GEOPOLITIC: India, Iran to Discuss Pipeline. Ignoring US Fears

India, Iran to Discuss Pipeline, Ignoring U.S. Fears
Indian Prime Minister Manmohan Singh and visiting Iranian President Mahmoud Ahmadinejad will attempt to hammer out an agreement today on a delayed gas pipeline through Pakistan, dismissing U.S. fears the project may finance the Middle Eastern nation's nuclear program.

``There will be a proposed review that will be taking place which will discuss the price, review the price, certification and project structure,'' Manu Srivastava, director at the Ministry of Petroleum, said in a telephone interview from New Delhi yesterday. ``There are a lot of issues to be resolved.''

India and Pakistan need natural gas from Iran, with the world's second-largest reserves of the fuel, because a shortage of energy will curb economic growth. India last week rebuffed U.S. calls to push Mahmoud Ahmadinejad to end Iran's nuclear program.

``The success of the pipeline will depend on what cost the gas is made available at to the customers,'' said R. Venkatesan, head of the industry division at the New Delhi-based National Council for Applied Economic Research. ``If you take political considerations it is not worth it.''

India and Pakistan are resisting U.S. pressure to end talks on the pipeline, which they want to complete by December 2012 after a decade of delays. The Bush administration says Iran's nuclear program may be a cover for building weapons, a charge which the Islamic republic denies.

U.S. Concerns
The U.S. would ``counsel against'' the pipeline plan, State Department spokesman Sean McCormack said at a briefing in Washington yesterday.

``Given where Iran is in the international system, being under sanctions, and given its actions within the international system, is now really the time to conclude a pipeline deal with the Iranian government?'' he said.

The U.S. raises issues of international concern over Iran's behavior in areas including ``terrorism and their destabilizing actions in the Middle East,'' McCormack said.

Mahmoud Ahmadinejad is slated to meet his counterpart Pratibha Patil and Singh to discuss ``issues of mutual interest,'' the Ministry of External Affairs said in a statement posted on its Web site.

The pipeline's prospects will hinge on the pricing. India hasn't been able to agree with Iran on the price for the gas or the fees it will pay Pakistan for transporting the fuel, according to the Iranian Oil Ministry.

Gas Demand
``India is a market short of gas. The key question is how much gas at what price,'' said Nagarajan Narasimhan, head of research at Crisil Ltd., the Indian unit of Standard & Poor's. The Indian government may also seek assurances about the pipeline's safety across international borders, he said in a telephone interview from Mumbai.

Oil ministers from India and Pakistan agreed on the principles of the project, they said on April 25. The South Asian neighbors resumed talks on the 2,100-kilometer (1,300-mile) pipeline a month after a newly elected government led by Prime Minister Yousuf Raza Gillani took office in Pakistan.

Ministers discussed the transit fees, transportation costs and project structure, Srivastava said. ``There is a greater agreement on that,'' he said. ``We will be proceeding.''

The pipeline will in the first phase transport 30 million cubic meters of gas each to Pakistan and India and 45 million cubic meters each in the second stage.

India's current gas supplies of 85 million cubic meters a day, including imported liquefied natural gas, fall short of the potential demand of 170 million cubic meters, according to government estimates. Demand may quadruple to 400 million cubic meters a day by 2025 if the economy grows at the projected rate of 7 to 8 percent a year, the government says.

New Delhi Visit
Mahmoud Ahmadinejad will arrive in New Delhi at 4:30 p.m. local time from Sri Lanka's capital, Colombo, and leave for Iran at 9 p.m., the Indian External Affairs Ministry said. Mahmoud Ahmadinejad and Pakistan's President Pervez Musharraf ``resolved all issues'' related to the pipeline project when they met yesterday in Islamabad, the official Associated Press of Pakistan reported.

In Sri Lanka, Mahmoud Ahmadinejad signed six agreements with his counterpart Mahinda Rajapaksa, including one for providing financial assistance for the expansion of the Sapugaskanda oil refinery, an e-mailed release from the government said.

Source: Bloomberg|by Jay Shankar

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