Indian energy: A delicate balancing
act By Siddharth Srivastava
NEW DELHI - News that a consortium of
Indian companies has struck a huge gas find in
Iran is likely to complicate matters further
between India and United States.
The
international arm of India's state-controlled gas
explorer Oil and Natural Gas Corp, ONGC Videsh Ltd
(OVL), has struck natural gas in the Farsi block
of Iran, with the reserves estimated at 10
trillion cubic feet.
OVL (40%), Indian Oil
Corp (40%) and Oil India Ltd (20%) are
partners in this block that
was awarded in 2002. OVL had previously discovered
oil, estimated at 1 billion barrels, in the Farsi
block that lies 90 kilometers off the port of
Bushehr.
Washington has been putting
pressure on India to refrain from dealing with
Iran because of Tehran's alleged aspirations as a
nuclear-weapons-capable country. Having put off
the military option against Iran because of its
involvement in Iraq, the US has been keen to
browbeat Tehran via every diplomatic or economic
avenue.
Washington thus has not been happy
about a proposed US$7.5 billion natural-gas
pipeline to run through Iran, Pakistan and India.
India has also signed a multibillion-dollar deal
with Iran to buy liquefied natural gas (LNG).
The latest finds, however, are only likely
to deepen India's involvement with Iran. OVL won
the bid for the Farsi block in early 2002 and
signed a contract with the National Iranian Oil Co
for a four-year period that December 25.
Under the contract, OVL cannot take oil
and gas found in the block to India. On the
investments during exploration phase, Iran will
pay a 35% rate of return. For the development
phase, the rate of return is to be determined,
which will open another round of negotiations
between New Delhi and Tehran.
The minimum
investment commitment in the exploration phase is
$27 million (OVL's contribution being $10.8
million) with a work program that includes seismic
survey and drilling of four wells.
Interestingly, the US had last September
expanded the ambit of economic sanctions under the
Iran-Libya Sanctions Act, by which foreign
companies making an investment of more than $20
million in one year in Iran's energy sector would
be blacklisted.
The political undertones
of India's dealings with Iran are being reflected
in the ongoing negotiations between New Delhi and
Washington on the final draft of the nuclear deal.
It is apparent that elements of the political
establishment in the US want any concession to
India in accessing international nuclear-power
technology to be linked to breaking ties with
Tehran.
Indian Prime Minister Manmohan
Singh has been facing vicious political criticism
over a strongly worded letter addressed to him by
a few US legislators who have demanded that India
"terminate cooperation with Iran in the energy
sector and military spheres". The authors of the
missive include Tom Lantos, chairman of the House
of Representatives Foreign Affairs Committee;
Ileana Ros-Lehtinen, the ranking Republican;
Howard Berman; Gary Ackerman, who is the chairman
of the House Middle East and South Asia
Subcommittee; and others.
Leftist party
leader Brinda Karat has said the letter was an
"open threat" to India's sovereignty.
The
White House expressed ignorance about the contents
of the letter and said it continues to discuss the
issue with New Delhi and wants India to use its
"influence" to make Iran behave responsibly.
However, Foreign Minister Pranab Mukherjee
sought to deflect the criticism and said India and
the US "remain committed to implementing the
understanding expeditiously in a way that adheres
as closely as possible to the framework of the
July 2005 Joint Statement and the March 2006
Separation Plan".
In a bid to defuse the
situation, President George W Bush spoke to
Manmohan on the telephone this week. "The two
leaders expressed happiness at the strengthening
of the bilateral relations and reviewed
developments pertaining to negotiations on
bilateral civil nuclear cooperation,'' the Prime
Minister's Office said in a statement.
The
call followed recent talks that Indian Foreign
Secretary Shiv Shankar Menon held with US Under
Secretary of State for Political Affairs Nicholas
Burns, to thrash out the final nuclear agreement.
Menon also met with Secretary of State Condoleezza
Rice. Burns is scheduled to visit New Delhi this
month.
Menon said in Washington that there
was "considerable progress" in his talks. "I am
happy with the progress that has been made," he
said.
Indeed, there is a powerful lobby in
the US (backing Bush) that wants the nuclear deal
approved because of the nuclear-business potential
and leverage for massive arms deals with India.
However, India will have to tread
carefully in trying to balance the need for the
latest atomic technology from the US and its
hydrocarbon requirements from Iran.
Ironically, the latest muddle over Iran
comes at a time when reports say New Delhi is
comfortable with the price of gas, at $4.93 per
million British thermal unit (BTU), offered by
Tehran under the proposed $7.5 billion
Iran-Pakistan-India pipeline project, which the US
opposes.
Indian Petroleum Minister Murli
Deora recently made an unscheduled stop in Tehran
to sort out issues related to the pipeline as well
as supply of LNG at the earlier-contracted price.
Deora said India could not be pressured.
"We are going ahead with our discussions on the
pipeline project with Iran and Pakistan," he said.
Iran and India are "determined" to sign a
contract to build a natural-gas pipeline via
Pakistan by June 30, an Iranian official said
after the meetings with Deora.
India
believes that it now has to negotiate about
Pakistani transfer and transit charges to make the
pipeline viable, with a tripartite treaty expected
to be signed in June or July.
There has
been progress on this front as well. Pakistan has
climbed down from its earlier demand of $1.57 per
million BTU to $0.70-0.75 as a transportation
tariff. On the transit fee, Islamabad is seeking
$0.493, while New Delhi has offered $0.20.
Recently, the World Bank described the
pipeline as a win-win deal and expressed readiness
to fund the project.
Mukherjee has linked
the Indo-US nuclear cooperation with the country's
energy security. "We need to tap all sources of
energy and keep our options in this regard open.
This is at the heart of the India-US nuclear
understanding and the larger energy dialogue."
He added that the strategic partnership
between the two countries has "truly matured" into
one of considerable substance.
Menon too
recently reiterated the energy angle. "At a
projected [economic] growth rate of 8% a year
through 2031-32, the minimum necessary to
eradicate poverty, India needs to increase its
primary energy supply by three to four times and
its electricity-generation capacity by five to six
times current levels."
With both Iran and
the US important partners in India's quest for
energy security, New Delhi's diplomatic mandarins
have their task cut out.
Siddharth
Srivastava is a New Delhi-based
journalist.
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