Iran uses energy diplomacy to fend off isolation

IslamabadIran-Pakistan-India (IPI) gas pipeline - A 7-billion-dollar Iran-Pakistan-India (IPI) gas pipeline is planned mainly to meet the energy needs of the two South Asian neighbours, but it could also help Tehran break out of US-instigated international isolation over Iran's controversial nuclear programme.

This appears to be the objective that brought Iranian President Mahmoud Ahmadinejad this week on brief visits to Islamabad and New Delhi to press both government to go ahead with the 2,600-kilometre gas pipeline that will initially carry around 60 million cubic metres of gas from Iran's South Pars field to Pakistan and India.

Analyst and a retired army general Talat Masood said the IPI project would improve Iran's strategic position in South Asia, where it was set to emerge as a main energy supplier.

"And this will help Iran in breaking out of the international isolation the US is trying to impose on it," he added.

Anticipating this, Washington has already exerted influence on New Delhi to withdraw from the project, saying it would breach the US Iran and Libya Sanctions Act of 1996 that forbids more than 20 million dollars of investment in Iranian oil and gas projects.

Instead, it has offered India a lucrative nuclear deal and favoured an alternative gas pipeline from Turkmenistan through Afghanistan and Pakistan.

Despite soaring demand for gas that stands at 280 million cubic metres per day against 190 million cubic metres per day production, India halted the IPI talks for almost one year, citing security concerns in Pakistan and the unresolved issues of transport tariff and transit fees with Islamabad.

But it hurried back to the negotiation table last week as soon as Pakistani President Pervez Musharraf offered China to replace India in the project.

"We have reached agreement on the principles on which, we hope, the project can go ahead," India's Oil Minister Murli Deora told reporters last Friday after meeting his Pakistani counterpart Khwaja Asif in Islamabad.

He dismissed US concerns, insisting his country had not been contacted by Washington on the issue. "It's their problem, and we do not know about that."

Two days later, Ahmadinejad stopped over briefly in Islamabad en route to Sri Lanka and announced the removal of all hurdles to a final agreement with Pakistan on the pipeline that was conceptualized in 1989 and is now planned to be completed in 2012.

He also welcomed Chinese interest in the IPI project, a move analysts believe is mainly devised to put pressure on India, which considers Beijing as its traditional rival and an economic competitor in the region.

Many experts, however, doubt the viability of the project.

"A gas pipeline from Pakistan to China will run through the Himalayan range at a height of about 4,500 metres and its construction is definitely a costly business," said Faisal Bari, professor of economics at Lahore University of Management Sciences.

However, Ahmadinejad sounded optimistic about Indian participation in what he called a "pipeline of peace and brotherhood" after his talks in New Delhi, where he was on a six-hour transit on Tuesday evening on his way home from Colombo.

All pending issues and agreements would be finalised within 45 days and "given to the leadership of the three countries. Afterwards we will decide," he said.

Apart from the lingering issue, Ahmadinejad also discussed a deal under which five million tons of liquefied natural gas (LNG) is to be exported to India.

Signed in 2003 during Iranian President Mohammad Khatami's visit to India, the 22 billion-dollar proposed project has run into snags apparently because of differences over the cost of gas.

Earlier in Sri Lanka on Tuesday morning, the Iranian president inaugurated the expansion plan of an oil refinery on the outskirts of the capital Colombo.

The 700-million-dollar project is largely funded by Tehran and it will triple the country's refinery capacity to 150,000 barrels per day from the current 50,000 barrels.

However, bad weather hampered the inauguration of the Iranian- funded 450-million-dollar Uma Oya hydro project, which once completed will add 100 megawatts to Sri Lanka's national grid.

"All this shows that Iran has targeted South Asia for its economic expansion," said Masood.

After feeling the heat from the West on the nuclear issue, the Iranian leadership is now looking towards the east for comfort, he added. (dpa)