India: India's Energy Suppliers: Questions on the IPI Gas Pipeline

2007

Dr Auriol Weigold

While the Indo-US nuclear deal faltered around issues of national sovereignty, will India's national interest lead to agreement with Iran (and Pakistan), to proceed with the gas pipeline project?

The strained relations between Iran and the US saw, in September 2007, an extension of the Iran Sanctions Act (ISA), (Congressional Research Service, ISA, 12 Oct 2007), and now include provisions to remove the Administration's ability to waive the application of sanctions on national interest grounds, as it did in the case of a pipeline project viewed as beneficial to Turkey, an American ally.

As the US regards India and Pakistan as allies, at least in the war against terror, the new sanctions provisos could prove very damaging in international relations terms, but so far US officials have only gone so far as to "expect" India to support the sanctions regime. Although American concern about the pipeline project has been expressed, and it has been called "unacceptable", no statement has yet been made (or made public), to the effect that the pipeline would be subject to sanctions.

There are also preliminary agreements with Iran for the construction of a petrochemicals plant near South Pars Gas Field with GAIL-India and Jaipan Industries (India), while the Turkish Petroleum Company has an agreement to transport Iranian gas to Europe, signed in July this year. The new provision disallowing the waiving of sanctions by the US should, theoretically, apply to both projects, as well as the IPI project. The interests at play here will be interesting to watch.

The construction of a gas pipeline from Iran to India through Pakistan seems likely to proceed although the three countries have yet to reach agreement on pricing (Daily Times, 21 Nov 2007), on pipeline security and its final route. India announced on 20 November that the pipeline project was being pursued and there has been no change to the estimated completion date in 2010.

The Asian Development Bank conducted studies in 2006 and concluded that the IPI project was economically viable for Indian gas imports. There are obvious concerns about the pipeline's security, but the global diplomatic hiatus that would result from India's national interests lying with Iran rather than the US is potentially disruptive across a number of fronts, and the outcomes difficult to predict.

WATCHPOINT: India's links with Iran are strong and of long standing. How will India balance this conflict of interest with the US?

 

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