WASHINGTON, June 25: The proposed Iran-Pakistan-India gas pipeline is posing a major foreign policy challenge for the US as it tries to balance its interests in South Asia with its objective to contain Tehran, says a major US daily.

The proposed pipeline is complicating US South Asia policy, which aims at promoting good relations between India and Pakistan, and is also frustrating the Bush administration’s efforts to isolate Tehran, notes The Wall Street Journal.

“In a classic foreign policy squeeze, George Bush administration is scrambling to show it can support increasing warmth between India and Pakistan while opposing a pipeline that would link the two,” the paper says.

The wild card, it says, is Iran, and Washington’s long-held desire to tamp down investments there and isolate Tehran’s government. The report says that top US officials see the proposed $4.16 billion pipeline, which would deliver natural gas from Iran to India across Pakistan, as another sign that Tehran is using its natural resources to gain leverage in South Asia.

This comes as Washington is trying to avoid tangles with New Delhi while it launches an unprecedented campaign — complete with promises of fighter jet sales — to cement diplomatic ties and “lift India as a democratic counterweight in Asia to China,” says the Journal.

It notes that the US faces another contradiction in its opposition to the pipeline. The main energy alternative the US is suggesting for India — more nuclear power — bumps up against another US foreign policy goal-stemming the flow of nuclear materials.

The paper notes that no president has moved to impose penalties under the Iran-Libya Sanctions Act since it was enacted in 1996, despite a number of foreign investments in Iran’s oil and gas industry.

Earlier this month, Secretary of State Condoleezza Rice told reporters in Washington that while the US had “concerns” over the proposed pipeline, it was conveying India and Pakistan in a “constructive” and not a “negative way.”

Meanwhile, a close US ally, Britain, has indicated that it supports the pipeline that would bring gas from Iran to India through Pakistan.

British High Commissioner Mark Lyall Grant told a recent meeting in Quetta that the proposed multi-billion dollar project was a win-win project. He said that both India and Pakistan needed new sources of energy for their developing industries and the project would be feasible for all three countries.

The European Union also has said it is not opposed to the project.