Yes, that pipeline is too risky

The word from the economist and the prime minister

He got that right, and his energetic petroleum minister agreed.

If an international consortium of bankers cannot be convinced to underwrite the Iran-Pakistan-India gas pipeline, there is even less reason for the Indian government to sink as much over $7 billion of taxpayers money into a risky venture, when there are less risky, and economically sound alternatives.

Washington Post: Can you discuss India’s discussions with building a gas pipeline with Iran?

(Prime Minister Manmohan) Singh: As far as the pipeline is concerned, only preliminary discussions have taken place. We are terribly short of our energy supply and we desperately need new sources of energy. And that’s why with Pakistan we have agreed to explore the possibility of the pipeline. But I am realistic enough to realize that there are many risks, because considering all the uncertainties of the situation there in Iran. I don’t know if any international consortium of bankers would probably underwrite this. But we are in a state of preliminary negotiations, and the background of this is we desperately need the supply of gas that Iran has. [WP]

The pipeline project is by no means dead, but has been dealt a strong blow. Among his domestic critics, his Communist allies, unsurprisingly, blame him for succumbing to American pressure. The only fault the opposition Bharatiya Janata Party could find was that he hit his own wicket. The Acorn applauds Dr Singh’s honesty, but is dismayed that he did not cite insurgency in Balochistan and Pakistan’s domestic instability as major risk factors.

The Pakistanis, meanwhile, are torn between blaming this as a cave-in to American pressure and as a negotiating tactic to extract greater concessions from Pakistan and Iran. They cannot be blamed, for both are plausible. But neither of them could have caused the Indian prime minister to say what he said. Not when he underlined India’s desperation to secure energy supplies.

It is more likely that he was stating a simple fact. One that India may have used rather cleverly in its negotiations with the United States, as indeed in its negotiations with Pakistan.

Update: Srirangan of India-Defence points out an interesting angle.

3 thoughts on “Yes, that pipeline is too risky”

  1. Pingback: The Indic View
  2. The risks are not new, and it is not as if Dr Singh and/or Mr Aiyar have suddenly come alive to their existence. Dr Singh talking about the risks in Washington should be seen in the perspective of his being hosted so perfectly by the United States. In the aftermath of all the euphoria over the US making concessions (unimaginable until recently) to India, the PM could not then snub his hosts in public. But it means little beyond that – explaining our stand and perhaps gaining some negotiation muscle.

    India has made it clear in the past that the security of the pipeline is the responsibility of Iran and Pakistan. On India’s part, she will buy every ounce of gas that is contracted for. Iran and Pak should ensure that every contracted ounce reaches our border, or else we should be appropriately compensated monetarily via international guarantees. If we do not get those guarantees, we will not go ahead anyway.

  3. India has made it clear in the past that the security of the pipeline is the responsibility of Iran and Pakistan…Iran and Pak should ensure that every contracted ounce reaches our border, or else we should be appropriately compensated monetarily via international guarantees. If we do not get those guarantees, we will not go ahead anyway.

    Kiran,

    I think that is a very good commercial negotiating position for any buyer to take. And I think India is doing a fairly good job on the terms and conditions of the pipeline project.

    My opposition is to the pipeline project itself (vs other alternatives to bring gas from Iran etc). If indeed India does go ahead with this project, the only hope is for brilliant execution to provide some kind of a saving grace. But enforcing international guarantees — that too from such countries as Pakistan — well, all the best ๐Ÿ™‚

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