Moneycontrol
May 24, 2012 12:52 PM IST | Source: ft.com

India and Pakistan sign gas deal

India and Pakistan on Wednesday signed a landmark natural gas agreement with Turkmenistan, which is expected to bolster the development of a USD 7.6bn pipeline that cuts across Afghanistan.

India and Pakistan sign gas deal

India and Pakistan on Wednesday signed a landmark natural gas agreement with Turkmenistan, which is expected to bolster the development of a USD 7.6bn pipeline that cuts across Afghanistan.

Under the agreement, Turkmenistan will provide 33bn cubic metres of gas a year to India and Pakistan for a 30-year period, a move that will significantly help the countries meet their growing energy demands.

The gas deal marks the latest sign of improving ties between the south Asian neighbours. Relations between the two collapsed in 2008 after Pakistani militants killed 166 people in Mumbai, India's financial capital.

"Each country stands to gain, making this not only the 'Peace Pipeline', but a pipeline to prosperity as well," said Klaus Gerhaeusser, director-general of the Central and West Asia Department at the Asian Development Bank, which backs the project.

The agreement also paves the way for greater co-operation between Islamabad and New Delhi on the development of a US-backed trans-Afghan pipeline, which will deliver the gas and is expected to be welcomed by Washington.

The US hopes that better ties between India and Pakistan will boost stability in Afghanistan, which has often served as a proxy battleground between the two countries.

"Today we are witnesses of a historic event, not just of regional but of world scale," said Baimurat Khodzhamukhamedov, the deputy prime minister of Turkmenistan.

However, the completion of the much-delayed 1,800km pipeline and successful distribution of gas from Turkmenistan to the south Asian countries will depend on the ability of all the parties involved in its development to secure it from Taliban attacks, analysts said.

The gas deal will also help India reduce its dependence on Iranian oil. Washington has repeatedly demanded that New Delhi cut its oil imports from Tehran, as part of America's efforts to curb Iran's nuclear programme.

The US has threatened to start sanctions from July against foreign banks that facilitate the purchase of Iranian oil, adding pressure on Asian countries, including India, China, Japan and South Korea, to seek alternative supplies of oil.

Additional reporting by Reuters

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