July 24, 2005EconomySecurity

Yes, that pipeline is too risky

The word from the economist and the prime minister

This is an archived blog post from The Acorn.

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.

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