Disagreeing over the price of gas over the USD 7 billion 2100 kilometer Iran-Pakistan-India Pipeline, India, Pakistan and Iran agreed to try one last time to break the impasse by appointing an international consultant to recommend a pricing plan. Iran has been demanding a price that is linked to crude oil while India and Pakistan have insisted on a price band with a floor and ceiling level. Iran says that the two buyers are only offering “half the price” it wants.
Pakistan is exploring both a bilateral and tri-lateral approach to see if Iran will give it undue benefits that it may not give India. The reasoning is that Iran may be peeved with India’s vote against its nuclear program and is therefore playing hardball. The other reason is for Pakistan to go ahead with the deal even if India does not join for whatever reason—the nuclear vote or US pressure to stop dealing with Iran.
Iran thinks that it can sell to other customers such as Europe but US pressure will prevail and the EU will not dare violate those diktats that India may. However, India does have other sources in Turkmenistan and Qatar which is what the US wants it to do. These sources may be more expensive to implement but are probably more reliable and secure.
Iran wants USD 1.20 per Million British Thermal Unit (MBTU) and USD .40 per MTBU for processing while India and Pakistan have suggested USD .30 for gas and USD .20 for processing. Iran’s linking of gas prices to crude oil retailing at USD 60 a barrel makes the price USD 7.2 per MBTU or 60% more that what India is willing to pay. Iran’s gas pricing linked to Brent crude oil with a fixed escalating cost component (10 per cent of Brent crude oil plus a 3 per cent annual escalation) works out USD 7.2 per MBTU while India is willing to pay up to USD 4.25.
The consultant would be required to submit a report within 4-5 weeks after which the three nations will meet again in Tehran.
