The Iran-Pakistan-India gas pipeline talks have not been derailed, insist officials taking part in the tripartite meeting last week in New Delhi. However, for the $7 billion Asian pipeline pipedream to become a reality, they needed to overcome the logjam on gas pricing. Unable to achieve an agreement on the issue they formed a committee (another one) to choose a global consultant to find a way out of the quagmire. India wants to import 90 million standard cubic meters of gas per day from Iran through the 2100-km long pipeline while Pakistan has indicated a requirement of up to 60 mmscmd.
Iran had forwarded a gas pricing formula wherein the gas price is linked to Brent crude oil with a fixed escalating cost component (10 percent of Brent crude oil). The formula translates into a price of $7.2 per million British thermal units (mBtu), with a three percent annual escalation. Both Pakistan and India have rejected this price formula and are looking for gas at “affordable prices”. Although there was some flexibility in its earlier Indian stand of paying not more than $4.25 per mBtu price of gas delivered at its border, it fell short of the Iranian expectations.
Besides the Brent linkage, the Iranian formula does not prescribe a floor and ceiling for the gas price. “New Delhi was opposed to both linkage with Brent crude oil and absence of floor and ceiling,” an Indian official was quoted as saying. Pakistan also rejected the Iranian pricing formula.
To even a common man, it is becoming all the more evident that despite the diplomatic language, serious impediments are afflicting the project. The fact remains that under immense American pressure, the political will for the project appear fading - at least for the time being. Parties appear gaining time, watching from the sidelines the result of the US-Iran moves on the geopolitical chess board. The pipeline is hinged on the outcome of this game, analysts concede.
The US has not made any secret of its opposition to the pipeline. It indeed wants to isolate and strangulate Tehran, politically and economically. And the pipeline stands in the way of achieving its stated objectives. And in the process, the US is using a stick and carrots policy.
Many now believe, the US-India nuclear deal was also an offshoot of this necessity to dangle out real carrot in front of New Delhi. That the deal was pursued despite serious reservations is an example of the Bush administration’s seriousness toward achieving its goals of keeping Indian away from Tehran as much as possible. Many now believe that Washington has succeeded in its efforts to a great extent and it is unlikely that any major development would take place on the issue, at least for the time being, unless Washington changes its perception of Tehran is very unlikely at present.
The US is also enticing Islamabad. Headed by the US energy secretary and his Pakistani counterpart, a joint US-Pakistan energy commission, announced while Bush was in Pakistan, that it already had its first deliberations. Then on the eve of the tripartite meeting, an offer was forwarded to Pakistan from Qatar. Interesting! Qatar reportedly reiterated its offer to supply oil and gas to Pakistan on favorable terms if Islamabad abandons the Iran-Pakistan-India gas pipeline project, Pakistani press reported.
The Qatari facility is a typical “American carrot for Pakistan to keep it away from transnational project of Iran-Pakistan-India gas pipeline,” an unnamed Pakistani official was quoted as saying. Already on throes of an acute energy crisis, the fast expanding Pakistan economy may start faltering in the wake of the energy supply problems, analysts are warning. It cannot wait and defer decisions on this front for long. “Even if one of the proposed pipelines kick-starts today, it could not be ready by 2009-2010, while the situation on ground indicates no chance of any pipelines materializing within the next three years,” a Pakistani official was quoted as saying.
With Iran ruling out to budge from its position on pricing, the Qatari offer to Pakistan looks even more attractive. Tehran indeed has reasons for not budging on gas pricing issue. Other consumers are willing to pay a “heavy price’’ for the Iranian gas, Hadi Nejad-Hosseinian, Iran’s deputy oil minister for international affairs told Petroenergy Information Network. He said Iran will not be able to satisfy the demand of European and South Asian customers and will have to choose whom it supplies.
“If we want to export to both destinations (India and Pakistan), then we will have to cut the volume (to other customers),’’ Nejad-Hosseinian said. Europe is asking for 100 million cubic meters (cm) of gas a day, while India and Pakistan need 150 million cm of Iranian gas, he said. However, there is a silver lining to this entire issue. Despite the odds, Iran is determined to become a major player in the world gas market and Tehran is seeking to increase its supplies to the European Union via Turkey through the planned “Nabucco” pipeline. And the EU is equally as keen to bypass Russia.
A group of companies, led by Austria’s OMV, plans to spend $5.8 billion to build the pipeline linking Western Europe to the Caspian Sea and possibly Iran and Iraq. The Nabucco pipeline is due to open in 2011. Pakistan on the other hand has stressed that it could even consider an Iran-Pakistan pipeline, in case India does not get on board. All is definitely not over yet. A way out of the imbroglio could still be found out, if the political will is there. And that seems to be missing now. If it is not derailment, what it is?