Stand firm

Updated: Nov 15 2005, 05:30am hrs
India must not succumb to Irans recent threatgo easy on the nuke issue, else there is no gas deal. In fact, by showing its colours, Iran has demonstrated the extent of risk involved in doing business with that country. Clearly, Iran is willing to bend commercial deals to meet its political and defence ends. Sanctity of contracts will be a casualty, especially since there will be no recourse to arbitration in the western world in the event of defaults. Hence, Indian PSUs must review the gas deals, especially as they have not reached the investment phase.

Certainly, proponents of the deal will point to the competitive pricing of gas vis-a-vis prevailing global prices. But that is not a fair comparison on several counts. Irans position as a seller is severely constrained in global demand centres, like the west. The recent threat also brings to light the poor negotiating ability of Indian PSUs and the petroleum ministry. Besides lack of access to large markets, Iran shares one of its largest gas fields with Qatar, which is a US allyhence the need to quickly monetise the gas. There is also a huge challenge ahead of the Iranians given the western blockadeto obtain liquefaction technology to sell gas to India,

Against this backdrop, the Indian strategy to rush through the LNG deal with Nigec, a subsidiary of the Iranian national oil company (NIOC), a few months ago, racing against the crowning of a fundamentalist regime, is suspect. After all, the NIOCs nod is mandatorily required to seal the dealsomething that the Iranians are now weighing! Clearly, we had to face the fallout of a change in regime, so what was the need to rush through the deal There is no denying that our energy demands require import of gas. However, commerciality of such imports must mean that the import price is linked to procurement risk. Else, the gas procurers and, in turn, the taxpayer, will be subsidising domestic gas consumers.

Alternatively, any notion of energy security needs to consider not only measures to mitigate the supply risk posed by errant behaviour on the part of Irana possibility, given their past recordbut also acts of war by the US and its allies. Surely, the tax payer deserves answers.