India feels the distance as China steps into Iran gap

An unperturbed China has gone ahead with fresh investments in Iran.

While the US seeks to influence countries like India to limit their economic engagement with Iran amid stepped-up efforts to impose fresh sanctions,an unperturbed China has gone ahead with fresh investments in Iran. Not just that,it is looking to fill up the space being vacated by other countries.

Ahead of External Affairs Minister S M Krishnas visit to Iran for the G-15 meet next week,the Indian side is beginning to feel restless on these issues as Tehran continues to prod New Delhi with avenues of intensifying economic engagement,particularly in the energy sector.

In fact,both sides are in talks to schedule a long-awaited meeting of the Indo-Iran Joint Commission soon and an official team from Iran was here last month to hold preliminary discussions on this. Energy sector is one key area where hectic parleys are underway.

In the light of this,India is caught in a spot to define the scope of its engagement,given that the US Government Accountability Office recently named five Indian companies as well as UK-based Hinduja Group among 41 companies doing active business in Iran. These include ONGC,ONGC Videsh Ltd and Oil India.

The Iran dilemma is one of the issues likely to come up at the Indo-US strategic dialogue slated for June 3.

Meanwhile,China has overtaken the EU to become Irans largest trading partner. Bilateral trade was over $20 billion in 2009,which has more than doubled from $10 billion in 2005. Iran was the third largest foreign source of crude oil to China last year,supplying over 23 million tonnes,which formed about 11 per cent of Chinas total crude imports.

Consider this:

Taking advantage of the fact that western firms have stopped gasoline supplies to Iran,China Oil,a subsidiary of State-owned China National Petroleum Corporation (CNPC),recently exported about 600,000 barrels of gasoline to Iran.

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Another Chinese trading corporation,UNIPEC,a subsidiary of SINOPEC,has been contracted to supply about 250,000 barrels. These supplies are in addition to export contracts signed earlier.

The Chinese companies made this offer to sell additional gasoline after Malaysian State Company,PETRONAS,decided to suspend supplies to Iran in March this year to protect its interests in the US. Many other companies from the UK,Russia and Switzerland have already suspended supplies to Iran.

CNPC and the National Iranian Oil Company signed a $4.7 billion contract to develop Phase 11 of the South Pars Gas Field. This is estimated to have gas reserves of about 14 trillion cubic metres. The contract was bagged after the French company,Total,withdrew from the project after signing a memorandum in 2004.

China has also signed a $3.2 billion deal with Iran for building a pipeline for transportation of gas from the South Pars Gas Field. Another agreement for a $1.7 billion project to develop the North Azadegan field was also signed by CNPC last April. Chinese companies are developing Yadavaran Oil Field and have also shown interest in investing in the Iran-Pakistan gas pipeline project.

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While remaining ambiguous on supporting the US in the UN Security Council to slap fresh sanctions on Iran for alleged irregularities in its nuclear programme,Beijing does not appear to have any plans to curtail its economic engagement with Tehran.

On the other hand,among Indian firms,Reliance Industries,which was the main supplier of petrol and diesel to Iran until 2009,is said to have withdrawn. Also,Essar seems to have shelved its plans for setting up a steel project. Public sector NALCO was to have set up an aluminum smelter and power plant but it has not yet materialised.