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Politics undermine Iran-India gas pipeline project

Kumar Amitav Chaliha

NEW DELHI -- Politics is undermining prospects for Indian imports of pipeline gas from Iran just months after a tour by Indian Oil Minister Mani Shankar Aiyar to Pakistan and Iran appeared to significantly advance plans for an Iran-Pakistan-India line. Renewed pressure from the US and the election of a new president in Iran have thrown such plans into disarray.

A visit by India’s prime minister Manmohan Singh to the US in mid-June provided an opportunity for the White House to pressure the Indian administration to drop plans to build the pipeline. To sweeten the deal, Washington offered to end its embargo on nuclear technology and fuel sales to India — in particular for the Tarapur power plant, where two new 540MW reactors are under construction.

US state department officials deny that there has been an explicit trade-off between renewed nuclear co-operation and India abandoning its plans to import gas from Iran. Singh also gave no assurances that India would drop its plans. But, he did cast his doubts about the feasibility of the pipeline. In an interview with the Washington Post during his US visit, Singh said: “I am realistic enough to realize that there are many risks … considering all the uncertainties of the situation there in Iran. I don't know if any international consortium of bankers would probably underwrite this."

Critics back in India accused Singh of selling out to the US in exchange for President George W. Bush's agreement to share civilian nuclear technology with India, subject to congressional agreement.

While India is likely to be able to resist US pressure, new doubts are emerging about Iran’s willingness to export gas following the June 24 election of hardliner Mahmoud
Ahmadinejad as president. Ahmadinejad has not yet appointed an energy minister, but likely candidates could oppose gas exports.

One such candidate is Kamal Daneshyar, the head of the energy committee in the Iranian parliament. Analysts from Honolulu-based consultancy Facts who recently met Daneshyar say he believes that Iran will have to increase gas reinjection at existing
oil fields from 3bn ft_/d (31bn m_/yr) now to 20bn ft_/d by 2010 — leaving no spare gas for export.

But a new energy minister in Iran, however hardline, will be looking to develop closer economic links with India, whose energy companies are proving to be ready investors as well as buyers of Iranian oil and gas. Gas exports to India through Pakistan would create the sort of regional economic axis that Iranian hardliners have been advocating for some time.

Tripartite talks on the Iran-Pakistan-India pipeline are likely to continue despite the doubts. But, with the continuing uncertainties, hopes for a speedy deal are fast vanishing.

Editor: Dr. Scott B. MacDonald, Sr. Consultant

Deputy Editors: Dr. Jonathan Lemco, Director and Sr. Consultant and Robert Windorf, Senior Consultant

Associate Editor: Darin Feldman

Publisher: Keith W. Rabin, President

Web Design: Michael Feldman, Sr. Consultant

Contributing Writers to this Edition: Scott B. MacDonald, Keith W. Rabin, Russell L. Smith, Caroline G. Cooper, Mark Reiner, Jean-Marc F. Blanchard and Kumar Amitav Chaliha

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