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UPA to go slow on Iran gas pipeline

By Sheela Bhatt and S Kumari in New Delhi
May 21, 2007 21:12 IST
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The government has put on hold the signing of the Iran-Pakistan-India pipeline deal, pending the conclusion of the 123 nuclear agreement with the United States.

The directive from 'above' has come to the petroleum ministry on the eve of the departure of the Indian delegation to Tehran for a decisive last round of the trilateral negotiations scheduled to be held there later this week.

Highly placed sources expressed satisfaction that the trilateral negotiations involving India, Pakistan and Iran have advanced to a stage when the signing of the pipeline deal is entirely within the realms of possibility, in the very near future.

They reiterated the statement by Petroleum Minister and Natural Gas Minister Murli Deora during his visit to Tehran last month anticipating the possibility of signing the long-awaited pipeline deal latest by the end of June.

The Indian minister arrived in Tehran on an unannounced visit during a regional tour.

Following talks with his Iranian counterpart and his call on President Mahmoud Ahmedinejad, Deora expressed optimism that he didn't expect any hitch in signing a full sale-and-purchase agreement.

The Tehran Times quoted Deora as saying, "The commercial agreement is nearly complete -- we're working very seriously."

The minister added that Pakistan Prime Minister Shaukat Aziz had assured the Indian government during his visit to New Delhi for the SAARC summit meeting in April that Pakistan would be applying tariff for the transit of the Iranian gas through its territory in full in conformity with international norms.

Deora revealed that the long-term nature of the sales contract would allow a price 'around the $5 per one million BTU' levels.

"We are working it out now. It's a long term agreement and it should be at a correct price. A price of $6 per one million BTU is definitely too high," he observed.

Another round of talks with Pakistan has since taken place.

A high-level source told that the petroleum ministry sought the go-ahead from the government for signing the commercial agreement.

It was at this stage that the dictate from the top arrived and confidentially counseled the petroleum ministry to defer any signing of the agreement at the present juncture when the so-called 123 agreement with the United States in relation to the Indo-US nuclear deal happened to be at a sensitive stage of negotiations.

The petroleum ministry was given the indication of a timeline of end-June for the successful conclusion of the current stage of negotiations with Washington over the 123 agreement.

The expectation is that the hurdles in the conclusion of the 123 agreement need to be addressed at the political level. US President George W Bush and US Secretary of State Condoleezza Rice had telephoned Prime Minister Manmohan Singh in recent weeks stressing the urgency of concluding the 123 agreement.

In this connection, the meeting between Manmohan Singh and Bush on the sidelines of the G-8 summit in Berlin in the second week of June is invested with high political significance.

The two leaders, who seemingly enjoy close personal rapport, are expected to inject a new momentum into the negotiations over the nuclear deal.

Former ambassador and an expert on Iran, M.K.Bhadrakumar told, "Evidently, the UPA (United Progressive Alliance ) government finds itself caught between a rock and a hard place. It is keen about the nuclear deal, and is treading softly, hopeful of an accommodative attitude by the Bush administration. At the same time, it also wants Iranian gas but is nervous about annoying Washington."

Sources estimated that Iranian government was unlikely to move forward on the 25-year 5 million tonne per annum LNG deal with India signed in June 2005, unless there was progress over the gas pipeline deal.

The Iranian government is yet to give formal approval to the LNG deal. Differences have arisen over pricing.

This, in turn, has also virtually stalled the proposed integrated LNG project in Iran by the Indian Oil Corporation, which was negotiated during the NDA government and signed by the UPA government in November 2004.

Importantly, the Iranian government has proposed three alternative formulae to Deora during his discussions in April in Tehran. These are under consideration in Delhi.

Meanwhile, comes the 'go slow' decision on the gas pipeline agreement and its linkage with the 123 and the Indo-US nuclear deal.

Bhadrakumar, who recently visited Iran, pointed out, "If this 'go slow' report is correct, then, we'd be stalling at a time when China is all set for signing a contract for the development of North Pars fields in Iran, containing 80 trillion cubic feet of natural gas, when southern European countries count on sourcing Iranian gas for their Nabucco pipeline project, and when Iran is probing another gas pipeline via the Caucasus and the Black Sea to the central European market."

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Sheela Bhatt and S Kumari in New Delhi

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