Melt butter in a large nonstick skillet over medium-high heat. Add shallots, and sauté 8 minutes or until golden brown. Remove from heat.
Combine water and rice in a medium saucepan over medium-high heat; bring to a boil. Stir in green peas and the next 8 ingredients (through bay leaf); cover, reduce heat, and simmer 20 minutes or until liquid is absorbed and rice is tender. Discard cinnamon stick and bay leaf. Stir in shallots and pistachios.