Has India sacrificed at Washington's altar?

Posted in India | 16-Aug-05 | Author: Ramtanu Maitra| Source: Asia Times

Indian Prime Minister Manmohan Singh (L) and US President George W. Bush wave from the balcony of the White House during Singh's visit to Washington in July 2005.

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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