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India - Pakistan Talk on Gas Pipeline Project

Talks between India and Pakistan this past week were not just on long-standing political disputes but ways to boost economic ties. This included a project to bring Iran's natural gas reserves to India through Pakistan. Indian officials are cautious but optimistic that such a venture could benefit the region.

When Pakistan's Prime Minister Shaukat Aziz made his first visit to India this past week, talks were not limited to politics. Mr. Aziz revived an eight-year-old project to build a $4 billion pipeline to carry natural gas from Iran to India through Pakistan.

The prime minister, speaking in New Delhi, said the pipeline could help meet the growing energy needs of both countries - which import most of their oil and gas. "We need the energy levels. We are talking to several countries, Turkmenistan, Qatar and Iran to get gas for Pakistan itself. If India needs the gas also, which I believe they do, we have asked the Indian government to join us in this project. However, if they have other sources of energy, Pakistan is going ahead anyway with this pipeline," he said.

Iran has been pushing the proposal to build the 1,600-kilometer-long pipeline from its massive gas fields since 1996, but political tensions between India and Pakistan have blocked progress.

Now ties between the South Asian neighbors appear to be improving. Talks between Mr. Aziz and his Indian counterpart, Manmohan Singh, resulted in a renewed commitment to finding a peaceful settlement on the disputed territory of Kashmir. And with this, hopes have revived for the natural gas-pipeline project.

Pakistan could earn an estimated $600 million in transit fees, while India could save about two billion dollars a year by importing the piped natural gas instead of shipping more costly liquefied gas.

Analysts say the pipeline will only be viable if India participates in the deal. But for now New Delhi remains cautious, fearing a pipeline running across Pakistan may compromise its energy security.

India's oil minister, Mani Shankar Aiyer, says the project should be linked to the overall widening of India-Pakistan economic ties. New Delhi wants Islamabad to lower tariffs, and to allow India the right to transport goods through Pakistan to Central Asia.

Both countries are in talks to boost trade ties, but progress has been slow. Annual trade is a meager $250 million. Businessmen on both sides say this could reach $4 billion in three years if tariff and other barriers are lowered.