The Telegraph
Since 1st March, 1999
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India oil diplomacy creates ripples in US

Washington, April 26: Mani Shankar Aiyar's petroleum diplomacy is creating ripples here in America's dealings with oil producing countries.

At the end of two days of intense meetings at the presidential ranch in Texas between Saudi crown prince Abdullah, top US officials and George W. Bush, American secretary of state Condoleezza Rice surprised reporters yesterday when she referred to India's oil-related activity as a cause for 'concern' for Americans.

'Obviously, with the states like China, India and others coming on line, there is a concern about demand and supply', Rice said to reporters in a briefing on the US-Saudi summit.

America is reeling from high petrol prices: in many areas, motorists now pay almost double what they paid at this time last year for filling up their cars.

Although pump prices in the US are substantially lower than in Europe and Asia, the virtual absence of viable public transport across America has severely hit motorists here.

Yesterday, Bush's job approval ratings was down to a worrying 48 per cent, mainly on account of rising petrol prices.

In 2001, Bush took office threatening to 'jawbone' oil producing countries into lowering oil prices. He may then have had visions ' since thwarted ' of Iraqi oil smoothly flowing into American petrol pumps by now.

In sharp contrast to such bullying of the Organisation of Petroleum Exporting Countries (Opec) that was promised to American voters five years ago, Bush and vice-president Dick Cheney were yesterday pleading with the Saudis to do something about oil prices.

Reading between the lines, the Saudis came to the Bush ranch confident in the knowledge that they are now secure in their ability to develop stable, long-term alternative markets to the ones in America.

Clearly India is among those as a country with rising demand for energy and plans to meet that energy because of Aiyar's petroleum diplomacy. Last month, Aiyar visited Saudi Arabia and initiated talks on long-term, guaranteed supplies from the kingdom.

To buttress that co-operation, Aiyar began talks with his Saudi counterpart, Ali al Naimi, for the setting up of a Saudi refinery in India, which will import crude from the kingdom and sell refined products to the Indian market.

A Saudi-Indian petrochemicals joint venture in Saudi Arabia's industrial town of Yanbu to go on stream this year will annually produce 100,000 tons of paraffin and 800,000 tons of alkyl benzene.

Possibly because of these alternatives, in their discussions with Bush and Cheney, the Saudis carefully skirted the issue of setting up more refineries in the US.

This has been discussed as a Saudi priority some years ago. National security adviser Stephen Hadley confirmed the omission. 'That specific issue did not come up,' he told reporters. 'This is one of a range of issues that we will have an opportunity to follow up on with the Saudi side, now that they have begun to pull together the kind of plan that they talked about.'

Hadley said: 'They are talking about a plan that would allow them to go to about 12.5 million barrels a day (of crude output) by the end of the decade, and plans in the next decade to increase that over time to about 15 million barrels a day in order to help stabilise the market and ensure an adequate supply at a reasonable price.'

It is not a plan that brings any immediate relief to Americans. Already there are scattered reports in the US media of American motorists filling up their tanks and driving away without paying.

One West Virginia newspaper yesterday quoted a petrol pump manager as saying: 'Just at this pump, we have seen about a third of an increase in the number of drive offs as the prices have spiked.'

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