Round The World

New Delhi, 6 April 2010

Iran-Pak-India Pipeline

DELHI NOT TO MAKE HASTY MOVE

By Monish Tourangbam, Research Scholar,

School of International Studies, JNU

The Iran-Pakistan-India (IPI) gas pipeline project, for which negotiations have been on for a long time, is back in the news again. With New Delhi deciding against joining the forming talks for some time now due to a host of security and economic reasons, Tehran and Islamabad have gone ahead to sign last of the series of agreements for implementing the project on a bilateral basis. The process to take this deal forward and keep the doors open for India was initialed last year by Pakistani President Zardari and his Iranian counterpart Ahmedinejad in Tehran on the sidelines of the tripartite Iran-Pakistan-Afghanistan Summit on Afghanistan’s security.

India is indeed in need of diverse energy sources to fuel its growing economy and wants to make haste with this project. Notwithstanding these concerns, New Delhi does continue to maintain its commitment to the trilateral venture, proposing trilateral technical-level talks in May to iron out the differences and attempt some sort of understanding. Its concerns mainly reflect differences of opinion regarding the safe delivery of gas and the pricing. Pursuant to reports, New Delhi is not satisfied with the sort of security mechanism offered by Tehran regarding the safety of delivery.

India wants Iran to take responsibility for the safe passage of gas through the Pakistani territory and would pay for the fuel only when it is delivered at the Pakistan-India border. On the other hand, Iran has put forth trilateral mechanism i.e. contractual provisions between the three countries to ensure safe delivery of gas to India. Under this system, New Delhi would have to pay for its share of gas even if the supplies were to be disrupted in Pakistan. Hence, Tehran has been insisting that ownership of gas would be transferred at Iran-Pakistan border while New Delhi wants it to be Pakistan-India border thereby making Iran explicitly responsible for safe delivery of gas.

New Delhi’s stance sounds logical looking at the current state of situation prevailing in Pakistan. In view of the acute security situation and the cold vibes in current India-Pakistan relations, New Delhi certainly wants some concrete in-built assurances to ensure value for money and a safe delivery of energy. Add to this, the all-too inherent geo-political constraints for New Delhi when it comes to doing business with Islamabad. The internal situation in Pakistan is not welcoming for materialization of such an ambitious project with high stakes involved in terms of profitability and loss.

The Pakistani economy and the domestic scenario do not have a semblance of stability, with the Government and the military largely busy in dealing with the over-arching influence of the Taliban. India-Pakistan relations have failed to substantially take off after the 26/11 Mumbai attacks and this reflects poorly on the prospects of the deal. India is wary of security of the pipeline in the Pakistani territory, particularly in Baluchistan province. It fears that Islamist terrorists might resort to sabotage and pressure tactics possibly holding the pipeline hostage and even cutting supplies.

Besides questions over the security and safety of the pipeline in the Pakistani territory, differences over the pricing of the gas have also made India hesitant and hence stalled the trilateral venture. According to New Delhi, Iran had originally priced its gas at US $3.2 per mBtu but later in 2007 revised the rates to US $ 4.93 per mBtu at US $60 a barrel crude oil prices, which was accepted by India. Last year, it again revised it and according to it, the fuel will cost New Delhi US $ 8.3 at US $ 60 per barrel oil price at Iran-Pakistan border. Added to this would be a minimum of US $ 1.1-1.2 per mBtu towards transportation cost and transit fee that India would have to pay for wheeling the gas through Pakistan. Accordingly, gas from the Panna/Mukta and Tapti fields in Mumbai offshore fetches the maximum US $ 5.70 per mBtu, while Reliance Industries' Krishna Godavari basin gas has been priced at US $ 4.20 per mBtu if crude oil price was US $ 60 or more.

Looking at the source reports and the current statistics, the deal seems to be poor economics because it would be the most expensive fuel in the country. If the trilateral talks do take place next month in Tehran as proposed by India, we need to wait and watch the outcome of the negotiations because presently, the deal in addition to the security concerns does not seem economically feasible. This is an ambitious project spanning three countries and importantly arch rivals, India and Pakistan, would have to function in concert for its viability and sustenance.  Moreover, if the project does go ahead in a trilateral fashion, New Delhi would certainly raise eyebrows among some friendly countries and would have to provide justification going ahead on a deal with a country like Iran, which is on the verge of facing serious sanctions in regard to its controversial nuclear programme.

 As such, it is expected that the Indian policymakers would consider all pros and cons before jumping in to go ahead with the deal. As of now, there are some rather serious impediments on the way which need to be sorted out for the process to be streamlined. India and Iran share interests on a host of other issues, including the security of Afghanistan and energy commerce. The convergence and the communication between New Delhi and Tehran has been kept intact despite the fact that India votes against Iran at the International Atomic Energy Agency (IAEA). This reflects the maturity and the diverse nature of the relationship, to weather differences in some issues and move ahead with comprehensive relationship. 

On the other hand, relations between India and the United States in recent times have moved by leaps and bounds and New Delhi would need to seriously consider whether to jeopardize this relationship. It is amply clear that the US is uneasy with the idea of the IPI pipeline and in all occasions has made clear its displeasure with providing any source of strength to the Iranian regime. As the UN Security Council members draft new sanctions against Iran, Washington has expressed its concerns on the Iran-Pakistan pipeline deal. It would have to be seen how Washington unravels its policy towards the current move by Pakistan, a country where the Obama administration has invested heavily in its fight against terrorism.

It is not hard to discern that New Delhi does not want to disrupt the recent thaw in US-India relations by signing the deal that would provide a source of revenue to Tehran. But at the same time, New Delhi would not want to be portrayed as lacking the backbone to follow an independent foreign policy. Thus, the Manmohan Singh government needs to walk a tight rope and be sure of what the deal provides India and what it has to sacrifice in return. Lately, Pakistan has come forward and offered to ensure the safety of delivery in its territory, thus reflecting the economic importance that India has to offer in this deal. --- INFA

(Copyright, India News and Feature Alliance)