/**SNAP Code begin **/ /**SNAP Code end **/

Friday, January 13, 2006

Dashed Pipeline?

The Blame Lies Elsewhere

Rediff reports that Petroleum Ministry may be rethinking IPI pipeline.
Apprehending adverse US reaction, India is unlikely to participate in building the $7-billion gas pipeline project from Iran via Pakistan and instead may prefer buying gas at its border...

The ministry feels that setting up of an international consortium - comprising of state-owned firms of the three countries and global energy majors - for construction and operation of one of the world's most valuable projects could be a non-starter due to political and legal opposition from the US...

The note says the full responsibility for ensuring safe and secure supply of gas to India would vest on Iran. Tehran would be solely responsible to ensure Indian supplies; arrange alternative supplies in case of disruption, and suffer penalties in case of supply disruptions.

Acron and theersa have argued it was a bad idea to begin with. Others have commented that India is bending to US will and is another example of spineless Indian foreign policy.

I think blame for this lies elsewhere - in Iran. Washington has for months, if not years, has been against this project because of its opposition to anyone trading with Iran. For India, from the inception of this idea, the problem was not Iran, but Pakistan and its habit of supporting terrorism in India. But India politicians wanted the project to move ahead, over the objections of Indian security analysts, for some intangible benefits of having closer economic ties with Pakistan.

The situation changed dramatically in the past month - not in Pakistan or in US, but in Iran. Iran stopped talking about working a deal with the Europeans with regards to its uranium enrichment program. Without a deal, it removed the seals of IAEA at nuclear sites and wants to move ahead with uranium enrichment program (apparently to make nuclear bombs, despite signing NPT). The Russian have made disapproving noises about the latest Iran's move. The Chinese are as usual quite - which means they want to get away with eating and keeping the oily cake. Europeans wants IAEA to refer Iran to Security Council. US agrees. Trade sanctions to complete economic sanctions are possible, likely within months, if the Chinese allow it.

Working towards the pipeline deal with Iran, under threat of U.N. Security Council sanctions, would be a disaster for the $7 billion project. And for India's future prospect of gaining permanent membership to UNSC. So the change of heart of petroleum minister Mr. Aiyer (and probably PM Manmohan Singh) after, probably, a "I told you so" from US ambassador.