India to make fresh proposals on Iran pipeline

Pranab leaves for Tehran today for joint commission meet and though concerns remain over the cost, project structure and security of the gas pipeline, Indian officials say India intends seriously to pursue the project...

31 October 2008
The Hindu

India to make fresh proposals on Iran pipeline

Siddharth Varadarajan

New Delhi: Falling oil prices and the successful conclusion of the Indo-U.S. nuclear agreement have come together to produce a renewed Indian interest in the $7.4 billion natural gas pipeline from Iran.

According to senior officials, External Affairs Minister Pranab Mukherjee, who departs for Tehran on Friday for the 15th meeting of the India-Iran Joint Commission, will carry with him a new set of proposals aimed at addressing the few outstanding concerns still remaining over the cost, project structure and security of the Iran-Pakistan-India pipeline.

The discussion India and Iran will have on the pipeline will build on the issues touched upon by both sides in their exchange of ‘non-papers’ earlier this year. During the visit to Delhi of Iranian President Mahmoud Ahmadinejad on April 29, India has drawn Tehran’s attention to a number of its concerns. The Iranian side replied to these concerns in July but matters did not progress any further as the Manmohan Singh government was wary of provoking the Bush administration at a time when Washington’s help was needed in the Nuclear Suppliers Group.

In its non-paper, Iran identified, for the first time, phases 19, 20 and 21 of the South Pars offshore gas field as the source for the gas to be fed into the IPI pipeline. Iran also said it was willing to examine a trilateral arrangement for the delivery of gas to India on the Pakistan-India border, as the Indian note had suggested.

In the absence of active Indian interest in the project, Pakistan has been suggesting running the pipeline northwards into China. But the Iranians are keen to reach agreement with India.

Among the specific ideas India intends to discuss with Iran on November 1 and 2 are the role that cross-investments in both upstream and downstream projects in all three countries could play in fostering co-dependency and confidence in the project. In addition, India would like to explore the possibility of Iran undertaking to provide alternative fuel to IPI gas-fed downstream projects in India in the event of supply disruption for any reason.

“The project is viable and good but the hype about a ‘peace pipeline’ has meant that we haven’t really been hard-nosed about the commercial details,” a senior Indian official told The Hindu. But given the country’s growing energy needs, India intends seriously to pursue the project, the official said.

If the passage of the NSG exemption and the 123 Agreement has eased some of the diplomatic pressure the Manmohan Singh government was feeling, the recent fall in oil prices is seen as strengthening the country’s negotiating hand on the prickly question of gas tariffs. With oil prices set to rise eventually as the world slowly pulls out of recession, India has a limited window to take advantage of.