The Lobbyists: Untold Story of Oil Gas and Energy Sector

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PART - 1

AMERICAN LOBBYISTS

CHAPTER I

ENERGY SECURITY NUKED

Naik, Aiyar and Savarvar

April 18, 2003, the Cellular Jail, Port Blair, Oil Minister Ram Naik was engrossed in watching the light and sound programme that depicted life and legends of kala pani, sacrifices of India’s freedom fighters. Emotions ran high. Naik was visibly moved. He resolved to install an eternal flame as a mark of respect for sacrifices made by incarcerated Indian patriots. He announced that the state-run Indian Oil Corporation (IOC) would erect a ‘Swatantrya Jyot’ or an eternal flame to respect and remember freedom fighters. According to media reports from Port Blair, Naik said that his first visit to the jail fulfilled his lifelong ambition to pay homage where Veer Savarkar had spent 11 years¹.

After 10 months, the Indian Oil Foundation announced the design of ‘Swatantraya Jyot’ that would be installed in the precincts of the jail². It was planned that the four sides would have quotes of great freedom fighters such as Netaji Subhas Chandra Bose, Madanlal Dhingra, Bhagat Singh and Veer Savarkar. The design was made by leading sculptor and a recipient of Lalit Kala Academy Award, Uttam Pacharne. It was proposed that the five feet tall jyot would be surrounded by about 14 feet high structure of bronze and it would be located near the martyrs’ platform.

IOC took the responsibility to supply approximately two dozen cooking gas cylinders every month to fuel the eternal flame. This was not the first case. IOC had already installed an eternal flame in the premises of Jallianwala Bagh in Amritsar, where hundreds of unarmed, defenseless freedom fighters were massacred. Hindustan Petroleum Corporation Ltd (HPCL) too had established a similar memorial at Hutatma Chowk in Mumbai.

Although, the sculpture was ready in April 2004, Naik could not inaugurate it because of the election code of conduct. The verdict of 2004 general election was against the Bharatiya Janata Party (BJP). Its ‘India Shining’ campaign was rejected by the people of India. Congress-led United Progressive Alliance (UPA) formed the government. Mani Shankar Aiyar, a friend of Rajiv Gandhi and a career diplomat, became the first oil minister of the UPA government on May 24³. He was expected to complete the formality of inaugurating the monument. In August, Aiyar inaugurated the jyot in presence of the former Oil Minister. Naik got upset after he found that the plaque containing Savarkar’s quotes was missing. Of course, no deviation from the plan would have taken place without the approval of the new minister.

Rashtriya Swayamsevak Sangh’s (RSS) weekly, Organiser, wrote an article criticising Aiyar and the Congress for disrespecting Savarkar, a freedom fighter⁴. The ‘Swatantraya Jyot’ became controversial. Naik alleged that Aiyar was insulting Savarkar and demanded an immediate apology and wrote to Prime Minister Manmohan Singh to intervene. But, it did not work. Despite relentless efforts from Naik, the UPA regime did not install the original plaque of Savarkar for more than a decade.

After a decade, times changed. Narendra Modi-led National Democratic Alliance (NDA) replaced the Manmohan Singh Government in May 2014. Naik was made Governor of Uttar Pradesh in July 2014, but he did not forget to accomplish the incomplete task he had initiated about 12 years ago. He ensured that the plaque was installed when he visited Port Blair in July 2015⁵. Despite inordinate delay, Naik accomplished the mission.

Internal Instability

This was just one example that showed how projects and plans of the two governments clashed over ideologies and often whims and fancies of individuals. Projects were modified, changed, postponed or stalled with the change of governments. Often opposition between BJP-led NDA and Congress-led UPA resulted into chronic policy standoffs. Projects and policies, meant to protect cultural heritage or boost economic development, had often become hostage of their conflicting ideologies or personal vendettas.

After the five-year rule of the Vajpayee Government, the people of India chose Manmohan Singh-led UPA regime for uninterrupted two terms of five years each. It was expected that Prime Minister Singh would be able to create robust and stable political and economic systems. But the Congress-led UPA faced more opposition from within the alliance than its political rivals. Apparently, the Congress Party within itself, divided into two camps, which were covertly conspiring against each other. The Ministry of Petroleum and Natural Gas (MoPNG) was one of the worst victims of this factionalism. Four ministers changed in 10 years and some ruled for less than two years. All four of them were bright in their own right, but their diverse personalities, divergent views and desire to keep their representative groups happy, resulted into confused policies and chaotic actions. Consequently, they became the biggest roadblocks to India’s energy security.

Aiyar Displeased America

May 23, 2004: the newly elected Prime Minister, Dr Manmohan Singh announced Cabinet portfolios of the rainbow coalition of the United Progressive Alliance (UPA). Mani Shankar Aiyar became the first Petroleum and Panchayati Raj Minister. Aiyar was a career diplomat, a friend of former Prime Minister Rajiv Gandhi, a columnist, an author and a three-time elected member of the Parliament. Perhaps, his clean image and his experience with the Indian Foreign Service (IFS) could be the reason for giving him one of the key portfolios, which was crucial for India’s energy security.

Ideologically, Aiyar disagreed with Naik. Differences did reflect in issues such as the ‘Swatantraya Jyot’ project and also on fixing retail prices of petrol and diesel. He abandoned Naik’s policy of allowing changes in auto fuel rates in small doses. The decision gave immediate comfort to the common man, but gradually created a monster in the form of oil subsidy.

Aiyar, however, continued Naik’s policies of acquiring energy assets abroad, private participation in domestic oil and gas exploration, and energy conservation and innovation. Auctioning of oil and gas blocks also continued as usual under the New Exploration Licensing Policy (NELP). The policy to acquire oil and gas assets abroad became more aggressive and methodical. China, which was considered a competitor in asset acquisitions, was cajoled to become partner in progress. The state-run ONGC and the Chinese energy major CNPC, jointly acquired 38 per cent stake of Petro-Canada in Syria.

He decided to take Naik’s efforts to import liquefied natural gas (LNG) from Iran to another level. Aiyar saw gas as an alternate to oil. An agreement to import five million tonnes from Iran was signed in Tehran in June 2005. Shell India had commissioned its 2.5 million tonnes at Hazira earlier that year. The plan was to expand capacity of Dahej LNG terminal to 10 million tonnes per annum. GAIL had entered into an agreement with the Belgian firm EXMAR Marine in November for using its onboard LNG regasification technology.

While Aiyar pursued NDA’s gas import policy to meet growing domestic requirements, he knew, importing gas in liquefied form was costlier compared to directly pumping natural gas from fields in Iran, Myanmar, Bangladesh and Turkmenistan. Globally, oil and gas pipelines were considered the preferred and cost- effective mode of energy transportation. For Aiyar, gas import from Iran through pipeline was not a distant dream. He was confident that Pakistan would support the project as it would also have enormous economic gains from this pipeline. His good ties with Pakistani officials, his diplomatic stint in the country and his book ‘Pakistan Papers’ were source of his confidence.

He felt that a gas pipeline from Iran via Pakistan was feasible. Resistance from the United States of America over alleged engagement of Tehran in nuclear projects was the only hassle. But, for Aiyar, India is a sovereign country and it did not require the United States’ nod before securing its energy needs. India and Iran had shared historical ties. Commerce between the two nations was based on the solid foundation of trust and ease of doing business. India and Iran were perfect fit for each other. Aiyar was convinced that there was no need to take the third party approval. After all, India always followed UN sanctions; it was not obliged to follow the US sanction.

Aiyar vs MEA over Iran

In early 2003, the Vajpayee Government had entered into a memorandum of understanding with Iran. Hydrocarbon-rich Farsi block was the main attraction. Later, in May that year, India signed an agreement with Iran at the first meeting of the Indo-Iran Joint Working Group (JWG) for importing five million tonnes of liquefied nature gas (LNG) in phases for 25 years. The agreement also gave opportunities to India’s state-run ONGC Videsh Ltd to pick up stakes in ‘discovered and semi-discovered’ Iranian oil and gas fields⁶.

The engagement with Iran for India’s energy security was already initiated by the NDA regime. As it was beneficial for the country, Aiyar decided to take it further. Initially, the Manmohan Singh Government supported his efforts.

Eight months after assigning the responsibility of petroleum-related matters to Aiyar, the Manmohan Singh Cabinet authorised his ministry to ‘lead and participate in bilateral as well as multilateral negotiations with Iran, Pakistan, Bangladesh and other countries for facilitating the laying of transnational pipelines for importing natural gas’⁷. It paved ways for creating regional gas grid. Three projects could be a reality in medium-term; Iran-Pakistan-India (IPI) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipelines on the west and Myanmar-Bangladesh-India pipeline in the east.

This was certainly Aiyar’s victory and a major blow to the Ministry of External Affairs (MEA), which always maintained its authority on diplomatic matters. Armed with the Cabinet’s decision, Aiyar could negotiate with Iran and Pakistan for laying a ‘pipeline of peace’. Aiyar had been posted in Pakistan as an Indian diplomat and had good relationships with top Pakistani leaders. He believed that Pakistan was more eager than India in getting Iranian gas and notwithstanding chronic Indo-Pak political rivalry, this pipeline was feasible.

He had a clear mandate from the UPA’s Common Minimum Programme, the document that unified the alliance of diverse political parties. The Cabinet supported Aiyar because energy security was a key component of the common agenda. It acknowledged that India required cost-effective and long-term arrangements to sustain 7-8 per cent economic growth. At that time, it was estimated that India’s natural gas demand was 150 million standard cubic meters per day (mmscmd) against a supply of 83 mmscmd. Out of that, 74 mmscmd was produced domestically and the balance was imported as LNG.

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Although the Cabinet authorisation empowered Aiyar immensely, it immediately created two formidable enemies for him; the Ministry of External Affairs (MEA) and the United States of America (USA). For MEA, it was a turf war and for the USA, Aiyar had potential to disrupt its geopolitical interests.

Unfazed, Aiyar continued his pursuit. The state-run fuel retail giant, Indian Oil Corporation (IOC), was assigned the task of appointing a financial consultant for Iran-Pakistan-India (IPI) pipeline project. GAIL India, the other public sector gas transportation major was asked to find technical and legal consultants for the project. After due diligence, IOC appointed Ernst & Young as its financial adviser and GAIL selected ILF Consulting Engineers as their technical consultant before the third meeting of the India-Iran Special Joint Working Group (JWG) on IPI pipeline project.

Meanwhile, Aiyar had sent a letter of congratulations to the new Iranian Minister of Petroleum, Kazem Vaziri Hamaneh, and had also spoken to him on telephone, inviting him to visit India.

Aiyar was at his diplomatic best. His IFS experience and his relationship with Pakistani elites helped in negotiations. By December 2005, India had several rounds of meeting with Iran and Pakistan over the pipeline project.

The American Pressure

An Iranian delegation led by Dr MH Nejad Hosseinian, Deputy Petroleum Minister for International Affairs, Government of Islamic Republic of Iran, visited India on December 28, 2005.

The then Oil Secretary SC Tripathi said in a joint press statement that the three countries – India, Pakistan and Iran – had high expectations from the project. He said it was necessary to take further concrete steps to realise the project that was important for the economic development of the three countries. The secretary informed the press that the three stakeholders were having regular meetings amongst themselves on the IPI pipeline project.

The third JWG enumerated several feats they achieved through negotiations by 2005 and presented a roadmap for the project. During a bilateral talk, India and Pakistan had decided that officials from the three countries would meet in February 2006. Iran not only confirmed the date but also offered to host the official-level meeting. It also proposed to host the tripartite ministerial meeting in Tehran the following month.

Iran reiterated its commitment that sale and purchase of gas would take place at the Indian border and also agreed that it would consider other alternatives proposed by India.

The two-day visit was satisfactory from the point of view of the project. But, Iran appeared slightly apprehensive. It was mildly expressed by Hosseinian in the joint press statement. It appeared that Iran was aware of the increasing American pressure on India and cracks within the Manmohan Singh Government.

Some people could notice his concerns from the statement. "He (Hosseinian) said that Iran had a strong will to implement the project as it would bring peace and prosperity to the region. He was confident that the Government of India would extend the same support and political commitment for the successful accomplishment of this highly important project.⁸" It was indicative that the Government of India was not extending the same support and political commitment as that of Iran.

Hosseinian’s apprehension was legitimate. For oil producers and speculators, Aiyar was not an easy person. Even America, which was apprehensive of Aiyar because of his Iran policy, was keenly watching his body language at different forums. One such occasion came in September 2004 when Aiyar visited Vienna to attend a two-day OPEC seminar.

The Organisation of the Petroleum Exporting Countries (OPEC), an association of 12 oil-producing countries⁹, often acted as a cartel to regulate petroleum supplies in the market. OPEC’s output decision did influence international petroleum rates, but it was not the only factor for price volatility. OPEC was formed in 1960 as a reaction to seven multinational oil companies. But, gradually, oil speculators started playing an important role in influencing the market¹⁰.

Aiyar Against Oil Apartheid

OPEC invited Aiyar in its seminar on September 16-17 in Vienna. As a good gesture towards global oil consumers, OPEC decided to increase its output ceiling by 1.0 million barrels per day to 27 million barrels. The increase would be effective from November 1 and the quantity excluded Iraq. The move was appreciated by oil importers such as India because increased supply would help in checking northward price movement that persisted around US$ 40 per barrel. Oil consumers took sign of relief as traditionally oil prices spiked because of increased winter demand from European countries.

"As long as the price is still high, we will send a signal to the market that it should come down¹¹", OPEC Conference President and Secretary General Purnomo Yusgiantoro said. He was also the Indonesian Minister of Energy and Mineral Resources.

The announcement was followed by a two-day seminar, ‘Petroleum in an Interdependent World’. Indian Minister appreciated OPEC’s intent of stabilising prices, and not looking for quick profits in an unstable market.

He spoke at the sixth session of the seminar, which was on ‘Petroleum and Sustainable Development’. Aiyar came prepared. He did not miss the opportunity to raise India’s foremost concern; price discrimination between Asian buyers vis-a-vis European and US refiners.

The skillful orator, Aiyar highlighted what pinched India the most. The country was suffering from oil apartheid from exporting countries, who charged it more for the same crude that they supplied to Western consumers. It was called ‘Asian premium’, which was then estimated to be around US$ 6 per barrel¹².

Aiyar said the existing system of oil pricing encouraged uneconomic consumption and discouraged sustainable development. He hit OPEC members saying that about two-thirds of oil produced in the Middle East were exported to Asian countries. However, producers charged higher prices for oil from Asian buyers, compared to distant consuming regions.

It had been calculated by Professor Yoshiki Ogawa of the Institute of Energy Economics in Japan that the transfer of income from Asian consumers to Middle East producers on account of the Asian premium varied between US$ 5–10 billion a year.¹³

The OPEC bulletin published a four-page interview of Aiyar. He was asked about the Asian premium issue. He said … we are not merely complaining, we are not just asking: ‘Why are you charging us the Asian premium?’ We have drawn attention to the obsolescence in international marker crude prices, and since the Asian premium is a derivative of existing markers, then if we’re able to find a marker that is more suitable to a new world in which west Asian oil is being imported by Asian countries, I think we may afford everyone the opportunity of finding an answer to this problem. It is the west Asian exporters who insist that they are not deliberately discriminating against the Asian consumer — it’s simply that that’s the way the market is currently structured — so if we can get the west Asian exporters to at least agree to think again without committing themselves to a particular solution at once, then perhaps we’ll start moving towards an answer to these questions.

Enigma of Asian Premium

Interestingly, the issue of Asian premium was well known to all, but this matter was never raised unequivocally in any bilateral discussions. Asian premium was not officially documented or officially invoiced. This matter was always under wraps and many Gulf-based producers, particularly Saudi Arabia, publically denied its existence.

Like Aiyar, his successor Murli Deora had also tried to raise the issue of ‘Asian premium’ during Prime Minister Manmohan Singh’s visit to Saudi Arabia in February 27-March 1, 2010 on the invitation of King Abdullah bin Abdulaziz Al Saud.

Deora raised the matter of ‘Asian premium’ with King Saud at a deliberation where Prime Minister Singh was also present. The King said that he was not aware of this matter. Later, Deora was reprimanded for raising an unpleasant matter, which was not on the agenda.

Describing details of his Saudi Arabia visit, Deora confirmed about the incidence. He said, he was annoyed by the PM’s attitude. We did not go to Saudi Arabia to eat food and enjoy. As an oil minister it was my duty to raise issues. He should have supported me there, he told me in March that year.

Earlier, in November 2007, during my visit to Riyadh to cover the Third OPEC Summit as a journalist, I did raise this matter with several delegates. They brushed aside the matter by saying that trade took place on the principle of free market and there were willing buyers and willing sellers. Some even alleged that part of the so called premium might also go back to people in buyers’ countries. Such allegations were quite normal with hundreds of billions of dollars oil and gas trade because minor difference of even one cent would mean a gain or a loss of millions of dollars.

Speaking at the summit, its chairman and Saudi Arabian prince Abdulaziz Bin Salman Bin Abdulaziz Al-Saud said that there had been no discrimination against any Asian country and they did not have any policy to charge Asian premium¹⁴.

The ‘Asian premium’ still remains an enigma. Oil producers flatly deny its existence. They say that we sell oil at its official selling price (OSP). But, if this matter was so simple, why did Asian buyers repeatedly raised this matter in different forums?

The Narendra Modi Government has also taken up this matter. As recent as on June 3, 2015, the incumbent Oil Minister Dharmendra Pradhan raised this issue in an OPEC seminar. There is a strong feeling that Asian counties like India should receive Asian dividend rather than paying Asian Premium while making bulk purchase of crude, he had said.

Pradhan pointed out that India is the fourth largest importer of crude oil, hence it should be demanding discount, rather than paying a premium. I will not hesitate to say that Asian premium was historically never justified and more so not justifiable in the changed market scenario where Asian countries are the major buyers. Any measure that erodes the advantage of geography for Asian countries and promotes a policy of subsidising oil traffic to distant destinations is not, and cannot be, in the interests of sustainable development. This calls for urgent rectification. I will urge upon the OPEC members to understand this genuine concern, he said.

According to Indian refiners, if crude is sold to them at par with their American and European counterparts, their refining margins would increase by up to US$ 2 per barrel. If we receive crude at a fair price without paying Asian premium, our gross refining margins will improve and it will result in competitively priced petroleum products, Pradhan was candid. In 2013-14, India imported about US$ 143 billion worth of crude oil, three fourths which came from the Gulf region.

India imported 171.73 million tonnes of crude oil in 2011-12, which rose to 189.4 million tonnes in just three years. With more refining capacity expected in the near future, India’s crude requirement was expected to jump significantly.

Aiyar’s Premium Jihad

Apart from OPEC Seminar, Aiyar raised the issue of ‘Asian premium’ again that September in Vienna at a dinner hosted by Saudi Oil Minister Ali Al Naimi. The dinner took place at the Schwarzenberg Palace on September 17, 2004. It was also attended by the Crown Prince of Saudi Arabia, Abdulaziz bin Salman and the President of Saudi Aramco, Abdallah S. Jum’ah.

Discussions over the three-hour long dinner ranged across India being listed as the first non-western country eligible to participate in exploration and production blocks in Saudi Arabia; joint ventures in Saudi Arabia’s burgeoning natural gas sector; R&D; and joint participation in downstream projects in third countries. The vexed question of the ‘Asian Premium’ was also briefly touched upon, an Indian government statement said¹⁵.

After returning from Vienna, Aiyar did not sit quiet. He was planning to convene a major Asian buyers-sellers meet in January 2005. The purpose was to develop an Asian reference market and ultimately get rid of the Asian Premium to bring down costs for oil importing¹⁶.

By December 2005, India hosted two ministerial roundtables. One included major Asian oil consumers such as China, Japan and South Korea. The other roundtable was with oil producers of North and Central Asia.

One way to teach lesson to producers charging Asian premium was to reduce dependence on the liquid fuel. Natural gas was a good substitute. But, its transportation was not easy. LNG was capital intensive and cumbersome. The best way forward was to set up a regional gas grid. Countries assembled in the second roundtable, proposed to institute a study on Asian gas grid of pipelines for networking both oil and gas sources to consuming countries¹⁷. Aiyar tried to woo oil importers like China and Japan to bargain a right price from Arabian exporters.

The Chinese Checker

China was the second largest petroleum consumer in the world. Aiyar knew well that the joint bargaining power of India and China would force Gulf-based producers to relent.

He visited China on January 12-13, 2006. He knew, closer ties between the two countries would not only help in collective bargaining but would also help them in avoiding unnecessary competition in acquiring oil and gas assets abroad.

Aiyar realised that in the last one year, on several occasions, Indian and Chinese companies had competed for the same assets in Angola, Kazakhstan and Ecuador. After several rounds of talks between the delegates of the two countries, it was clear that joint biding of assets could help both countries in getting oil and gas fields cheaper.

On January 12, 2006, in Beijing, Aiyar had a delegation-level meeting with Ma Kai, Chairman, National Development and Reforms Commission (NDRC) of China. He could not hide his exuberance. My visit to China has been well and carefully prepared over the last one year, he said in his opening remarks.

He recollected Premier Wen Jiabao’s India visit in April last year and read the portion of the joint statement that emphasised cooperation between the two countries in the field of energy security and conservation.

He acknowledged that China had taken a lead in its overseas oil hunt. Almost everywhere we go, we meet our Chinese friends. Thus far, we have usually met as friends but commercial competitors. We are now entering the era of meeting as friends and partners. Cooperation between India and China in third countries is not only eminently desirable; it is also entirely feasible, he said, adding that "when the companies from the two sides submit a joint bid, no project would be beyond our reach.¹⁸"

Unbridled rivalry between Indian and Chinese companies for the acquisition of overseas hydrocarbon assets is to the advantage only of the seller of the asset and to the disadvantage of both our countries, irrespective of who eventually wins the bid, he said.

He, however, avoided any mention of the ‘Asian Premium’ in his speech, but his intent was well known to the audience.

Aiyar was travelling with top officials and executives. Director General of Hydrocarbons (DGH) VK Sibal, GAIL India Chairman Proshanto Banerjee, IOC Chairman Sarthak Behuria, Oil India CMD RK Datta, HPCL Chairman and Managing Director MB Lal and ONGC Videsh Managing Director RS Butola, among others, were part of the delegation. There, on a lighter note, he introduced Talmiz Ahmad, the Additional Secretary in the Oil Ministry, as an Assistant Minister. But, India’s biggest public sector ONGC was conspicuous by its absence. It was public knowledge that ONGC Chairman and Managing Director Subir Raha had an acrimonious relationship with his boss.

On January 13, while speaking at a conference on ‘India and China in Asia’s Quest for Energy Security’ in Beijing, Aiyar said:"For our part, we look upon China not as a strategic competitor, but as a strategic partner.¹⁹"

He presented an ideal picture that would ensure energy security for both the countries by connecting oil and gas supplies to consuming centres in Asia. But, it was not clear whether China was equally eager and enthusiastic.

The Iranian Ulcer

Aiyar was on a mission mode. Pipeline diplomacy, collective bargaining and cooperation with neighbours were key elements of his thought and action. But, his strategies were not conducive for the global powers. While the cartel of oil producers was apprehensive about Aiyar’s efforts in making consumers’ union, America found him as a spoilsport over its Iran ambition. Aiyar’s focus on cooperation with Iran was not only Washington’s headache but also embarrassing for the Prime Minister’s Office (PMO), which was all out to appease the United States.

Days before authorising the Oil Ministry in bilateral as well as multilateral negotiations with Iran, Pakistan, Bangladesh and other countries for laying transnational pipelines, MEA appointed CR Gharekhan as a special envoy for West Asia and the Middle East peace process²⁰. US diplomats posted in New Delhi saw him facing competition from Aiyar²¹. Besides being a career diplomat, Gharekhan was a friend of Foreign Minister Natwar Singh, then very close to the Gandhi family.

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Aiyar believed that Iran was important for India’s energy security and it was logical. But, laying a gas pipeline from Iran to India via Pakistan was not that easy. He knew that the project would face tough resistance from within, due to the chronic hostility with Islamabad and a tilt of New Delhi towards USA.

He had to do a lot of explaining both internally as well as to outsiders. One such interaction he had with the US Ambassador David C. Mulford in on February 11, 2005. The Ambassador expressed US Government’s concerns about Indian investments in the development of Iran’s oil and gas resources. The US had imposed sanctions against Iran because of its alleged nuclear activities and support to terrorism.

Aiyar told the Ambassador that Iran’s natural gas was vital for India’s energy security and pointed out that many countries including some of the US’ allies such as Japan and China were engaged with Tehran. Aiyar indirectly conveyed him that the US should first ask its friends to leave Iranian oil and gas sector before demanding India to snap ties with Iran.

He was also practical. He tried to convince Mulford that India was not immediately investing in Iran’s oil and gas sector and the current engagement was to prepare grounds for such investment when the Iran problem was resolved.

India did not want to completely cut off from Iran as it had a bad experience in Libya. It did not pursue its oil and gas interests in Libya because of the US sanctions. But, when sanctions were lifted, American firms swiftly moved in, leaving India high and dry.

He explained that against natural gas demand of 150 mmscmd, India’s output was only 90 mmscmd and the consumption was expected to jump to 400 mmscmd in the next two decades. Iran’s gas was important for India’s energy security; hence, its relationship with Iran was purely based on commercial considerations.

Aiyar told the Ambassador that the Indian Cabinet had authorised him to pursue energy deals with Iran and Pakistan. Mulford informed Washington that Aiyar anticipated the negotiations to be neither quick nor easy and the project was not happening in the near future.

The communication from the US embassy praised Aiyar. In contrast to his (Aiyar) often provocative and sometimes anti-American pronouncements and writings, Aiyar was thoughtful, reasonable and insightful²². The Ambassador advised the US Energy Secretary to visit India as the country was expected to play an important role in the global oil and gas markets in the future. The cable said; He (Aiyar) stood his ground firmly on Iran.²³

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Why was India strategically important for USA? This was answered in one of the cables published by Wikileaks on its website. Ambassador Mulford sent a communication to Secretary Bodman on March 9, 2005, emphasising that energy was the key to Indo-US relation. He wrote; "Secretary Bodman, now that you have had a few weeks to settle into your new role, I want to share with you some thoughts and ideas on our relationship with India. You already know from our meeting last November my views on the emerging India, a vibrant, multi-faceted democracy that is a growing and increasingly confident regional power with legitimate global ambitions. A decade of economic reforms has raised GDP growth to the 7-8 per cent range and has created growing public support for continuing reforms. Successive governments are moving these reforms forward, albeit within the political constraints imposed by India’s vigorous and sometimes frustrating democratic system. Most big players here predict several decades of sustained robust economic growth, thanks in part to India’s youthful population, which will lift India into the top ranks of global economic and political powers. Energy is at the heart of the Indian agenda because there is consensus that India will not be able to achieve its aspirations without secure and reliable energy supplies. The Indians realise that we are critical to their energy agenda, which gives us considerable leverage in influencing their developing energy policies²⁴."

USA realised that its relationship with India had changed. Where once there was doubt and suspicion, today there is greater candor and cooperation. … Even when we disagree, as we did over Iraq, we are generally able to deal constructively with our differences, and move on, the communication said.

It said that in just nine months, the UPA Government had moved on several issues of importance to USA that included an open skies policy with America; strengthening India’s IPR regime and raising foreign direct investment limits in several sectors. Another highly symbolic FDI legacy issue, the Dabhol dispute, which was complicated by the Enron collapse, is moving closer to resolution. We hope Boeing will soon be awarded a US$ 8.5billion contract for the sale of commercial aircrafts to Air India, which has not bought new planes since the 1980s, it said.

America was also concerned; India imports about 70 per cent of its oil and gas needs, primarily from the Middle East. It is among the fastest growing importers of oil and gas in the world. In the decades ahead, India (along with China) could be competing with the United States for access to limited supplies.

The communication praised Petroleum and Natural Gas Minister Mani Shankar Aiyar as the brightest and most successful of the UPA ministers, and also pointed at the potential conflict between MoPNG and MEA. It said that Aiyar had significantly raised his Ministry’s profile, usurping the international role that the Foreign Ministry earlier monopolised.

Mulford advised Washington to engage with India in an energy security dialogue and the purpose was to protect American interests. We could influence Indian energy policy such that it follows a path conducive to U.S. economic, political, security, and global environmental interests, he said in the communication.

He pointed at India’s growing oil and gas relationship with Iran and suggested that a renewed and invigorated high level exchange could allow them to exert some influence on this Indo-Iran energy relationship ....

He said the Indian Government had sought more collaboration with the United States in the civil nuclear area, which could be ‘an opportunity’ for USA to leverage it in settling other issues of importance to America.

America’s ‘Nuclear’ Lollipop

Dr Condoleezza Rice, US Secretary of State, was the first Cabinet member to visit India in the second term of Bush administration. In the joint press conference on March 16, 2005, External Affairs Minister Natwar Singh said that India would cooperate more closely with the US in the field of energy, besides expanding defence cooperation and moving towards an open skies agreement.

Before addressing the conference, Rice had already met UPA Chairperson Sonia Gandhi in that morning for about half-an-hour. Of course, she had a plan to meet Prime Minister Manmohan Singh later that day. Rice described her meeting with Gandhi as very cordial and wonderful, whom she had earlier met in Washington.

Like a good host, Natwar Singh did not waste any opportunity to boost the ego of his American counterpart. "I told Condoleezza Rice that she comes here as a friend and when a friend comes to India they do not have to knock at any door, they will find the door open²⁵," he said in his opening remarks.

Rice was candid that energy cooperation between the two countries was one of the key matters for discussion. After both spoke, a volley of questions followed.

The very first question to Rice was about Iran-Pakistant-India (IPI) gas pipeline. The question was pointed and direct; What do you feel about the cooperation between India and Iran on the gas pipeline since you have just made a statement about expanding the dialogue on energy. Are there any reservations about cooperation between India and Iran on the gas pipeline?

Before Rice could make a comment, the reporter tagged Natwar Singh with this issue. "Aapse Natwar Singhji, kya aap ise hastakshep ke roop mein dekhenge agar Amercia is par kuch aapatti jatayega?²⁶" (From you Natwar Singhji, whether you would see it as interference if America expresses its reservations on this matter?)

The US did not hesitate to express its concerns about the pipeline. "I think our views concerning Iran are very well known by this time and we have communicated to the Indian Government our concerns about gas pipeline cooperation between Iran and India. I think our Ambassador has made statements in that regard. So, those concerns are well known to the Indian Government. We do need to look at the broader question of how India meets its energy needs over the next decades, and whether its rapidly growing economy, an economy that must continue to grow in order for the benefits to be felt by India’s people... Since that is something that is a goal that we very much support, we believe that a broad energy dialogue should be launched with India because the needs are there. We have our own energy needs and indeed given the technological sophistication of our economy, of India’s economy, I would hope that we can also explore ways that new technologies can help us over the next decades to meet what are undoubtedly going to be burgeoning energy needs.