairman of Business Executives for National Security, a Washington-based organization of US business leaders. George W. Bush, Weiss noted, should not allow his loathing for Tehran's reactionary mullahs to trump America's need for India and should recognize that India and Iran are the key to regional stability, and join New Delhi and Tehran in an axis of friendship.
If the Indians do cave in to US pressure on the pipeline from Iran, as seems likely, it could open up the ever-growing Indian energy market for Qatar, which has the world's third largest gas reserves of 14 tcm and is an established LNG exporter. India's Petronet and Qatar's Ras Laffan LNG (RasGas) have an agreement for 10.3 bn cm of LNG per year. Deliveries by tanker began in January 2004, but there has been some talk of an underwater pipeline from the Gulf to western India.

Another alternative for New Delhi is a pipeline running from Myanmar across Bangladesh to Bengal. An underwater pipeline from Iran across the Arabian Sea to India, circumventing Pakistan, is also an option. But that could cost four times as much as a land pipeline.
So for now, at least, the peace pipeline starting from Asaluyeh on Iran's southern Gulf coast, running for 700 km through unruly Baluchistan in south-western Pakistan to India's Rajasthan state in western India, is still considered the best bet.

Iran and India have been discussing the overland pipeline project since 1993 and in 2002 Iran and Pakistan signed an agreement on a feasibility study. On January 7, 2005, New Delhi's energy diplomacy was given a massive boost when India and Iran signed a $ 40 bn oil and gas deal. India agreed with the National Iranian Oil Co. to import natural gas over 25 years and to develop two Iranian oilfields and a gasfield. Iran committed to supply 5 mm tpy of LNG beginning in 2009, with a provision to increase the volume to 7.5 mm tons.
India's ONGC Videsh Ltd. (OVL) gets a 20 % stake in developing Iran's biggest onshore oilfield, Yadavaran, one of the world's biggest new fields near the Iraqi border. That will provide India with about 60,000 bpd. OVL also gets 100 % rights in the Jufeir oilfield, which produces 300,000 bpd.

The deal was seen as a major boost for the Iran-Pakistan-India pipeline plan and in February, the Indian and Pakistani foreign ministers agreed to go ahead with the project. India's participation in the project is of paramount importance to Iran, because it badly wants its secure political support from New Delhi to counter the strong pressure from the United States and Europe to terminate its nuclear program.
A month later, Condoleezza Rice visited New Delhi and left no doubt about the Bush administration's disquiet, even to the point of helping India develop nuclear power generation.

That is testimony to the tremendous changes in the geopolitical landscape wrought by September 11th. Until 9/11, the United States shunned India because of its nuclear weapons program and now it's offering to work with them on expanding nuclear power as part of an energy dialogue to help India meet its growing energy requirements.
“We do have our concerns,” Rice declared at the end of her 24-hour visit. “And we have communicated our concerns to the Indian government about gas pipeline cooperation between India and Iran.”
“But,” she added, “we do need to look at the broader question of how Iran meets its energy needs.”

Transit fees.
India is a vast and growing market for natural gas as its economy expands, which puts it in rivalry with China. Meanwhile, economically weak Pakistan has been slated to get one-third of the gas pumped through the peace pipeline, earning it $ 600 mm-$ 800 mm a year in transit fees. Pakistan has one of the world's fastest growing populations and its demand for gas will almost double by 2015, when Pakistan's reserves, mainly in Baluchistan, will decline.
US displeasure about the Iranian pipeline should not have come as a great shock to New Delhi. But Rice's visit may have made it more direct. Although India's Foreign Minister Natwar Singh insisted New Delhi would continue to work with Iran on the pipeline project.
“We have no problems of any kind with Iran.”

Petroleum Minister Mani Shankar Aiyar indicated that India might pull out of the LNG deal, which would make the planned pipeline redundant. Aiyar explained that Iran was charging too much for the gas, about $ 4 per mm Btu, while Indian customers were prepared to pay only $ 3 per mm Btu.
With transportation costs added on, the gas would end up costing the Indians around $ 4.5 mm Btu. India and Pakistan would need around 200 mm cmpd of gas, so Tehran should come up with a special discount for such a large volume.

There were other quibbles as well: Tehran insisting on a take-or-pay agreement, India insisting on a supply-or-pay arrangement, but it looked as though the Indians were looking to wriggle out of the deal with Iran rather than risk New Delhi's new alliance with the United States and the military and economic benefits that this would produce. This may have been compounded by an explosion of violence among Baluchistan's unruly tribes, who have never paid much heed to Islamabad's writ, that poses a growing security threat to the planned pipeline.
Conspiracy theorists even suggest that the Americans stirred up trouble in Baluchistan for that purpose. There has been no evidence to support that, although there are mounting indications that the Americans are preparing their military forces encircling Iran for possible action against the Islamic Republic if it does not halt its alleged nuclear arms program. Iran, which is new to the LNG business, is pressing hard to develop its gas export projects.

Most of Iran's natural gas lies in the offshore field in the southern Gulf shared with Qatar, and Tehran is concerned that the emirate's more advanced export trade and its faster rate of extraction could leave it out in the cold. So the prospect of export deals with India and China have strategic importance that goes beyond simply poking the Bush administration in the eye.
Energy alliances with Asia's two titans are now seen as crucial not just for economic reasons, but as a valuable asset in countering the threat of possibly military action from Washington.

Source: Arabies Trends
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