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India weighs pipeline
options
By Ramtanu Maitra
One should not be surprised if New Delhi's
enthusiasm for laying the US$4.5 billion gas
pipeline between Iran and India via Pakistan
begins to take a downturn. New Delhi may cite a
number of reasons for the shift, such as the high
price of Iranian gas and the endemic security
problem of laying the pipe through
less-than-reliable Pakistan, among others. What,
however, New Delhi will not say is that when US
Secretary of State Condoleezza Rice showed she was
ready to shoot across the bow, the Indians
blinked.
That India, a country that
aspires to global-power status, got itself into
the position of having to backpedal on this
important matter in the first place is telling.
Whether the explanation lies in residual naivete
at the official level or poor intelligence, or
some combination of the two, is hard to determine.
Indian intelligence was admittedly badly
battered in Nepal recently, but there is little
excuse for being caught flat-footed as far as the
US view on the Iran pipeline is concerned.
A few days before the American secretary
of state arrived in India for a 24-hour visit last
week and the Indian petroleum minister headed to
Islamabad for tri-partite talks between India,
Pakistan and Iran on the planned gas pipeline, US
Ambassador David Mulford, a former banker, had
already conveyed that though he appreciated New
Delhi's interest in the pipeline project, he felt
it was his "duty to highlight US concerns on
Iran".
Mulford was merely preparing the
Indians for the full court pressure that would be
exerted on them when Rice arrived. It is not clear
how much pressure was in fact exerted, but it is
evident that New Delhi decided rather abruptly not
to risk the wide-ranging security and economic
relationship with Washington now in the process of
gelling for Iranian gas.
India holding
its own?
Describing what transpired at the
meeting between Indian External Affairs Minister
Natwar Singh and Rice in New Delhi on March 16,
Principal Deputy Under Secretary of State Donald
Camp told a panel discussion at the Heritage
Foundation in Washington on that same day that the
talks reflected a difference of views between two
matured nations.
At a joint press
conference, Rice said, "We do have our concerns.
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 India
meets its energy needs."
"We have no
problems of any kind with Iran," Singh said,
standing beside Rice. "We need a lot of new
additions to our sources of energy, and so the
pipeline is important." He added, though, that
"the dispute is rather hypothetical at this
stage". These reports gave the impression that
India was very much holding its own, and did not
waiver under US pressure. However, that may not be
the real picture.
One Indian newspaper has
already reported that Petroleum Minister Mani
Shankar Aiyar indicated off the record that Iran
was pricing the gas too high, and "if they
[Iranians] say they have alternate markets in the
US, China and Japan, then I might as well ask them
to tap those markets".
It has also been
reported that the entire time that the petroleum
minister was trying to work out a deal to get the
Iranian gas to India, the Indian Embassy in Tehran
was opposing the deal. According to these reports,
the embassy echoed the hardliners in Washington,
saying Iran was a highly unstable place to risk
long-term investment, that Iran had an established
history of reneging on contracts, and that it
would be disastrous in terms of worker layoffs if
gas supplies from source to dependent industries
and townships abruptly ceased because of war,
terrorism, or other reasons.
"Even if you
build 10% dependency on the gas, that is a lot of
dependency," said an energy expert, "and then the
producer holds the levers against you. It no
longer remains a buyer's market, because
established infrastructure cannot be moved
around."
In the pipeline
Iran
and India signed an agreement for an overland
natural gas pipeline in 1993, and in 2002 Iran and
Pakistan signed an agreement on a feasibility
study for such a pipeline. India-Pakistan tensions
over Kashmir and related security concerns have
delayed the project. In late February and early
March diplomats from all three countries said a
deal would be signed soon, and Iranian Foreign
Minister Kamal Kharrazi said the pipeline would be
2,700 kilometers long, and India would buy 7.5
million tons of LNG (liquefied natural gas) a year
for 25 years.
On March 16, however, Aiyar
said that his country might withdraw from the
deal. Aiyar explained that Iran wanted to charge
as much for natural gas as it does for LNG (about
$4 per million British thermal units - MBTU),
whereas the main Indian consumers - the fertilizer
and power sectors - are unwilling to pay more than
$3 per MBTU. With the addition of transportation
and transit charges to the Iranian price, Aiyar
said, the gas would end up costing $4.50 per MBTU.
Aiyar added that India and Pakistan will need
approximately 200 million standard cubic meters of
gas daily, and Iran should offer a special price
for such a large order.
Tehran,
furthermore, is insisting on a "take-or-pay"
agreement in which India must pay for the agreed
amount of gas even if it does not take delivery of
it, Press Trust of India reported. India
reportedly prefers a "supply-or-pay" contract, in
which Iran must deliver gas to the Indian border
or pay for the contracted quantity. Tehran also
rejected India's request for natural gas that is
rich in petrochemicals, preferring instead to
deliver "lean" gas that does not contain butane,
ethane or propane.
India's other
suppliers
India is a huge and growing
natural gas market. According to the Energy
Information Administration, natural gas use was
nearly 25 billion cubic meters in 2002 and is
projected to reach 34 billion cubic meters in 2010
and 45.3 billion cubic meters in 2015. India
produces gas and has worked with outside partners
- including Bechtel, Gaz de France, General
Electric, Total and Unocal - to increase
production, but it is looking to other countries
to fulfill its requirements.
One idea is
to connect Bangladesh's natural gas reserves with
the Indian gas grid. Myanmar could be a source of
natural gas, too. Two Indian companies - Oil and
Natural Gas Corporation and erstwhile Gas
Authority of India, Ltd own equity in Myanmar's
natural gas reserves, and officials there have
indicated an interest in running a pipeline to
West Bengal in India.
Qatar - with the
world's third-largest natural-gas reserves (14.4
trillion cubic meters) - is another competitor for
the Indian market. India's Petronet and Qatar's
Ras Laffan LNG Company (Rasgas) signed an
agreement for the provision of 10.3 billion cubic
meters per year of LNG, and deliveries began in
January 2004, according to the Energy Information
Administration.
Aiyar visited Moscow and
Kazakhstan in late February to discuss energy
issues. He reportedly said that India was willing
to pay $2 billion for a 15% stake in
Yuganskneftegaz. He also said India could invest
$25 billion in the entire Russian energy sector.
India's cabinet recently authorized discussion of
the Turkmenistan-Afghanistan-Pakistan Natural Gas
Pipeline Project. Iran does not, therefore, have a
stranglehold on the Indian market.
Iran's
other markets
Iran natural gas reserves are an
estimated 26.6 trillion cubic meters, according to
the Energy Information Administration, but the
country only produced about 76.5 billion cubic
meters of natural gas in 2002. Most of that gas
was used domestically, although Iran did export to
Armenia and Turkey.
Iran is eager to reach
other markets. Iranian Petroleum Minister Bijan
Namdar-Zanganeh and Omani Oil and Gas Minister
Muhammad bin Hamad bin Sayf al-Rumhi on March 15
signed an agreement on the export to Oman of 10
billion cubic meters of natural gas annually,
beginning in 2006, IRNA reported.
The same
day, Zanganeh and Kuwaiti Energy and Oil Minister
Ahmad Fahd al-Ahmad al-Sabah signed a deal for the
export to Kuwait of 10 million cubic meters of
natural gas a day, beginning in late 2007, IRNA
reported. Zanganeh said the deal with Kuwait is
worth more than $7 billion over 25 years. He went
on to say that the legal documents relating to the
deal will be drawn up in a few months.
Earlier in March, the possibility of
Ukraine purchasing 15 billion cubic meters of
natural gas from Iran every year was discussed at
an Iran-Ukraine energy commission meeting in Kiev.
Two pipeline routes are being considered -
Iran-Armenia-Georgia-Russia-Ukraine or
Iran-Armenia-Georgia-Black Sea-Ukraine. Other
countries that have signed gas-related memoranda
or at least discussed the topic with Iran include
Austria, Bulgaria, China, Greece, Italy and
Turkey.
Iran likes to present every
meeting as a major accomplishment by staging the
signing of a memorandum of understanding, but
these are not binding contracts. Conclusion of the
deal with India is potentially very important for
Iran, because it will curtail some of its
political isolation and will earn it a place in
the international gas market. But Tehran's pricing
policies and Washington's opposition may scuttle
this effort to break out.
A deal in the
works?
The US seems to be aware that it
would be difficult to take away the pipeline
project without offering India some form of
solution to its burgeoning energy shortage
problems. Joel Brinkley of the New York Times
reported from Islamabad March 16 that Rice has
indicated that the US may help India build one or
more nuclear power plants. That article also
claims that Singh acknowledged that India may have
to rethink its pipeline plan, should the United
Nations impose sanctions on Iran because of its
nuclear program.
Another report suggested
that a "deal" is in progress between India and the
US to drop the pipeline. That report pointed out
that Rice signaled the Bush administration's
willingness to end over 31 years of nuclear energy
blockade of India. Whether this will translate
into reality is another matter. But as senior
Indian government sources said, "The difference is
the willingness to move away from a traditional
theological approach to India's nuclear power
aspirations."
The biggest American reactor
manufacturer, Westinghouse Inc, is vying for an $8
billion contract for four nuclear power plants in
China, competing against Areva SA of France. In
India, the Department of Atomic Energy has a
master plan to install 20,000 megawatts of
electrical power generation capacity in nuclear
energy by 2020.
It is evident that India
is not geared up to carry out such a large nuclear
power generation expansion within the next 15
years by itself. But Russia is no longer willing
to provide new reactors in violation of the
Nuclear Suppliers Group's regulations, and the
non-proliferation lobbies in US Congress and the
administration so far have shown no indications
that they are willing to help out a non-signatory
of the NPT. Still, New Delhi must have seen some
positive signals in that direction to choose to
comply with the American objections to the
pipeline.
US opposition is loud and
clear
In her interview with Rediff.com on
March 18, Rice said her government had voiced
concerns to the Indian government about the gas
pipeline with Iran. "It's not only with India.
We've similarly talked to Japan about a gas
project that they would have, because the United
States has sanctions on Iran for good reasons. We
have many differences with Iran about terrorism,
about interference in their neighbor's affairs,
about the fate of the Iranian people themselves.
And so we've voiced our concerns," Rice said.
The US originally imposed sanctions
against Iran on November 12, 1979, seven months
after the "Khomeinization" of Iran and the second
and final ouster of Washington's best ally, Reza
Shah Pehlavi. But after the fall of Saddam
Hussein's regime and the occupation of Iraq by US
troops, the campaign against Iran was rejoined,
led by neo-conservatives.
In May 2003,
Senator Sam Brownback, a long-time supporter of
exiled Iranian opposition groups, including the
front organization of the militant Mujahideen-e
Khalq, introduced a bill called the Iran Democracy
Act. This legislation declared US support for an
"internationally monitored referendum" to achieve
peaceful regime change in Iran. Brownback later
told the press that top Pentagon officials backed
funding for covert operations as part of the
legislation, but the bill was not so amended and
remains in committee.
Later, a tougher
companion legislation was sponsored in the House
of Representatives by Democrat Congressman Brad
Sherman. The Iran Freedom and Democracy Support
Act calls for rolling back the Bill Clinton
administration's partial trade allowances and
discouraging the World Bank from giving loans to
Iran. The Iran and Libya Sanctions Act Enhancement
and Compliance Act, yet another measure introduced
in October 2003 by Representative Ileana
Ros-Lehtinen, a very important cog in the India
caucus in Washington, would tighten the existing
sanctions.
Dumping on Iran
Sherman's Iran Freedom and Democracy Support
Act says, among other things, the
following:
"The Government of Iran is currently
seeking to develop nuclear weapons and other
weapons of mass destruction and has an active and
successful ballistic missile program.
"Recent revelations have shown that Iran
is further along than previously believed in
enriching uranium and developing nuclear weapons,
and may only be months away from developing the
capability to manufacture nuclear weapons.
"There is currently not a democratic
government in Iran. Iran is an ideological
dictatorship presided over by an unelected supreme
leader with limitless veto power, an unelected
Expediency Council, a Council of Guardians capable
of eviscerating any reforms, and a president
elected only after the council disqualified 234
other candidates for being too liberal, reformist
or secular.
"The April 2003 Department of
State report on terrorism indicates that Iran
remained the most active state sponsor of
terrorism in 2002. That report also states that
Iran continues to provide funding, safe heaven,
training and weapons to known terrorist groups,
notably Hezbollah, Hamas, the Palestine Islamic
Jihad and the Popular Front for the Liberation of
Palestine.
"Human rights have failed to
improve in Iran under the pseudo-reformers.
Torture, executions after unfair trials and
censorship of all media remain rampant throughout
the country. Stoning and beheading are used as
methods of punishment."
Sherman's bill
said the US would support transparent, full
democracy in Iran; an internationally-monitored
referendum in Iran by which the Iranian people can
peacefully change the system of government in
Iran; the aspirations of the Iranian people to
live in freedom; and would help the Iranian people
achieve a free press and build an open, democratic
and free society.
Ramtanu Maitra
writes for a number of international journals and
is a regular contributor to the Washington-based
EIR and the New Delhi-based Indian Defence Review.
He also writes for Aakrosh, India's defense-tied
quarterly journal.
(Additional
reporting by Radio Free Europe/Radio
Liberty.)
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