The Hindu Business Line : Iran-India pipeline project confronts 2 obstacles

US pressure
"The project confronts two major obstacles, the most obvious one being the huge American pressure against the deal. As long as Iran and the US remain deadlocked over the nuclear dispute, this pressure is unlikely to abate."

Chennai May 15 During his recent trip to West Asia, the Minister for Petroleum and Natural Gas, Mr Murli Deora, and the Iranian President, Mr Mahmoud Ahmadinejad, both reaffirmed their commitment to the Iran-India natural gas pipeline, a deal that was signed in June 2005.

But these "declarations of goodwill" should not be credited with much importance, according to Mr Roger Howard, UK-based author of Iran Oil: The New Middle East Challenge to America, among other books.

He said, in an exclusive interaction with Business Line, that the declarations are superficial and hide the obstacles that lie in the project's way.

US pressure

"The project confronts two major obstacles, the most obvious one being the huge American pressure against the deal. As long as Iran and the US remain deadlocked over the nuclear dispute, this pressure is unlikely to abate."

Mr Howard said that though Mr Deora and Indian leaders might talk about realising the deal, to actually go ahead with the project in the face of intense US lobbying "would be a brave act. India just can't easily dismiss the threat of facing US political and economic retaliation."

He cited the fate of Japanese interest in the South Azadegan oilfield.

"Tokyo was under huge pressure from the US not to proceed. So, the Japanese consortium that won the upstream contract in 2004 did not commit itself: It spun out negotiations for as long as possible and then made an excuse to play for more time, until an exasperated Iran cancelled it."

The other obstacle, albeit a much less important one, is that of pricing.

"In sharp contrast to oil, whose price is usually determined by the open market, the cost of LNG (liquefied natural gas) is fixed by mutual agreement. And determining this price has proved highly contentious elsewhere," he said.

"It looks like similar issues may mar the Iran-India link and considerably complicate matters."

Recent reports said that Iran had decided to ask for more money - at least $5.1per million British thermal unit instead of the agreed $3.2.

Despite these hurdles, there are three factors that may push New Delhi towards Tehran while ignoring US demands, according to Mr Howard.

"One is the state of internal Indian politics. Another is concern about meeting future energy requirements and the perceived lack of alternative supplies. Finally, there is the countdown to US Presidential elections next year."

On "artificial" international crude price spikes, Mr Howard said that the issue could be better understood from a psychological angle.

"When everyone becomes afraid, their fear can easily turn to panic. Fears work on each other and starts multiplying, because fear is about self-preservation."

He added: "Apply this to the oil markets and international crude prices become `artificial' in the sense that markets panic, traders easily assume the worst when they hear bad news and this leads to price `blips' - rates soaring right up and then crashing right down when it turns out that the fears were unfounded."

More Stories on : Petroleum | Politics | Infrastructure

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page