Energy Sector - 2

[Naresh]

<b>India’s new oil minister poised for pipeline diplomacy</b>

India’s new oil minister is likely to adopt a less strident approach to an Iran-Pakistan-India gas pipeline project that could threaten the country’s relationship with the US.

Manmohan Singh, the prime minister, removed Mani Shankar Aiyar, the controversial minister of petroleum, in a cabinet reshuffle at the weekend, replacing him with Murli Deora, a senior Congress party leader from Maharashtra. Mr Deora’s appointment is likely to be privately welcomed in Washington, where he is a familiar and friendly figure.

Analysts attribute Mr Aiyar’s ousting to his vociferous support for the pipeline, to which the US is opposed. His vehemence was likely to have rankled with the US at time when it was trying to garner support for United Nations sanctions against Iran’s nuclear programme, they said.

While New Delhi is loath to jeopardise a pipeline that will help overcome India’s chronic energy shortage, it has a competing desire to clinch a nuclear co-operation deal that would see Washington help India with a civilian nuclear energy programme, reversing its 30-year-old sanction of India’s nuclear capabilities.

The appointment of Mr Deora comes at a particularly sensitive moment, as India is under pressure to join the US in voting against Iran’s nuclear programme at Thursday’s International Atomic Energy Agency meeting in Vienna.

Analysts say India is likely to demonstrate its independence from the US by abstaining from the vote, and comments from the country’s new oil minister saying the IAEA vote is directly related to energy security point to such an outcome. “The upcoming IAEA vote affects the petroleum ministry more than any other ministry as it has a direct impact on energy security of the country,” Mr Deora said yesterday.

Mr Deora refused to address the Iran pipeline deal specifically but said: “Some of the policies [of Mr Aiyar] would continue while some may need change.” He added, however: “I will continue to steer the ministry to achieving this strategy of ensuring the fuel supplies and energy security of our nation.”

The appointment of Mr Deora, who has close ties to both Washington officials and India’s private-sector executives, is a balancing act, according to political commentator Pran Chopra. “India is not giving in on the pipeline idea but it may go slower on it,” he said. “By abstaining from the vote, it’s giving one gesture to Iran, and by changing the petroleum portfolio, it’s giving another gesture to the US. We don’t want to abandon Iran and we don’t want to cause offence to America.”

Mr Deora’s appointment may also help on the domestic front. While Mr Aiyar aggressively lobbied for India to shore up energy resources both in India and from abroad, he frequently clashed with the heads of public sector companies, such as Subir Raha, chairman of the Oil and Natural Gas Corporation (ONGC).

Analysts say Mr Deora is likely to take a more diplomatic approach. [b][blue]“Despite his overt enthusiasm, [Mr Aiyar] was seen as a bit of a hindrance,” says Abheek Barua, chief economist at ABN-Amro Bank.[b][red] “He rubbed PSU [public sector undertaking] chiefs up the wrong way.”

Mr Aiyar took the ONGC to task for not being efficient enough on oil exploration within India, which imports two-thirds of its energy needs. “It’s best not to have an overbearing minister breathing down their necks,” says Mr Barua.

Mr Aiyar, who has been sidelined with his appointment as minister of youth and sports affairs, expressed confidence in his successor. He said: “I’m sure he will live up to the prime minister’s expectations. The government has not changed so I’m sure the policy will remain steady.” He refused to comment on his dismissal, saying only that it was the prerogative of the prime minister to select his own cabinet.

The prime minister’s cabinet reshuffle mainly focused on smaller portfolios, but analysts said it was notable that he filled ministerial rank vacancies with longstanding Congress party leaders, demonstrating the government’s commitment to an economic reform process that has been stalled by leftwing parties in its ruling coalition.

“It represents an increasing assertiveness by the Congress to put old hands in the cabinet,” said Peter de Souza, a senior fellow at the Centre for the Study of Developing Societies.

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