In fact, the sources seemed to be extremely pleased with the two-day dialogue just concluded with Iranian Foreign Minister Kamal Kharazzi, saying Teheran had offered to sell liquefied natural gas (LNG) to India on a long-term basis. A joint working group will now be set up to go into the details of the offer.

Along with Oman, with which India will soon conclude a 25-year-old agreement to buy LNG worth just under $1 billion annually, a potential deal with Iran in the hydrocarbons sector will propel New Delhi towards visualising ``strategic linkages'' with its region. The government realises that with its own energy needs set to boom in the next century, Iran is not only a lucrative potential partner but also shares a border with Turkmenistan, said to possess among thelargest natural gas reserves in the world. The public remark about Rushdie came at a press conference at the end of the tenth Indo-Iranian joint commission in the Capital. Kharazzi, in reply to a question about the visa to Rushdie said, ``We are not very happy about it.'' He went on to add that India should focus on ``creating understanding between Muslims and non-Muslims... anything that divided them should not be encouraged.'' But the sources pointed out that Kharazzi did not mention the issue at all in the two-day dialogue with Indian officials, leading them to speculate that the public remark was made for the benefit of Iran's conservative audience at home.

In keeping with New Delhi's world view that relations with nations in India's neighbourhood should be strengthened, External Affairs Minister Jaswant Singh went out of his way to applaud the ``dialogue of civilisations'' initiative taken by Iran's moderate President Khatami.Khatami's proposal at the UN last September had sought the UN's approval inmaking the first year of the third millennium, AD 2001, the year of the ``dialogue of civilisations.'' New Delhi, which had supported the proposal at the UN, reiterated the idea over the last two days, saying that as one of the oldest civilisations in the world it had a lot to contribute. Both countries signed an agreement on maritime commercial navigation, while formalities were exchanged about the 1997 tripartite transportation agreement between India, Iran and Turkmenistan. It was decided that both sides would upgrade economic ties on the ground to match the quality of the political sentiment.

The plunging price of petroleum -- under $10 a barrel today, down from $16 a barrel some years ago -- has affected Iran's capacity to import goods, the sources conceded. With the 20-year-old US sanctions underlining the economic crisis, Teheran is going out of its way to woo Western companies in the oil and gas sector.

Under the circumstances, Iran is also more than willing to make political compromises withricher nations. An off-the-record deal with the UK a few months ago on the Rushdie case -- Teheran is believed to have told London that it is willing to remove the death penalty from British citizen Rushdie if London would resume economic ties -- has reaffirmed Khatami's libertarian credentials worldwide.

The offer to sell LNG to New Delhi should also be seen in this perspective. The government has also offered a $20 million credit line, open for a year, for Teheran to buy anything it would like from India.