India Intelligence Report

 

 

   Iran's Proposed Price Rejected

  In rare unity, India and Pakistan have rejected a proposal by Iran-appointed consultant with new pricing for the USD 7 billion Iran-Pakistan-India pipeline project because "certain parameters given by Iran, was not acceptable to India and Pakistan."
 

 

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In rare unity, India and Pakistan have rejected a proposal by Iran-appointed consultant with new pricing for the USD 7 billion Iran-Pakistan-India pipeline project because "certain parameters given by Iran, was not acceptable to India and Pakistan." Holding out hope and replying to a query in the Parliament, Minister for Petroleum Murli Deora said in a written reply that "The consultant has been given revised parameters to work out the gas pricing."

Iran appointed Gaffney Cline and Associates to work out a price formula for the gas Iran wants to sell to India and Pakistan after earlier negotiations collapsed over pricing and open-ended contracts that Tehran wanted contrary to the floor-ceiling contract desired by New Delhi and Islamabad. Deora did not specify what parameters were not acceptable, although reports indicate that Iran will ask the consultant to work out pricing based on projected future Liquefied Natural Gas (LNG) prices. India wants LNG prices based on past contracts but extrapolated to crude oil prices to be used as the benchmark. In the last trilateral meeting in August, Iran wanted a price equal to 10% of the Brent crude oil rice plus a fixed cost of USD 1.2 per million British Thermal Unit which India and Pakistan thought was excessive.

Not pinning its hopes on just this project, India is still searching for sustainable and reliable supply of energy. In a recent international seminar on energy and transport links between South Asia and Central Asia that brought together academics and policymakers, the consensus was that a commercial viability and energy requirements should determine the future of transit corridors and not geopolitics and power projection.

Underlining the tremendous scope for energy and transport linkages between South Asia and Central Asia, academics and policymakers from the region, participating in a major international seminar here, said commercial viability and energy requirements should determine the architecture of transit corridors rather than geopolitics and power projection. The recommendation of the participants seems to be anti-US and also a message to US opposition to politically inconvenient projects such as the IPI or Myanmar-Bangladesh-India project and politically motivated projects such as the Turkmenistan-Afghanistan-Pakistan-India pipeline or west-bound energy grids.

Additionally, there was a lot of support for India deepening its relations with the Shanghai Cooperation Organization (SCO) and bilateral/trilateral relations with China and Russia. They called on India and China to open traditional Himalayan routes through Ladakh and Xingjian and to transport power instead of hydrocarbons.

The problem with these suggestions is that it calls for trust and good behavior between nations that do not have any. Unless there is an economic protocol established where countries in the area agree to not deny access or disrupt supply to power or hydrocarbons, these proposals will never work.