‘India wants Iran’s energy, but cautious’

In 2010, India was the fourth largest buyer of crude oil and natural gas from Iran after South Africa, China and Japan.

Washington: India`s reluctance to go ahead with multi-billion IPI gas pipeline and some other steps being taken by it recently indicate that New Delhi is now cautious
about any expansion of energy relations with Tehran, a Congressional report has said.

Noting that India has generally been considered friendly toward Iran and unlikely to impose any national sanctions on Tehran, the Congressional Research Service (CRS) in its latest report on Iran informed US lawmakers that many experts were
surprised when India`s central bank, in late December 2010, announced that it would no longer use a regional body, the Asian Clearing Union, to handle transactions with Iran.

The Asian Clearing Union, based in Tehran, was set up in the 1970s by the United Nations to ease commerce among Asian nations.

There have been allegations in recent years that Iran might be using the Clearing Union to handle transactions so as to avoid limitations imposed by European and other banks.

The Indian move, CRS said, complicated India`s purchases of about 350,000-400,000 barrels per day of Iranian oil, and Indian officials subsequently undertook negotiations with Iran to find an alternate mechanism to clear Indian payments for
that oil and other Iranian goods.

"Still, the Indian move - and the reported difficulty in agreeing to a replacement payments mechanism - appeared to signal that India was taking steps to join US/European-led efforts to shut Iran out of the international financial system.

"The Indian move followed President Obama`s visit there in November 2010," said the CRS report.

In 2010, India was the fourth largest buyer of crude oil and natural gas from Iran after South Africa, China and Japan.

The CRS said India had been a part of the USD 7 billion project, which would take about three years to complete, but India it did not sign a memorandum between Iran and Pakistan finalising the deal on June 12, 2010.

"India reportedly has been concerned about the security of the pipeline, the location at which the gas would be officially transferred to India, pricing of the gas, tariffs, and the source in Iran of the gas to be sold," it said.

Other steps taken by India since late 2010 to prevent some banking transactions with Iran, discussed later, could suggest that India is now cautious about any expansion of energy relations with Iran, the report said.

Previously, the threat of imposition of US sanctions had not dissuaded Indian firms from taking equity stakes in various Iranian energy projects, it said.

Energy experts in Iran say Iran has largely completed the pipeline extension from its network to the Pakistan border, meaning that the project could become operational if Pakistan completes construction on its side of the border, and the two
are linked.

CRS said India may envision an alternative to the pipeline project, as a means of tapping into Iran`s vast gas resources.

"During high-level economic talks in early July 2010, Iranian and Indian officials reportedly raised the issue of constructing an underwater natural gas pipeline, which would avoid going through Pakistani territory. However, such a route
would presumably be much more expensive to construct than would be an overland route," it said.

CRS is the independent bipartisan research wing of the US Congress and prepares periodic report on issues of interest for the lawmakers.

The report normally prepared by eminent experts of the area is for information purpose for the lawmakers to take informed decisions and does not reflect the views of the US Congress.


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