Speaking on the sidelines of the World Petroleum Congress industry event, which ended in Madrid on July 4, Minister of Petroleum and Natural Gas Murli Deora announced that India, Pakistan and Iran would sign the IPI pipeline deal in the current month. Though the statement was yet another in a string of assurances that have been coming from top officials of the UPA government, the purported resolution of a set of contentious issues lend it greater importance this time around.

Iran and Pakistan had already signed a mutual gas agreement earlier in the year. India on its part remained uncommitted, due to unresolved concerns over issues like the amount of transit fees to be paid to Pakistan and the price of gas to be bought with Iran. Iran and Pakistan, in a bid to push forward the negotiations, had also stated that they were open to the possibility of extending the pipeline to China if India backed out of the project. They have however maintained that Indian participation would be the ideal situation. Experts noted that the China angle was a mere negotiating tactic as technically it would have been very difficult to take the pipeline through the rugged Himalayan ranges. The strategy however paid off with India announcing on June 23, 2008 that the transit fees issue with Pakistan had been resolved and that it was ready to go ahead with the pipeline, though no details of the agreement were disclosed then1.

Prior to these developments, India also attended the first quadrilateral meeting of the Asian Development Bank (ADB)-backed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline. TAPI had a strong American backing as it killed the proverbial two birds in one go. It would have removed the rationale for the IPI project as well as undercut the growing Russian influence in the Central Asian region.

The TAPI pipeline project however seems more of a pipedream. The cost of the project doubled from its estimated rates in 2002 (to $7.6 billion), with energy experts still skeptical of the new estimate, given the fact that the pipeline is envisaged to pass directly through war-torn Afghanistan. Doubts were also being expressed about TAPI's output, with the ADB – the financiers for the project, not yet disclosing data regarding Turkmenistan's energy resources. Many analysts believe these were grossly overestimated. The new momentum towards the IPI, at least for the time being, could come at the cost of TAPI.

The IPI project meanwhile seems to have overcome many of its bottlenecks, including the strong American opposition. The issue of security of the pipeline also appears to have been resolved with each nation deciding to organize its own leg of pipeline construction. Further, in previous rounds of talks, Gazprom and British Petroleum surfaced as potential bidders.

Another bone of contention between India and Iran was on deciding the point where the gas would be delivered – at the Iran-Pakistan or the India-Pakistan border. This issue also appears to be headed for resolution with the Iranian Oil Minister Gholam-Hossein Nozari stating that Tehran was open to negotiations on the issue, provided that the deal was implemented soon. Nozari announced this after a meeting with Mr. Deora on the sidelines of the Madrid World Petroleum Congress2.

Given the above developments, the project seems set for take off. It must however be noted that the exact details of the ‘resolved dispute’ were yet to be revealed. Many analysts also believed that the latest momentum on the IPI pipeline from the Indian side seemed to be targeted at the country’s domestic politics, embroiled as it is on the Indo-US nuclear deal. The ‘nuclear deal albatross’ however, continues to hang.

• 1. Maha Atal, “India's Iranian Pipeline Deal,” Forbes News, July 01, 2008, at http://www.forbes.com/2008/07/01/india-iran-america-biz-energy-cz_ma_070...
• 2. “Iran open to changing gas delivery point,” The Hindu, July 01, 2008 at http://www.hindu.com/thehindu/holnus/000200807011863.htm.