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UPA should avoid double standards

No matter what the United Progressive Alliance government’s final call on the India-United States nuclear cooperation agreement, there is one other energy topic that must be prioritised as a ‘talking point’ when Prime Minister Manmohan Singh meets U.S. President George W. Bush on the sidelines of the G-8 summit meeting in Japan next month — the Iran-Pakistan-India gas pipeline project.

The Prime Minister must obtain Mr. Bush’s consent so that the UPA government can proceed with the IPI with the earnestness the project deserves. Even assuming that the nuclear deal is all about India’s energy security, it stands no comparison in the short and medium term with the contribution that the IPI can effectively make in meeting India’s energy needs at much lower costs.

By now, certainly, Dr. Singh’s initial apprehensions regarding the prospects of a financier sponsoring the IPI project — which he publicly voiced on American soil three years ago — would have been laid to rest. With oil prices soaring so high, any financier would grab a money-spinning energy project such as the IPI. That is, even if we are to disregard the Russian giant, Gazprom’s standing offer — repeatedly voiced — that it is deeply interested in undertaking the IPI including as an equity participant. With such massive volumes of Russian sovereign wealth available for investment abroad, we have no reason to disbelieve Gazprom’s offer. In an interview to the Reuters news agency in Moscow on Wednesday, Russian President Dmitry Medvedev (who served as Gazprom’s chairman from 2000 to 2008) reiterated that Moscow proposed to pursue a policy of “actively investing” its surplus funds in foreign assets and big projects that “help us to develop our economic relations with these countries.”

Rightly or wrongly, notwithstanding incantations to the contrary from time to time by our Petroleum Minister, a perception has grown that the UPA government cannot quite muster the political courage to push ahead the IPI project lest Washington should feel offended. Plainly speaking, all the excuses totted out by Indian officials still cannot adequately explain away their lackadaisical approach towards the IPI. Until recently, they cited the unrest in Pakistan’s Balochistan province as unnerving them. Then they pleaded that the regime change in Pakistan delayed them. A possibility now arises that with the Congress leadership and the UPA seemingly poised to press the pedal on the Indo-U.S. nuclear deal, IPI may further languish. American politicians have warned that the ratification of the 123 agreement by the U.S. Congress remains predicated on India’s conduct of its relations with Iran.

That is why it becomes important that, along with the nuclear deal, our Prime Minister talk to Mr. Bush also on the critical need of the IPI at such a time when India bears intolerable economic burdens ensuing from high oil prices. He must explain to Mr. Bush that IPI has a short gestation period in comparison with the nuclear deal. There is no conceivable reason why the friendliest U.S. President we have had will not see the point of our demarche.

After all, the Bush administration is gearing up to re-establish a diplomatic presence in Tehran after a 30-year gap — since the 1979 Iranian revolution. A necessary first step is being taken by Washington to meaningfully engage Iran. The Bush administration appears to have made up its mind to bequeath to its successor an Iran policy that is on even keel. Mr. Bush would be in a receptive mood, arguably, to Dr. Singh’s entreaties regarding the IPI.

There is also considerable urgency in this regard as time may be running out for the IPI. The present Iranian leadership of Mahmoud Ahmadinejad has placed a strong emphasis on energy cooperation with Asian countries. That was partly a matter of ideology, partly of geopolitics and also for want of an alternative when potential western partners kept away from Iranian projects under American pressure. All that may be about to change. An unprecedented national debate is unfolding in Iran regarding the directions and ideology of the country’s economic policies in the era of globalisation. In some ways, the debate was germane to the Iranian revolution 30 years ago and is belatedly gathering steam. But it also forms part of the “hotting up” of the political scene in Iran ahead of the presidential elections next year. Strong symbiotic links between the clergy and the bazaar have been a running feature of Iran’s political economy and under the present day requirements of coalition-building ahead of the presidential election, economic policies have become the stuff of noisy debate and political grandstanding by political factions.

Simply put, it is about time the UPA robustly pushed IPI (and the LNG project) through the window of opportunity that the Ahmadinejad government has kept wide open in the recent years. Iran’s oil sector is a gravy train and powerful vested interests vie for control over it. There is nothing much unnatural here for an oil-producing country. But what distinguishes the scene in Tehran is that while this is happening, the geopolitics around Iranian energy is also poised for a dramatic shift.

Two developments in the past week must alert us to the shape of things to come regarding Iranian energy exports. First, the Royal Dutch Shell has indicated that it may be looking to play a role in developing new pipelines to transport natural gas from the Middle East to Europe through eastern Arab and Levantine states. The executive vice-president of Shell’s gas and power division, John Mills, has assessed that the Middle East holds an estimated 40 per cent of the world’s gas resources and is likely to play a role in filling the European gas supply gap. He pointed out that countries such as Egypt, Jordan, Syria and Turkey could likely be part of facilitating the transit of that gas.

That is to say, the idea of an Arab gas pipeline is finally getting under way. The impetus is provided by the Nabucco gas pipeline project, which is expected to run from Turkey to Austria and beyond. But the problem is that figures aren’t yet quite adding up. Nabucco has a full capacity of 30 billion cubic metres (bcm). Azerbaijan’s export capacity remains unclear; Turkmenistan has no means of getting the gas to Nabucco; Iraq has made a pledge of 5 bcm; Egypt, Jordan, Lebanon and Syria — members of the Arab gas pipeline consortium — can together supply only 2 bcm for Nabucco.

Thus, increasingly, the European Union is facing the reality that Nabucco, which it nurtures with hope as a means of loosening Europe’s energy dependence on Russia, can become a reality only with a portfolio of gas supply sources that includes Iran. In other words, Europe, which has so far remained circumspect about energy deals with Iran, is having a rethink. In a major statement last week, the Managing Director of Vienna-based Nabucco Gas Pipeline International, Reinhard Mitschek, said: “We know that Iran would like to improve and increase transport capacity from the south to the north, from the South Pars fields to Tehran and also to the Turkish border. So I could imagine that Iran will offer natural gas for export to Europe to interested buyers … moreover, not only could Turkey act as a buyer of Iranian gas but also European companies may appear on the scene to buy Iranian gas … EGL [Swiss energy firm] has announced they are on the way … So other European companies will follow.”

He added: “As soon as a European gas buyer will contract gas from Europe, we will transport the gas through Nabucco. Iran announced recently that they are keen to construct IGAT-9, a pipeline from the South Pars field to the north to Tehran and finally to the Turkish border, and I could imagine that at a certain point of time … gas exports from Iran to Europe will take place. We have several statements also from the European Commission, Commissioner [Andris] Piebalgs and others that Iranian gas in the long term is an issue for Europe.”

Clearly, Europe, which is a huge guzzler — gas consumption stood at 500 bcm in 2007 and will increase to 700 bcm in the coming decade — can virtually absorb all the supplies that Iran can provide. That is why it is astonishing, to say the least, that our government has been adopting such a double standard on the IPI project. On the one hand, it cries from the rooftop regarding the imperative need of the Indo-U.S. nuclear deal for meeting the country’s energy needs. On the other, it shies away from advancing the IPI for fear of American politicians depriving it of the nuclear deal.

(The writer is a former ambassador belonging to the Indian Foreign Service.)

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