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Has India sacrificed at
Washington's altar?
By Ramtanu Maitra
Shortly after his return from a state
visit to Washington, Indian Prime Minister
Manmohan Singh told the Indian media that the
United States had no role in the proposed gas
pipeline from Iran to India via Pakistan. It was
the umpteenth time this face-saving line had been
ritually trotted out in New Delhi, despite
evidence to the contrary.
Given the
fractious US-Iran relationship, and both
statements issued by US officials and the
pussyfooting of the Manmohan government over the
past six months about the future of the ambitious
project, it is evident that unless the Iran-US
bilateral relationship changes dramatically, the
pipeline is a non-starter.
The
participating countries in the proposed
2,600-kilometer, overland natural-gas pipeline
began discussions in the early 1990s, but it has
only been in recent meetings among officials from
India, Iran and Pakistan that indications were
given that the project could get underway in the
near future, despite pricing disagreements.
India is a huge and growing natural-gas
market, with consumption of nearly 25 billion
cubic meters in 2002 and projections it will reach
34 billion cubic meters in 2010 and 45.3 billion
cubic meters in 2015. Iran sits on the world's
second-largest natural-gas reserves - an estimated
26.6 trillion cubic meters, according to the US
Energy Information Administration.
US
State Department official Stephen Rademaker has
warned that Iran could fund terrorism and weapons
of mass destruction with the money it made from
natural-gas sales, and US officials have warned
the Indians and Pakistanis that their companies
could be sanctioned if they go ahead with the
project.
The issue thus is a prism that
has thrown into bold relief the political
challenges and domestic dilemmas of India's
unfolding strategic relationship with the US.
US opposition
The Bush
administration's opposition to the pipeline first
showed up in March, when the then-newly appointed
US Secretary of State Condoleezza Rice, visiting
New Delhi, said, "I think that our views
concerning Iran are very well known at this time.
And we have communicated to the Indian government
our concerns about gas pipeline cooperation
between Iran and India. I think our ambassador has
made statements in that regard, so those concerns
are well known to the Indian government." As
students of American foreign policy know, when the
US secretary of state expresses "concern" it is a
pleasant if emphatic way of saying no.
At
the same time, the US-Iran relationship appears to
be heading to a possible confrontation over
Tehran's nuclear program. Tensions have heightened
this week with Iran removing United Nations seals
on equipment used in uranium enrichment at the
Isfahan facility. The US suspects that Iran's
program will be used to develop nuclear weapons,
not just the nuclear energy that Tehran claims.
There are ample indications that
Washington does not like the idea of its new
strategic ally, Delhi, helping its enemy, Iran. In
fact, President George W Bush reportedly conveyed
this bluntly to the visiting Indian premier during
the latter's July visit. New Delhi denies this,
but the report refuses to vanish.
And in
case there was any question on the US stance, on
August 4, according to The Hindu newspaper, US
Assistant Secretary of State Christina Rocca told
a group of visiting Pakistani journalists that
Washington opposed the Iran-Pakistan-India gas
pipeline project, adding that Islamabad and New
Delhi should explore alternative sources for
meeting their energy needs. Rocca said the US
believed it was not the right time to invest in
Iran's gas and oil sector. "We would support this
gas and oil coming from somewhere else," she was
quoted as saying.
Rocca went on to accuse
Iran of pursuing a nuclear weapons program in
violation of its obligations under the nuclear
Non-Proliferation Treaty (NPT) and of being a
state sponsor of terrorism. She said investments
in the oil and gas sector in Iran would be "a bad
idea" because the US Congress is beefing up laws
placing sanctions on any investments in the
Iranian oil and gas sector.
Similarly, in
a statement before the Senate Foreign Relations
Committee on July 26, Assistant Secretary of State
for Economic and Business Affairs, E Anthony
Wayne, reiterated the explicit message: "A more
troubling aspect of the recent surge in overseas
energy deals by China and India is their
willingness to invest in countries that are
pursuing policies that are harmful to global
stability. Both Chinese and Indian firms have
reportedly been involved in oil and gas-sector
deals in Iran that raises concerns under US law
and policy.
For example, Indian and
Pakistani officials are engaged in detailed
discussions on the technical, financial and legal
aspects of building a $4-billion pipeline that
would bring Iranian natural gas to Pakistan and
India - a project that, as Secretary Rice has
said, also raises US concerns. India, and to a
much larger extent China, have significant
upstream investments in Sudan's energy sector ...
." There is no mincing of words here.
Isolating Iran
The US objection
to the project stems from the fact that at this
point Iran is an enemy of the US, and unless this
relationship changes the Bush administration will
do its best to see that Iran becomes more and more
isolated. Such isolation is necessary as the US is
reportedly developing a contingency plan to "take
out" Iran's nuclear facilities. Some in Washington
insist that preparation for such a confrontation
has in fact already begun.
In objecting to
the Iran-Pakistan-India gas pipeline, US officials
cite the existing Iran-Libya Sanctions Act of
1996, signed by former president Bill Clinton. The
act requires the president to impose sanctions on
any international firm that does $40 million or
more in oil or gas business with Iran or Libya, or
that violates United Nations sanctions already in
place against Libya.
The act was initiated
due to US disapproval of Iran's alleged support of
international terrorism. Statutory sanctions were
imposed in 1984, when Iran was officially placed
on the list of state supporters of international
terrorism. Not only were weapons sales prohibited,
but all assistance and loans to Iran from
international financial institutions were
prohibited as well. In 1997, an executive order
prohibited the importation of goods and services
from Iran. The 1997 sanctions restated that US
citizens were prohibited from engaging in all
trade and investment activities in Iran. This
action was primarily spurred by the US accusation
of Iranian efforts to disrupt the flow of oil from
the Persian Gulf with naval mines and missile
attacks.
Watch his feet, not his
mouth
Significantly, even as premier
Manmohan was asserting India's independence of the
US in the India-Iran pipeline affair, he was
acting to scuttle the project. On August 3, the
Press Trust of India reported that New Delhi was
unwilling to sign a memorandum of understanding
(MoU) with Iran to set a timeframe for
implementation of the pipeline. The news agency
commented that the Indian unwillingness stemmed
from the fact that it would not be appropriate to
sign an agreement until its security concerns were
addressed.
At the beginning of a two-day
special joint working group meeting this month on
the pipeline, Tehran had proposed an MoU similar
to the one it signed with Pakistan last month,
setting a clear timeframe. Iran wants the project
structure to be in place by December-end, and the
implementation mechanism and project financing
model by April next year so as to begin work by
the second half of 2006.
But India is now
clearly dragging its heels. Whether New Delhi's
actions stem from a desire to please Washington,
or represent practical self-interest in the face
of an imminent US-Iran confrontation, is not
known.
Further, the cost estimate for the
project, previously stated to be US$4.5 billion,
has now jumped to $7.4 billion. This is
understandable and justified: the original
estimate is old. But at the same time, it is
evident that in the absence of international
financing due to the American opposition to the
project, it would be difficult to put together
that additional $2.9 billion, if not the whole
amount.
Aside from the potential negative
side-effect of preventing the implementation of
the pipeline, some observers in India point out
that there may be an upside for India to the cost
revaluation. Pricing disagreements between Iran
and India still persist, and Iran may try to
salvage the deal by offering India a lower price
for its gas.
It is not clear whether the
Indian premier was fully aware of the 1996
Iran-Libya sanctions legislation, but it is
evident that it was read out to him while he was
in Washington. On July 21, while still in
Washington, Manmohan suddenly began saying he was
unsure whether the pipeline would get funding, the
Press Trust of India reported. "I am realistic
enough to realize that there are many risks,
because considering all the uncertainties of the
situation there in Iran, I don't know if any
international consortium of bankers would
underwrite this," Singh said, according to the
news agency.
Moving for damage control
At a lower level, the Manmohan government
seems to have quietly allowed the singing of a
different tune in New Delhi. Talking to the
Iranian news agency, IRNA, on July 27, Lydia
Powell, a senior fellow at the New Delhi-based
Observer Research Foundation, a think-tank known
to be closely aligned with the Congress coalition
government in Delhi, elaborated on the economic
difficulties the project faces. Powell said that
the economic facts on the ground were not
supportive of the pipeline project.
"There
is a contradiction between India's foreign policy
and energy policy. In such circumstances there is
not a single bank that will come forward to fund
it," Powell said. In addition, indicating that a
regime-change in Tehran was very much on the Bush
administration's agenda, and New Delhi must take
note of that, Powell said such projects take a
long time to execute and governments might be
replaced and only a stable national policy could
ensure construction of a like project.
In
what may be the clearest indication that a
damage-control effort is underway, Powell also
took aim at the Manmohan government's most
outspoken proponent of the project. "The pipeline
project seems to be steered by the personality of
the Indian Minister of Petroleum and Natural Gas
[Mani Shankar Aiyar]. A project does not become
bankable because of one minister," Powell
declared.
Indeed, one of the most strident
voices assuring the Indian people that the
pipeline will be built no matter what, has been
that of Aiyar. He has repeatedly assured Indian
parliamentarians that there was "no going back"
for India. He also told the Indian parliament July
28 that there was no American "pressure" on India,
but, significantly, did confirm that at least two
US officials had expressed reservations over the
project.
It was the same Aiyar who was the
first to disclose the increasing US pressure on
India after a meeting with the American envoy in
New Delhi, David Mulford, ahead of Rice's March
visit. At the time, the Indian media reported
Aiyar saying: "All of us have noted what the US
concerns are, but I think they too are aware of
our energy security requirements."
Again,
on June 4, during a visit to Lahore, Pakistan,
Aiyar said India would not give in to US pressure
to abandon the project because of concerns that
Iran might use the revenues to develop nuclear or
other banned weapons, the Press Trust of India
reported.
Manmohan dilemma
The
difficulty that the Manmohan government faces is
living up to recent claims that New Delhi's
warming relations with the US have not undermined
India's independent foreign policy or its close
ties with Tehran. He must also prove that the
recent announcement by the US that it will
cooperate with India on nuclear issues has not
resulted in India surrendering the autonomy of its
strategic nuclear assets. "We have not surrendered
in any way the effectiveness of our strategic
nuclear assets program," Manmohan told Indian
parliamentarians on August 4.
The India-US
nuclear deal is the anchor of Manmohan's visit to
Washington. Although some believe the deal was
less than favorable for India, it is nonetheless
projected by the premier as the crown of success
in his dealings with Washington. By identifying
"India's independent foreign policy or its close
ties with Tehran" as potential chips in a bargain
with the US, Manmohan has opened himself up for
close observation by his critics.
In
addition, if Powell is to be believed, Aiyar may
go a long distance before allowing his premier to
dump the project, albeit temporarily. This could
create a serious factional division within the
cabinet centered on the project. This is something
Manmohan will have to face up to sooner rather
than later.
The Bush administration, on
the other hand, holds the keys to the project. The
Indo-US nuclear deal cannot be put in place unless
the US Congress approves it. The deal could be
scuttled by opposition from the Congress, from
other nuclear powers, or even from countries that
gave up their own nuclear ambitions to sign the
NPT. Bush has promised to lobby his own Congress
as well as foreign allies to amend American laws
and international agreements that now bar nuclear
cooperation with India because it has not signed
the NPT.
Under the circumstances, if New
Delhi does not play ball with the Bush
administration on the Iran-India pipeline, it is
unlikely that the White House will go out and
lobby to see the nuclear deal through. Moreover,
within the US Congress, the anti-Iran lobby is
getting stronger and the White House is sparing no
effort to augment the process.
The
Pakistan factor
Pakistan is another element
in the Indian dilemma. As of now, Pakistan has
shown eagerness to see the pipeline project
through. It would bring a substantial amount of
money annually to Pakistan - some estimates
suggest as much as $600 million a year in transit
fees. Hence, there exists a lobby within Pakistan
who would like to see the project implemented.
At the same time, however, US-Pakistan
relations are multifold and compelling. Despite
their joint commitment to the "war on terror" (to
the tune of about a billion dollars in American
aid a year since 2002), Islamabad's apparent
difficulty in fighting its own people on behalf of
the US makes the situation tricky. Pakistan has
long been fussing about the growing military power
of India and was denied military hardware by the
US because of its "unlawful" development of
nuclear weapons. But recently Washington resumed
military assistance to Islamabad and in March
agreed to sell the much-needed F-16 fighter jets
to the Pakistan Air Force.
While in
Pakistan last March, Rice reportedly argued with
Pakistan Foreign Minister Khurshid Mahmud Kasuri
that even if the US administration gave up its
opposition to the pipeline, there were powerful
groups within the US Congress, media and academia
that would continue to oppose the project - all of
which would ultimately adversely affect
Washington's relations with Islamabad.
In
other words, both Pakistan and India remain
vulnerable to the Bush administration's policy on
the Iran-India pipeline. Pakistan is arguably more
vulnerable than India.
However, Pakistani
Foreign Ministry spokesman Muhammad Naim Khan
announced on July 25 that even if India gave in to
US pressure, Islamabad would build a natural-gas
pipeline from Iran, media reported. "We would
welcome Indian association with this project, but
if it is not feasible with India, we are going to
go ahead with the project in any case," Khan said,
adding that Pakistan needed the gas.
Iranian Petroleum Minister Bijan
Namdar-Zanganeh visited Islamabad and met with
Pakistani Petroleum Minister Amanullah Khan Jadoon
in the first week of July. The two sides signed a
MoU that called for continued discussions, and
Namdar-Zanganeh said he hoped a final agreement
would be signed by April next year. He noted that
after 10 years of talks, this was the first
"written document". Namdar-Zanganeh also met with
President General Pervez Musharraf and Prime
Minister Shaukat Aziz.
Business Recorder,
a Pakistani financial daily, has reported that
Islamabad had already begun a search for
investment banks that could serve as "financial
adviser/consultant" for the pipeline.
The bottom line
But beyond all
that, it is evident that the US-Iran relationship
is reaching a point of no return, which may soon
enough lead to military confrontation. In fact,
according to Philip Giraldi, writing in the new
issue of the American Conservative, the Pentagon,
acting under instructions from Vice President Dick
Cheney's office, has tasked the United States
Strategic Command with drawing up a contingency
plan to be employed in response to another
September 11-type terrorist attack on the US.
The plan includes a large-scale air
assault on Iran, employing both conventional and
tactical nuclear weapons. Within Iran there are
more than 450 major strategic targets, including
numerous suspected nuclear-weapons-program
development sites. Many of the targets are
hardened or are deep underground and could not be
taken out by conventional weapons, according to
this report, and, hence, the nuclear option. (As
in the case of Iraq, the US response is not
conditional on Iran actually being involved in the
act of terrorism directed against the US.)
The bottom line, then, is that the
prospect of such a war breaking out during the
time period it would take to implement the
pipeline (one estimate suggests designing the
pipeline would take 12 to 18 months and actual
construction would take between three-and-a-half
years to four years) would, by itself, be
sufficient to render the project unviable. And it
is likely that the US informed India about this in
no uncertain terms.
The India dilemma is
to make the Indian people accept the fact that
implementation of the pipeline project depends on
a green light from Washington.
(Additional
reporting by Bill Samii of Radio Free Europe/Radio
Liberty)
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