India to Proceed With Natural Gas Pipeline

By John Lancaster
Washington Post Foreign Service
Tuesday, September 27, 2005

NEW DELHI, Sept. 26 -- Despite objections from Washington, India is moving ahead with plans to import natural gas by pipeline from Iran and hopes to have a deal signed by the end of the year, the government's top energy official said Monday.

Mani Shankar Aiyar, the minister of petroleum and natural gas, described the $7 billion project as vital to India's energy security and to sustaining high rates of economic growth in this rapidly developing nation of more than a billion people, whose domestic energy resources fall far short of its needs.

"There is simply no other way in which any other interested party could help us meet our energy needs," Aiyar said of the project to build a pipeline from Iran to India via Pakistan. "We are desperately foraging for energy wherever we can get it."

Aiyar's comments in an interview here came at a delicate time in India's relations with Iran, with which it has long been on friendly terms. On Saturday, India reluctantly joined the United States in voting at a meeting of the International Atomic Energy Agency in Vienna for a resolution finding that Iran had violated its treaty obligations by secretly developing a nuclear program.

India's decision to back the resolution, which followed intense lobbying by the Bush administration, reflected the generally improving state of its relations with the United States following decades of Cold War hostility. More specifically, analysts said, the vote reflected India's desire to preserve a recent accord with Washington on the sharing of civilian nuclear technology that still must be approved by Congress.

But Aiyar, a Cambridge-educated former diplomat and stalwart of the ruling Congress Party, expressed confidence that India's vote against Iran on the nuclear issue would have no bearing on the future of the 1,700-mile pipeline.

"Since it's a relationship that goes back 5,000 years, I don't think glitches of an occasional kind are going to unsettle the essential stability of that relationship," he said. "I would hope that nothing has changed and we can go forward on the path that we've already charted."

India's historically cordial relations with Tehran reflect, in part, its large population of Shiite Muslims. Over the last several years, however, India has signed a number of commercial, scientific and military agreements with the United States. The improving ties reflect India's growing economy and democratic tradition as well as its perceived value in Washington as a strategic counterweight to China.

As for Washington's objections to the pipeline, Aiyar said, "we are aware of U.S. concerns and we trust the U.S. is aware of our energy requirements, and on this happy basis I trust we can move forward."

U.S. officials have warned that the pipeline project could trigger sanctions under a law aimed at discouraging foreign companies from doing business with Iran, which they accuse of sponsoring terrorism and operating a clandestine nuclear weapons program.

They note, however, that the project is still in the realm of the hypothetical, since it depends to a large degree on further progress in peace negotiations between India and Pakistan, historic rivals that have already fought three wars. It is not clear that Pakistan could guarantee the security of the pipeline, which would transit the restive desert province of Baluchistan on the border with Iran.

Aiyar acknowledged that the project is "necessarily fraught with risks" but said all three partners -- Iran, India and Pakistan -- have strong incentives to see it through. Aiyar noted that India has hired the accounting firm Ernst & Young to act as a consultant on the deal and expressed hope that the three governments would sign an agreement by the end of the year, "which would really signal serious business."

India is already the world's sixth-largest energy consumer; in order to sustain economic growth rates of between 6 and 7 percent a year, it would need to increase its energy use by about 4 percent annually, according to independent estimates.

In the face of skyrocketing oil prices, India is increasingly looking to satisfy its energy needs with natural gas, the demand for which is projected to more than double by 2025, according to Aiyar. Some will be produced domestically, and some will arrive in tankers in liquefied form.

But the key to India's long-term energy security, Aiyar said, will be pipelines from Turkmenistan, Burma and Iran.

"If the energy requirements of the Western world grew exponentially with the growth of their economies, how can it be different for fast-growing Asian economies?" he asked. Aiyar said that while the U.S. offer to share civilian nuclear technology can make an important contribution to meeting India's energy needs, "nuclear power cannot substitute for the role that natural gas must play in our economy."

© 2005 The Washington Post Company