Mixed signals

The visit by the Iranian president Hassan Rouhani to Oman last week marked the advent of post-modernism in the politics of Gulf region.

A new setting has appeared for the complicated multilayered relationships of immense cultural and political complexity and difficult current history playing out in the region. The transition is attributable primarily to the slow and steady reintegration of Iran with the western world following the commencement of direct talks between Tehran and Washington. The Gulf Arab regimes are called upon to make adjustment, having tapped into the US-Iranian hostilities through the decades since the Islamic Revolution in 1979.

Among the Gulf regimes, Oman is unique insofar as it throughout kept friendly relations with Iran despite strong US pressure. Paradoxically, the innate pragmatism in Washington prompted it to eventually solicit in great secrecy Oman’s help to prepare the ground for direct talks with Tehran. Unsurprisingly, Oman’s Sultan Qaboos bin Said was the first Arab dignitary whom Rouhani received in Tehran last August, and the Iranian president chose Muscat for his first visit to an Arab country.
The above backdrop is useful to know in order to put in perspective from an Indian viewpoint the agreement that has been signed last week in Muscat to construct an undersea gas pipeline connecting Iran’s Hormozgan Province with Oman’s Sohar port. On a parallel track, the two countries also sealed a 25-year deal valued at $60 billion for the sale of Iranian gas to Oman from 2015.

Delhi would marvel at the news drifting in from Muscat – a key American ally strikes a multi-billion dollar gas deal with Iran that will put a big hole into the tapestry of the US’s sanctions regime against Tehran and yet Washington could do nothing to stop it. How could a tiny country (population: 3 million) like Oman show the thumb at Uncle Sam who keeps arm-twisting the Indian leadership with such delectable ease to force Delhi to atrophy ties with Tehran?

Curiously, even as the gas pipeline deal was being concluded in Muscat, Delhi received a ‘top energy official’ from Washington who came to remind India that it needs to cut down its crude oil imports from Iran by two-thirds so as to comply by July with the prescribed quota (195000 bpd) set by the US for the quantum of its six-monthly oil imports from Iran.

The Reuters reported that Indian authorities (read petroleum ministry headed by Veerappa Moily) meekly caved in and Delhi has begun complying with the American quota restriction by cutting its oil imports from Iran. The government-owned Mangalore Refinery has begun executing the decision taken in Delhi. This is notwithstanding the fact that Iran has offered oil to India at discount price and with free delivery.

Complicated answer

Why is India so whimsical? The answer is more complicated than one may imagine. Put simply, Delhi is voluntarily sacrificing the energy ties with Iran to negotiate a new template in the US-Indian energy dialogue. Suffice to say, the government is backing an Indian energy giant, which seeks Washington’s approval for gaining access to the upstream shale gas sector in the US. It hopes to acquire the hydraulic fracturing – known as ‘fracking’ – technique of extracting gas from shale gas and transfer the technology to India, which is estimated to hold a whopping 500 to 2000 trillion cubic metres of recoverable shale gas (according to ONGC estimates), much of it in Gujarat, Assam and the Gondwana Basin (central India).

However, there is nothing like free lunch in the American culture. While president Barack Obama announced during his visit to India in November 2010 that the US decided to cooperate in the fields of clean-tech and shale gas, the US also has certain expectations from India. One is, of course, that India should reduce its energy ties with Iran. Secondly, India should do something about its nuclear liability law, which blocks business prospects for the American nuclear industry.

The US-India Energy Dialogue, which was held last week in Delhi and Mumbai, focused on these inter-related questions. That the dialogue was held in the final weeks of the UPA era underscores the alacrity with which Indian leadership is keen to push the company’s case. Indeed, the BJP didn’t raise dust over it, because there is a ‘bipartisan’ consensus in India over a business issue of vital interest to that company. Moily on his part did his best to create a ‘feel-good’ ambience for the Energy Dialogue by drastically slashing India’s imports of Iranian crude oil.

Very little has been actually divulged to the media about the understanding reached in the Energy Dialogue with regard to the US allowing Reliance to make investments in its upstream shale gas sector and Delhi reciprocating by ‘tweaking’ its nuclear liability law to facilitate the export of American nuclear reactors to the Indian market. It’s now up to the BJP government to follow through.

Meanwhile, Delhi has floated a proposal to extend the Iran-Oman undersea gas pipeline to India as well. The reports say the concept involves transporting Iranian gas to India via Oman. Is Delhi serious? The question is valid because Delhi usually voices interest in moving forward in relations with Iran on the eve of some important India-US interaction (such as the recent Energy Dialogue) with a view to generate leverage with the Americans.

The sad part is our lop-sided priorities. Shale gas, after all, is an idea whose time hasn’t come even in the European countries. On the other hand, Iran has the second biggest natural gas reserves in the world and it is situated next-door to India. Delhi ought to be genuinely serious about a Iran-Oman-India gas pipeline project. Our interlocutor here will be Oman, which is a key American ally. Sultan Qaboos has amply demonstrated the grit to stand up to US pressure and we can conveniently take shelter behind him to advance an Iran gas pipeline project for us that could boost India’s energy security.

(The writer is a former ambassador)