- The Washington Times - Tuesday, March 15, 2005

NEW DELHI — The United States is raising objections to a proposed $4 billion gas pipeline running from Iran through Pakistan to energy-hungry India, an issue likely to arise during a visit this week by Secretary of State Condoleezza Rice.

India sees the so-called “peace pipeline” project as a boost in its rising competition with China for energy resources and as a way of fostering economic cooperation with its historic rival Pakistan.

But the United States, at odds with Iran over its nuclear program, has warned India that if it proceeds it could run afoul of the Iran-Libya Sanctions Act, which empowers President Bush to order punitive measures against any international company that invests more than $20 million a year in Iran’s energy sector.

U.S. Ambassador to India David Mulford said on Saturday that he had raised the issue during a meeting with Petroleum and Natural Gas Minister Mani Shankar Aiyar.

At that meeting, he said, he explained “the U.S. government’s concern about Iran’s ongoing pursuit of weapons of mass destruction and support for terrorism.”

Those concerns are likely to be aired again when Miss Rice, on her first visit to the region, meets with officials in New Delhi and Islamabad this week.

India, which now imports liquefied natural gas by ship from Qatar, approved the project last month as part of a quest to meet the fast-growing economy’s rising energy requirements.

“China is ahead of us in planning for its energy security. India can no longer be complacent,” Prime Minister Manmohan Singh has warned.

The pipeline from Iran could be operational by 2011.

With domestic energy production stagnating, India also has launched a vigorous drive to get foreign companies interested in oil and gas exploration, an area in which the United States is happy to cooperate.

Mr. Aiyar made a pitch for investment at a recent conference in Houston attended by several oil majors such as Exxon Mobil Corp. and ChevronTexaco. There, he spoke about the prospect of the United States becoming the largest foreign investor in India’s oil and gas sector.

He reportedly has responded enthusiastically to Mr. Mulford’s offer to organize a meeting of the heads of U.S. and Indian energy corporations, and to write to Energy Secretary Samuel W. Bodman.

But the Indian Express newspaper reported that Mr. Aiyar would try to convince Mr. Bodman that India has “no choice but to seek gas from Iran” in the near term.

The pipeline project faces problems beyond U.S. opposition.

One is a surge of violence by rebels who have attacked a domestic gas pipeline and other facilities in Pakistan’s Baluchistan province bordering Iran.

Another is that industry analysts promise technological developments that will make the shipping of liquefied natural gas in tankers increasingly attractive.

“India would be using the natural gas basically for power and fertilizer plants, so there is the very real fear of what would happen if the gas supply were to be interrupted,” said Sunil Jain, managing editor for Business Standard magazine.

“No doubt piping gas is cheaper, but the cost of shipping [liquefied natural gas] is falling and it is seen as a safer alternative,” he said.

Last year, India and Iran signed a 25-year contract worth $20 billion to $30 billion for the supply of up to 7.5 million tons of liquefied natural gas, but the project will not become operational until 2009.

Iran now supplies gas only to Turkey, and despite Washington’s backing of the India-Pakistan peace process, it has made clear to both countries that they should move slowly on the pipeline proposal.

“America’s global interests will obviously take precedence over its policy for South Asia,” said New Delhi political analyst Balveer Arora.

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