Iranian President Ahmedinejad’s brief stopover in New Delhi on 29 April for talks with Indian leaders expectedly aroused great interest throughout the world. When the Americans suggested that India should use the occasion to press Iran to stop nuclear enrichment, India tartly responded that it did not need any “guidance” on how to handle its relationship with Iran.

India’s External Affairs Minister Pranab Mukherjee and National Security Adviser M. K Narayanan publicly stated that India did not think that the so-called ‘international community’ was handling Iran properly – Iran needed to be treated with respect, the P-5 + 1 format was not the only one for dialogue with Iran, and it should be left to the IAEA to determine whether or not Iran was embarked on a nuclear weapons programme.

This was a startling about-turn by India, which was widely perceived both within India and abroad to have supinely agreed to toe the US line on Iran ever since the disastrous vote of September 2005 that started the process of the Iranian dossier being taken out of the purview of the IAEA and referred to the UN Security Council.

The significance of Ahmedinejad’s whistle-stop visit to India was of important political and symbolic value for both sides. Under pressure from the West, Iran could show that it has weighty friends in the region who are happy to provide him a platform for US-bashing. Under pressure from domestic critics, India could show that it runs an independent foreign policy, and is not tied to Uncle Sam’s apron strings. These are not unimportant considerations as the ruling regimes in both countries face elections over the coming months. In India, the Muslim vote, particularly that of the large Shia community, could turn out to be important, perhaps even decisive in some cases, in the upcoming elections to a number of State Assemblies and to Parliament.  

But there were substantial gains too from the visit for both sides. The visit conclusively cleared the atmosphere between Iran and India, with Ahmedinejad publicly drawing a line under the past and exuding gushy praise for Indians. Pragmatic considerations of ensuring India’s energy security appear to have been also present in India’s mind in agreeing to host Ahmedinejad. With oil touching nearly $ 120 dollars a barrel, and having lost out to China in persuading Myanmar to supply recently discovered offshore gas, India can hardly afford to ignore a leading global producer of both oil and gas in its vicinity like Iran. 

That is why despite stiff US opposition, India appears to have put aside its political hesitations about going in for mega energy deals with Iran. Possible deals include the revival of a stalled 2005 LNG contract, signed but not ratified by the Iranian Majlis, the Iran-Pakistan-India gas pipeline project, participation by Indian companies in development of upstream oil and gas projects in Iran, and setting up of downstream petrochemical projects in both countries.

The gas pipeline project is obviously the one that has drawn maximum attention and controversy.  For more than two years, India’s participation in the project was uncertain. Despite official denials, India had given the impression that it was deliberately going slow on this project in deference to US sensibilities.  However, during the visit of India’s Petroleum Minister Murli Deora to Pakistan in the last week of April, India and Pakistan managed to agree to a mutually acceptable transit fee, which now awaits Governmental approval on both sides.

Iran and Pakistan claim they have reached an agreement on all issues and now it is up to India to do so with Iran and Pakistan.  It was significant that a political decision was taken by Indian and Iranian leaders during Ahmedinejad’s visit to go ahead with the gas pipeline project. No doubt the possibility that China is ready to step in should India not be interested has spurred India to look at it as a strategic rather than a purely economic project.  

Details are to be worked out by the concerned Ministers over the next 45 days. Important issues that remain to be resolved relate to taking measures to ensure assured supplies of gas, the quality of gas to be supplied by Iran, the financial and management structure of the project and, most important, the price at which the gas will be supplied over the period of the agreement. Legitimate security concerns too will need to be addressed. It should not be difficult to work out suitable internationally guaranteed safeguards as well as to deal with them. Risks from non-state actors can be handled by using modern technology to ensure physical security measures and they could be co-opted as responsible stakeholders in the project by suitable financial incentives like sharing of transit fees. Although India has been traditionally wary of creating a dependency on Pakistan for energy transit, it is highly unlikely that Pakistan would deliberately cut off gas supplies, as such a move would ostracise Pakistan internationally and prompt India to retaliate by cutting off water supplies to Pakistan from the Indus and its tributaries.

On the other hand, the economic and geopolitical benefits of an Iran-Pakistan-India pipeline would be enormous for all three countries.  On the energy front, it would provide Pakistan and India with plentiful gas supplies for many decades. Politically, it would be a huge confidence-building measure between India and Pakistan that could create a momentum for a fundamental transformation of India-Pakistan relations. The project would also bring Iran huge political benefits, as it would undermine the US policy to sanction and isolate Iran. Gas exports to Pakistan and India would give Iran valuable long-term customers and a steady stream of much-needed revenue. The project would also act as a huge confidence-building measure for the Indian business community to make investments in Iran, something that Iran badly needs.  Finally, as a regional energy project, the gas pipeline project could form the nucleus of a regional cooperation arrangement between South Asia and Iran (which has become an Observer of SAARC) could have a very positive impact for long-term regional peace and stability.