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India finds a $40bn friend in
Iran
By M K Bhadrakumar
India's oil diplomacy took a
giant leap forward on Friday when New Delhi
unveiled a multibillion-dollar deal with Iran and
Russia that will be crucial to India's long-term
energy security, and took the initiative the same week
to host the first-ever conference on
regional cooperation among Asian oil-producing and
consuming countries.
In its US$40 billion
deal with the National Iranian Oil Co (NIOC),
India committed to import natural gas from Iran
over a 25-year period and to develop two Iranian
oil fields and a gas field. Iran will sell the
liquefied natural gas (LNG) to India at a price
linked to Brent crude oil. According to the
agreement, India will pay $1.2 plus 0.065 of Brent
crude average, with an upper ceiling of $31 per
barrel. Iran will ship 5 million tonnes of LNG to
India annually, with a provision to increase the
quantity to 7.5 million tonnes.
As part
of the deal, India's ONGC Videsh Ltd (OVL) gets a
20% share in the development of Iran's biggest
onshore oilfield, Yadavaran. The Indian company will
also get 100% rights in the 300,000-barrel-per-day
Jufeir oilfield. The stake in Yadavaran translates
into 60,000 barrels per day of oil for India.
Significantly, Chinese state oil company Sinopec
(China National Petroleum and Chemical
Corp) operates the Yadavaran field. With
the deal signed in Delhi, India will now hold a
20% stake in Yadavaran, Iran 30%, while China
retains its existing 50% share.
In March,
Beijing and Tehran signed a deal worth $100
billion. Billed as the "deal of century", this
agreement is likely to increase by another $50
billion to $100 billion, bringing the total close
to $200 billion, when a similar oil agreement,
currently being negotiated, is inked. The gas deal
entails the annual export of some 10 million
tonnes of Iranian LNG for a 25-year period, as
well as the participation, by China's state oil
company, in such projects as exploration and
drilling, petrochemical and gas industries,
pipelines, services and the like.
India
also confirmed that it is talking to Russia for
investing in crumbling oil major Yukos. Officials
in New Delhi said ONGC was considering investing
$2 billion for a stake in Yuganskneftegaz, the
main production unit of Yukos, which was auctioned
last month in Moscow in a cloak of mystery.
Incidentally, Russia recently offered a 20% stake
in Yuganskneftegaz to Sinopec. In the event of
both India and China taking shares in
Yuganskneftegaz, it would become a triangular
Russian-Chinese-Indian collaboration - alongside
the envisaged Chinese-Indian-Iranian cooperation
in Yadavran.
The trend puts paid to the
Great Game theorists who have speculated on the
inevitability of a Sino-Indian rivalry in the race
for energy. At a meeting with Indian Petroleum
Minister Mani Shankar Aiyar in Delhi in October,
the Chinese ambassador proposed cooperation
between the two countries in the energy sector. A
framework agreement on such cooperation could be
signed during the visit of Chinese Prime Minister
Wen Jiabao to India in March. China signed a
similar agreement with Pakistan last month during
the visit of the Pakistani prime minister to
China.
It's evident now that India
is working on a coherent, long-term energy plan.
The country is making it clear that it views Iran
and Russia as two pivotal partners in its quest
for energy. An early sign of the Indian thinking
was evident when Aiyar visited Moscow in October
for discussions with the Russian government on
energy cooperation. In a far-reaching statement,
Aiyar compared the significance of India's
cooperation with Russia in the energy sector in the
coming years with Indo-Soviet cooperation in the
security field. "In the first half-century of Indian
independence, Russia has guaranteed our
territorial integrity, and in the second half it
may be able to guarantee our energy security. What
I am talking about is the strategic alliance with
Russia in energy security, which is becoming for
India at least as important as national security,"
he had said.
During Russian President
Vladimir Putin's visit to India, the two countries
signed a memorandum of understanding for joint
exploration and distribution of natural gas from
the Caspian basin, as well as for building
underground gas storage facilities in India and
technology transfer from Russia. Much of the
credit for formulating and steering India's new
energy policy must go to Aiyar, who is emerging as
one of India's outstanding political leaders.
Aiyar is credited with his progressive outlook on
diverse aspects of India's national policy - from
dialogue with Pakistan to devolution of power to
India's local bodies. Iran had first proposed the
deal to the previous National Democratic Alliance
in Delhi over a year ago. Aiyar relentlessly
pushed the deal through India's leviathan
bureaucracy and made it a reality.
Under Aiyar, India also hosted
the first-ever round table of Asian oil ministers last Thursday.
At the gathering, attended by oil ministers
- including those of the Persian Gulf, China
and Southeast Asia - Aiyar mooted the idea of a
common platform for Asia's oil-consuming and oil-producing
countries. He said the region ought to develop a
sophisticated market for petroleum and petroleum
products. The meeting endorsed India's proposal,
and as a first step decided to create a benchmark
crude for the Asian market. The conference also
called for regional cooperation for investment in
exploration and strategic storage of hydrocarbons
for energy security.
India has found a
strong partner in Iran in the pursuit of an Asian
oil market. From the Iranian perspective, the
Indian initiative on regional cooperation
dovetails with its own policy of shifting its oil
and gas trade to the Asian region so as to reduce
its market dependence on the West. Speaking at the
conference in Delhi, Iranian Oil Minister Bijan
Namdar Zanghaneh proposed the creation of an Asian
Bank for Energy Development to finance energy
projects in Asia (like the proposed
Iran-Pakistan-India gas pipeline). With particular
reference to growing markets like China and India,
the Iranian minister called for a lower price for
energy supplies from Asian producers to Asian
consumers.
The Iran gas deal also
opens the door for the long-standing
Iran-Pakistan-India gas-pipeline project. A day before the India-Iran
deal, Aiyar announced in Delhi that he has invited
Iranian officials to visit Delhi to discuss the
pipeline. "A delegation from Iran will visit India
on the eve of the Asian gas buyers' summit
commencing on February 14 to initiate negotiations
on a term-sheet for the delivery of Iranian
natural gas by pipeline at the India-Pakistan
border," he said. In a forceful acknowledgement of
India's interest in the project, Aiyar said, "Our
anticipated demand in 2025 for gas would be 400
million standard cubic meters per day. Our output
today is less than 100 mscm per day. It is not
possible to meet the incremental demand from
domestic production and import of LNG, and natural
gas through pipeline is needed to meet the demands
of the growing economy."
Iran has also
been quick to sense that the gas deal would turn
the focus back on the decade-old pipeline project
proposal. The Tehran Times, which reflects the
Iranian government's views, commented, "The
Iran-India agreement on LNG exports will pave the
way for the implementation of the project to pipe
Iranian gas to India via Pakistan and the dream of
the peace pipeline could become a reality in the
near future".
But Pakistan's willingness
to address Indian concerns about the pipeline
project remains unclear. After a meeting with
the visiting Pakistani prime minister, Shaukat
Aziz, in Delhi on November 24, Aiyar summed up the
Indian position: "We did repeat what we have said
earlier about using Pakistan as transit corridor
[for sourcing gas from Iran] creating mutual
dependency ... we need to replicate such mutual
dependency in several other sectors so that we can
conceptualize whatever cooperation we have in the
hydrocarbon sector in the wider trade and economic
relationship between the two countries."
A section of the Western press
has reported that US pressure is building up on
Islamabad not to enter into an energy deal with Iran
at this juncture. An Iran-Pakistan-India
gas-pipeline project flies in the face of American efforts
to isolate Iran regionally. The project, if
it materializes, would also foreclose
whatever prospects remain of the revival of
the trans-Afghan pipeline project, which many
still see as a raison d'etre of the US
intervention in Afghanistan.
M K
Bhadrakumar is a former Indian career diplomat
who has served in Islamabad, Kabul, Tashkent and
Moscow.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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Mystery shrouds auction of Yukos
unit (Dec 21, '04)
Oil rekindles Indo-Russian
affair (Dec 2, '04)
China rocks the geopolitical
boat (Nov 6,
'04)
Russia energizes Asian
conquest (Oct 27, '04)
India, Pakistan and the 'peace'
pipeline (Sep 15, '04)
India, China and energy
security (Feb 7, '04)
India and Iran: Renewed
energy (May
22, '03)
India eyes investments in oilfields
in Iran (May 13, '03)
India, Iran: Strategic
realignment (Jan 29, '03)
Iran takes a step closer to
India (Jan 18, '03)
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