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The energy route to peace

The establishment of a joint working group on energy cooperation marks a new high in the development of bilateral relations between India and Pakistan. Having wisely set aside its political objections to the pipeline, India needs to sort out a whole raft of economic and financial issues with both Pakistan and Iran. The cost of gas at the well-head is a major issue for New Delhi and Islamabad, and one which the two countries will jointly have to tackle for maximising their individual gains. Transit fees are another issue that will require careful negotiation. Eventually, trilateral discussions involving Iran will be needed to settle questions of security, insurance and infrastructure finance. An obvious factor to be taken into account is the United States' publicly expressed opposition to the project. However, despite the existence of domestic laws such as the Iran-Libya Sanctions Act, Washington will not find it easy to sabotage the proposed pipeline or block international sources of funding. Japan, for example, has successfully resisted the Bush administration's pressure to walk away from the Azadegan oilfield project. As long as India and Pakistan remain firm on their right to conduct business with Iran, the U.S. will have to back off.

The Iran-Pakistan-India pipeline is, of course, only one of a number of projects that New Delhi needs to push ahead with in order to tackle the growing mismatch between domestic energy production and consumption. By 2025, India's gas deficit is likely to be more than 200 million metric standard cubic metres a day (mmscmd). Imports from Iran via Pakistan will help narrow the gap but the country will also have to tap additional sources as diverse as Myanmar, Qatar, Turkmenistan and the wider Caspian basin. During his talks with his Pakistani counterpart, Oil and Natural Gas Minister Mani Shankar Aiyar has suggested making India the final destination for the proposed Turkmenistan-Afghanistan-Pakistan (TAP) pipeline. The Turkmen idea was first floated during the Taliban's rule by an international energy consortium led by U.S. firm Unocal but could not find traction for obvious reasons. Today, however, the scenario is quite different. If New Delhi were to join TAP, it would give India and Pakistan an incentive to work together for bringing peace and stability to Afghanistan rather than working at cross-purposes there as they have done in the past. Notwithstanding Pakistan's insistence that the "stand-alone" Iran pipeline project will not be the harbinger of a broader set of economic linkages, the size of the venture is bound to generate positive externalities in every sphere. Creating mutual dependencies is the surest way of ensuring that India and Pakistan start living like normal neighbours. In the energy sector itself, India has asked Pakistan to remove diesel from its negative import list so that surplus diesel from north Indian refineries such as Panipat can be sold across the border. Given the absence of its own refineries in West Punjab, Pakistan would be foolish to demur.

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