As tensions mount between Iran and the west over the Islamic state’s nuclear ambitions, Tehran seems to be adopting an Ostpolitik, looking to China and India for political and energy ties. Opec’s second-largest oil producer, which also has the world’s second-biggest gas reserves, is wooing Asia’s fast-growing and energy-hungry economies.
The courtship started with two big deals for long-term exports of liquefied natural gas to China and India. And there are bigger plans afoot with New Delhi, involving an export pipeline via Pakistan. The problem is that Washington does not want the deal to go ahead while Tehran is on the brink of joining the world’s nuclear club.
Only days after hardliner Mahmoud Ahmadinejad took office as Iran’s new president, the country restarted its uranium conversion activities in the central city of Isfahan in defiance of European requests to keep the operation suspended.
But analysts believe growing economic ties between Iran and the two Asian superpowers could thwart a unanimous decision against Iran in the UN.
At the same time, analysts expect Iran’s new conservative government to strike more deals with Asian powers. Bijan Khadjehpour, chairman of consultancy Atieh Group, says: “western companies would realize that there are a number of Asian competitors such as the Chinese and Indians that are happy to take their places in Iranian business.”
For example, after a long honeymoon for German and Italian firms that have had a key stake in developing Iran’s fast-growing steel industry in recent years, the Islamic state has now turned its eye eastwards.
Tata Steel, India’s largest private-sector steel maker, was granted a $1 billion-plus deal in June for building steel plants in Iran. The investment came on the same day Iran agreed a big deal to export LNG to India – a further sign of warmer relations between the two countries.
But it seems the road to closer relations between the two states is not obstacle-free. Soon after initial talks started between Tehran and New Delhi for the gas pipeline, president George W Bush, in a dramatic policy volte-face, promised India full cooperation in developing its civilian nuclear power programme without demanding that it sign a major nuclear arms control treaty.
Analysts believe Bush’s offer to help India increase its nuclear capacity is motivated at least in part by a desire to give New Delhi an alternative to the proposed $4 billion gas pipeline deal with Iran. Soon after Bush’s comments, Indian prime minister Manmohan Singh expressed concerns about the pipeline project. During his visit to the US in July, he said it was a risky venture that would be difficult to finance.
In Tehran, oil and gas expert Narsi Qurban says: “As the nuclear dispute between Iran and the US heightens, finalizing this deal will be very difficult.” Qurban believes the best bet for the huge gas pipeline is that it should be handed over to an international consortium, instead of being negotiated by state-owned gas companies that are directly subject to national politics. “Such a consortium can easily take care of the deal’s political obstacles,” he says.
After a visit to India in August, Iran’s deputy oil minister, Mohammad-Hadi Nejad-Hosseinian, said he expected the deal to be finalized in the winter.
But analysts believe Washington has other interests in hampering Iran’s gas export to India. An alternative plan proposes a pipeline running to south Asia from Turkmenistan through Afghanistan. However, poor security in Afghanistan has delayed that project. Qurban says: “This is a serious alternative considered by big American companies for a long time.”
