INDIA/IRAN: Course Correction

Published on IPS, by Praful Bidwai, May 2, 2008.

NEW DELHI, May 2 (IPS) – Relations between India and Iran, which deteriorated over the past three years from traditional friendship and warmth into mutual suspicion and tension, have started looking up again.

This development has significant implications for India’s role in West Asia and Central Asia as well as ties with its new ’strategic partner’, the United States.

Iranian President Mahmoud Ahmadinejad’s one-day visit to New Delhi on Tuesday is expected to kickstart talks aimed at reviving long-stalled contracts for the purchase of natural gas, and at improving cooperation in a number of areas, including industry, communications and trade.

This was the first visit to India by an Iranian President since January 2003 …

… India has agreed to help Iran build a crucial 600-km rail link in the north-south corridor of the proposed Trans-Asian Railway project. This will run from the Iranian port of Chabahar to Fahraj, and through Azerbaijan and Russia all the way to St Petersburg.

India is already constructing a road link between Zaranj and Delaram in Western Afghanistan, which will be linked to a transit corridor to Chabahar, which is close to India’s upper West coast.

This will enable India to trade with Afghanistan while bypassing Pakistan, which is reluctant to grant it India transit rights.

Other projects — including metallurgical industries, gas liquefaction and port development — are also under discussion. India is being offered large contracts in Iran for laying railway tracks, supplying electrical equipment, and upgrading railway signalling systems and train operations.

However, what of the crucial Iran-Pakistan-India pipeline? Ahmadinejad expressed the hope that the three countries’ petroleum ministers would reach an agreement on the project within the next 45 days.

But India’s Foreign Secretary Shivshankar Menon was more cautious and said a “lot of work” needs to be done to ensure that the pipeline is commercially viable and secure, and that gas supply is not interrupted.

However, it is clear that India sees the pipeline as a “confidence-building measure”, not just a commercial project.

“Yet, that does not mean that the project will go through without major problems,” says a high official in India’s petroleum ministry, who requested anonymity under briefing rules. “At least three issues need to be resolved. First, India wants a dedicated gas field to be nominated for the project, with detailed development plans. Second, India wants custody of the gas only at the India-Pakistan border, and not at the Pakistan-Iran border near Gwadar, as proposed.”

Adds the official: “And then there’s the issue of pricing of the gas. India, Iran and Pakistan reached an agreement in January last year on the base price. But Iran wants any future price revision based on a shifting band, not a fixed one. This may not be acceptable to major consumers of gas in India, who can only pay a limited price for fuel in power generation.”

None of these problems is insuperable but most agree that political will is needed to resolve them. (full text).

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