India fast losing energy

Posted in India | 09-May-06 | Author: Siddharth Srivastava| Source: Asia Times

Siddharth Srivastava is WSN Editor India.
NEW DELHI - In its quest for energy, New Delhi is in danger of falling between two stools in its dealings with the US and Iran. Ratification of the India-US nuclear deal over civilian nuclear energy cooperation has hit major roadblocks in Congress, with sharp differences emerging over various definitions of the deal.

Tehran, on the other hand, has announced that it wants to renegotiate a $22 billion gas deal signed last year. Although Tehran says that this move has no connection with India siding against Iran over its nuclear program, few in Delhi believe that there is no connection, and they are concerned that Tehran's irritation with India will manifest itself in future interactions.

This week, Iranian Deputy Oil Minister Mohammed Hadi Nejad Hosseinian said in New Delhi that Tehran wanted to reopen the commercial agreement for a 5 million ton liquefied natural gas (LNG) deal signed last year between Indian Oil Corporation and the National Iranian Gas Exporting Company. Indian Oil Minister Murli Deora said the dispute was over price.

"Because it [LNG deal] is not ratified [by the Iranian government], we think we don't have any obligation, but the Indian side thinks it is approved and is in effect. So we have a dispute," Hosseinian said.

India is not too happy. "Oil prices have shot up, so they want a review. But we do not want to revise it. We want the gas at the price that was mentioned in the contract," Deora said. New Delhi has also begun simultaneous negotiations with Australia and Qatar for LNG due to Iran's isolation by the global community.

Another move that India does not appreciate is the decision by Iran and Pakistan to work on a gas pipeline project together if India fails to join them. Following talks with Iranian officials, Reuters has quoted Ahmed Waqar, permanent secretary at Pakistan's Petroleum Ministry, as saying that Pakistan and Iran had agreed to go ahead with the pipeline regardless of the outcome of the trilateral $7 billion India-Pakistan-Iran (IPI) project.

In Delhi, Hosseinian said that India had to agree on the pipeline by July. Failing that, Tehran would proceed with exports to Pakistan. "India has not been edged out of pipeline. We continue to engage in discussions leading to a tri-nation ministerial meeting next month," Hosseinian said after meeting Deora.

Last month, the oil ministers of Iran, Pakistan and India said at an international energy forum in Doha that they were very near a final agreement on the pipeline, in defiance of US opposition. Iranian Oil Minister Kazem Vaziri said he expected the final deal to be signed in Tehran in June.

Iran's toughening stance comes at a time when more "wrinkles" have appeared on the nuclear deal. The US has insisted that India adhere to a moratorium on testing atomic weapons (which India has rejected) as part of the deal that would give India access to US and foreign nuclear technology for the first time in three decades.

The Bush administration has said that Delhi must be prepared to accept "amendments" to the agreement which are within the "spirit" of the accord announced in March.

Sounding a tough note, Foreign Secretary Shyam Saran, recently back in India after canvassing for the deal in Washington, said that it was "delicately balanced", and any substantial changes or revisions to it were unacceptable to India. Saran said that Delhi hoped Congress would implement the pact along the agreed parameters.

Meanwhile, US pressure on New Delhi to stay away from Iran continues. Early last month, in trying to sell the India-US nuclear deal, Secretary of State Condoleezza Rice said the Bush administration could not guarantee that if the deal was approved by Congress, the Iran-India gas pipeline would not be built.

However, on a more stringent note, Washington has also reiterated that it is against any such deals with Iran. Energy Secretary Sam Bodman said at Doha that conducting business with Iran encouraged its nuclear ambitions, when asked about the IPI at a press conference. "Doing business with Iran, it seems to me, at a certain level encourages this [Iran's nuclear program]," he said.

The US has also outlined an ambitious project to tap the energy-rich ex-Soviet republics of Central Asia. The plan would develop a regional power grid from Kazakhstan to India to feed India, Pakistan and Afghanistan, and help integrate the economies of Central and South Asia, circumventing Iran and reducing the reliance on pipelines through Russia.

Assistant Secretary of State Richard Boucher presented the plan and said that Kazakhstan and Turkmenistan were rapidly becoming top energy producers.

Delhi, meantime, has also been trying to strike a conciliatory note towards Tehran, at a time when assembly elections are being held in four states - West Bengal, Kerala, Tamil Nadu and Pondicherry - with Muslims are a sizeable voting bloc. This is also being seen as an attempt to send a political message to the Muslim population, which is believed to be upset with New Delhi's pro-US, anti-Iran stance.

Last month, Prime Minister Manmohan Singh had a telephone conversation with Iranian President Mahmud Ahmadinejad and discussed energy cooperation and the need to push forward the IPI pipeline.

Recently, the minister of state for external affairs said that India would go ahead with the pipeline project with Pakistan. It was lost on nobody that the announcement was made at Thiruvanthapuram in Kerala state, where the elections are being held. "India and Iran enjoy traditionally friendly relations ... We intend to further strengthen and expand our multi-faceted ties," the minister said.

Some experts say that India may actually not be interested in the pipeline. According to an analysis by Stratfor, "India and Iran have talked about the natural gas pipeline deal for more than a decade. The deal has not progressed primarily because it has been regularly used as a political tool by New Delhi, Tehran, Islamabad and Washington. For India, running a natural gas pipeline through Pakistan does not make sense from a national security perspective. Distancing New Delhi from Tehran's orbit is one of Washington's major objectives. New Delhi's motives for the current announcement of progress on the deal is largely attributable to assembly elections."

Siddharth Srivastava is a New Delhi-based journalist.