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Middle East miscalculation

Middle East miscalculation
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First Published: Thu, May 12 2011. 01 15 AM IST
Updated: Sat, Jul 02 2011. 01 07 PM IST
For a country that is heavily dependent on energy imports, India’s approach to energy security is curious. Its dealings with countries in West Asia, especially Iran, are a study in carelessness.
As reported in Mint on Thursday, engineering giant Bharat Heavy Electricals Ltd has won a contract to supply 10 gas turbines of 126MW each to Iraq. Earlier in the week, it was reported that India is quietly trying to renew energy ties with Iran.
New Delhi’s dealings with Iran are a study in political gymnastics. Last month it submitted a revised master development plan for the Farsi natural gas block that ONGC Videsh Ltd (OVL) had won in 2002. This came months after India entangled itself in a payments row with Tehran when it decided not to channel them through the Asian Clearing Unit, a clearinghouse mechanism in place for decades. Slightly later, in January, OVL sought legal opinion that cautioned it against pursuing oil and natural gas projects in Iran. It is interesting that now it is willing to proceed with the Farsi project, something that will require $5 billion in exploration and production work.
The global oil and natural gas market is different from the market for, say, shirts. Unlike many other commodities where money and commercial interests alone determine access and prices, politics plays a strong role here. Even if one leaves this aside for a moment, one cannot ignore the fact that it is a market with many buyers and few sellers. Resultantly, ordinary price setting mechanisms don’t operate here. This is evident even in spot markets where prices fluctuate wildly from what demand factors alone would dictate. If for this reason alone, India’s engagement with major suppliers like Iran should be more consistent. It has been anything but that.
It has been speculated that India was under US “influence” when it behaved in this curious fashion. One hopes that was not the case. In this matter, India should look and learn from the American record in securing its interests in that region. Its friendship with Israel—its longstanding friend there—has not come in the way of making other friends who, by some accounts, are inimical to Israel. There is no reason why we cannot be friends with Iran and the US at the same time. That only requires some diplomatic deftness to manage.
Energy security in a world of dwindling resources should be a priority for the government. “Influence” of other countries in ignoring or offending important partners is a bad excuse.
What explains India’s flip flops with Iran? Tell us at views@livemint.com
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First Published: Thu, May 12 2011. 01 15 AM IST
More Topics: Energy security | Energy | Reform | India | Iran |