US embassy cable - 05NEWDELHI3878

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 003878 
 
SIPDIS 
 
E.O. 12958: DECL: 05/25/2015 
TAGS: PREL, ENRG, EPET, PK, XA, ZK, ZP, IN, Energy 
SUBJECT: PRIORITIZING INDIA'S ENERGY DIPLOMACY AND 
OPPORTUNITIES 
 
REF: A. NEW DELHI 3770 
     B. NEW DELHI 2509 
 
Classified By: Charge Robert O. Blake, Jr., for Reasons 1.4 (B, D) 
 
1.  (C) Summary:  Ministry of Petroleum Additional Secretary 
(International Cooperation) Talmiz Ahmad outlined India's 
priorities for accessing more foreign fuel sources in a May 
24 meeting with Charge and Emboffs.  While domestic fuel 
subsidies continue to consume much of his attention, Minister 
Mani Shankar Aiyer is working hard to cultivate additional 
sources of energy in the Gulf, Africa, Central Asia, and 
South Asia.  On Iraq, while Ahmad was confident that the GOI 
would act on recommendations made by Special Envoy to West 
Asia, Ambassador C. Gharekhan, he was personally not 
optimistic that large-scale engagement would be forthcoming 
due to GOI security concerns.  With no new energy initiatives 
taking hold in the Gulf (although the region provides 
two-thirds of India's oil and gas imports), the GOI is 
seeking new sources in Africa, in addition to its $2.8 
billion investment in Sudan.  Projects in Central Asia will 
take time to come to fruition, but the proposed 
Iran-Pakistan-India pipeline is generating ideas within the 
GOI about how to structure the deal in light of US 
sensitivities.  Finally, the GOI has appealed for greater US 
partnership in the hydrocarbons sector.  End Summary. 
 
2.  (C) Ahmad is a career Foreign Service Officer who was 
brought into the Petroleum Ministry as part of Aiyer's effort 
to develop a more ambitious "Energy Diplomacy" (Ref B).  He 
previously served as India's Ambassador to Oman.  Referring 
to the GOI "Hydrocarbons 2025" report, which warned that 
India's current 70 percent energy deficit would reach 85 
percent by 2025, Ahmad briefly outlined India's priorities to 
boost both its domestic and foreign energy sources.  Domestic 
capacity for fuel production is so low, however, that even 
doubling the current volume would not gain much.  Rather than 
focusing on increasing domestic fuel production, most of the 
Ministry's political energy is currently spent on the 
contentious issue of domestic fuel subsidies.  The GOI has 
stated its intention to curb its massive subsidies for fuel, 
but Ahmad admitted that this may not happen, as most Indians 
cannot afford market prices for basic cooking fuel or diesel. 
 By creating a new division of International Cooperation, 
Minister Aiyer is shifting some of the ministry's attention 
toward cultivating foreign sources of energy. 
 
Business As Usual in the Gulf 
----------------------------- 
 
3.  (C) On boosting foreign fuel sources, Ahmed spoke about 
GOI priorities and projects in the Gulf, Africa, Central 
Asia, and in its own region.  Despite GOI efforts to develop 
a more multi-faceted partnership with Gulf countries, Ahmad 
described India's relationship with those states as still 
that of "buyer and seller," rather than one of strategic 
partnership.  He noted with particular disappointment Saudi 
Arabia's lack of interest in collaborating on oil refineries 
and other projects, despite Minister Aiyer's recent visit to 
the Kingdom to lobby their support. 
 
Violence Restricts Engagement in Iraq 
------------------------------------- 
 
4.  (C) While confident that the GOI would make every effort 
to act on recommendations made by Special Envoy to West Asia, 
Ambassador C. Gharekhan, upon his return from his current 
mission to Iraq (Ref A), Ahmad was personally skeptical that 
large-scale engagement in Iraq would be forthcoming in the 
near term due to spiraling violence.  Recalling his 
involvement in Iraq during the negotiations for the release 
of three Indian hostages in 2004, he said, "To be frank, the 
problems are inherent in the occupation...resentment of the 
occupation is all-pervasive."  However, Ahmad was confident 
that the GOI was actively looking for ways to engage in the 
country, starting with reviving the Joint Indo-Iraq 
Commission, chaired by the two Petroleum Ministers.  Ahmad 
said that Minister Aiyer has invited his Iraqi counterpart to 
Delhi to resurrect the Joint Commission later this year. 
 
Seeking New Sources in Africa 
----------------------------- 
 
5.  (C) The GOI is also turning its attention to petroleum 
sources in Africa, namely, in Angola and Nigeria, as well as 
newer areas in Niger, Chad, Gabon, Congo, and the DRC, in 
addition to its already large investments in Sudan. 
According to Ahmad, African countries are interested in 
Indian participation in their energy bids to provide a "fresh 
presence" and "balance" among the competitors, but India 
still finds it difficult to lobby effectively for inclusion 
in the bids which are usually done on a nomination basis. 
The GOI already has significant commitments in Sudan, with 
$2.8 billion in investments, including the oil pipeline from 
Khartoum to Port Sudan.  Aiyer will visit key African 
countries this year to assess opportunities for increased 
fuel trade, Ahmad stated. 
 
"Still a Long Way Off" in Central Asia 
-------------------------------------- 
 
6.  (C) Ahmad described two projects the GOI is pursing in 
Central Asia:  Kazakhstan's offer of two oil exploration 
blocks in the Caspian Sea, and the proposed 
Turkmenistan-Afghanistan-Pakistan pipeline, although he 
admitted both are "still a long way off."  Traversing 
extremely rugged geographic and political terrain, the 
proposed Turkmenistan pipeline is "the weakest project in the 
region" because of uncertainties about the volume it might 
deliver and how much of that volume has already been 
committed to Russia, the Additional Secretary observed. 
 
Iran-Pakistan-India Pipeline Generates Ideas 
-------------------------------------------- 
 
7.  (C) Ahmad spoke at length about options for structuring 
the proposed Iran-Pakistan-India pipeline to minimize the 
risk to New Delhi and Indian companies in light of potential 
US sanctions under the Iran Libya Sanctions Act.  In the 
past, he noted, the GOI would not consider any pipeline that 
crossed Pakistan, but the advent of better Indo-Pak relations 
has fueled more progressive thinking within the GOI about how 
to use this project to its best political and economic 
advantage.  Rather than investing capital in the project at 
the outset -- a move that may trigger sanctions under US law 
-- the GOI wants to limit its role to that of buyer, either 
at wellhead, or upon delivery at the Indian border.  Ideally, 
the GOI would purchase the fuel at the wellhead free on 
board, then a consortium (with an India joint venture 
partner) would take over transport.  The advantage of such an 
arrangement, according to Ahmad, is that the GOI would not 
have a contract with Iran after the initial purchase, but 
would still have an equity share in the project, and an 
Indian company would be involved in the consortium.  The 
Charge cautioned that even a structure that involves an 
equity share could trigger sanctions.  Ahmad stressed that 
this is only an example of the possible options for 
structuring the deal and that other models were also being 
examined. 
 
8.  (C) Besides considering models for how India may be 
involved in the project, the GOI has already had two rounds 
of discussions with Iran, but none yet with Pakistan, nor 
have Iran and Pakistan discussed the deal separately, Ahmad 
stated.  If there is political consensus within the GOI to 
pursue the project, the GOI would embark on a trilateral 
government agreement, followed by a detailed feasibility 
study.  Ultimately, price will be the determining factor in 
the GOI decision about whether to participate in the project, 
Ahmad said.  Minister Aiyer is scheduled to visit Pakistan 
the week of June 1 for more detailed discussions. 
 
9.  (C) Charge asked about other energy alternatives as these 
projects are being negotiated.  Ahmad said the GOI will seek 
to provide gas via pipeline from Iran and/or Turkmenistan for 
northern India, and gas from Myanmar to power projects in the 
East, while the south will get LNG from Myanmar, Indonesia 
and the Gulf for petrochemical projects.  He also described 
the possibility of building a spur to the proposed Myanmar 
pipeline so gas from the Indian state of Tripura can be 
exported. 
 
Appeal for Hydrocarbon Partnership 
---------------------------------- 
 
10.  (U) Charge noted the opportunity to press forward on 
energy issues during Deputy Planning Commissioner Montek 
Alhuwalia's visit to Washington at the end of May.  Ahmad 
expressed hope that there would be more US interest in 
engaging with India in hydrocarbons, especially in the area 
of research and development. 
 
11.  (U) Minimize considered. 
BLAKE