Given the security concerns surrounding existing pipeline routes connecting the Caspian Basin and Turkey, Iran is trying to fashion itself as a viable energy export alternative. The desire for an energy opening to the West is sufficiently strong that at least some political factions in Tehran seem willing to explore a deal with the United States and European Union concerning Iran's nuclear program.
Russia's August incursion into Georgia reshuffled the geopolitical deck in the Caspian Basin. [For background see the Eurasia Insight archive]. In particular, Russia's continued military presence in Georgia has cast doubt on US and European hopes for building an energy-export network in the region that would allow for the Westward transport of large volumes of oil and gas without transiting Russia.
Intent on bolstering Iran's struggling economy and reversing a decline in the country's oil production levels, Iranian officials are eager to try to fill a perceived energy void. With Georgia now seeming a risky bet for energy export initiatives, Tehran has put forward an ambitious plan to become a major European energy supplier.
Deputy Iranian Oil Minister Akbar Torkan publicly outlined Iran's energy export ambitions in late September. The centerpiece of the Iranian plan is the proposed construction of a $4 billion pipeline that would deliver natural gas via Turkey to EU countries, including Greece, Italy and Germany. According to a report in the Russian business daily Kommersant, Iranian officials are in talks with a "well-known European company" about forming a pipeline consortium. The proposed route would have an estimated annual capacity of 37 billion cubic meters.
The Iranian initiative immediately becomes a challenger to two other proposed export routes - Nabucco and South Stream. [For background see the Eurasia Insight archive]. All three routes have drawbacks. Nabucco has long been plagued by questions about whether it can secure a sufficient supply of gas to be viable. [For background see the Eurasia Insight archive]. South Stream, meanwhile, is a Kremlin creature, and thus would not address the EU's stated desire of diversifying its energy sources. At present, the EU obtains roughly two-thirds of natural gas from Russia.
In terms of available reserves, Iran would certainly qualify as a potential major European exporter of oil and gas. But the Pars pipeline project, along with the development of Iranian reserves in general, stands little change of being realized as long as the standoff between Iran and the West over Tehran's nuclear program remains unresolved, industry analysts say. "Iran holds the world's third-largest proven oil reserves, and the world's second-largest natural gas reserves," said Samuel Ciszuk, Middle East energy analyst at Global Insight in London. "But the political risk centered on Iran's nuclear program and US-directed sanctions on Iran's energy industry have dissuaded energy companies from investing there."
The United States has reportedly played a major role in putting several Iranian energy projects on hold. For example, European firms such as Royal Dutch Shell and Total have recently suspended liquefied natural gas (LNG) projects in the South Pars field, the world's largest gas deposit, because of increased political risk. Similarly, a report posted by Tabnak, an influential Iranian website run by former Revolutionary Guards commanders, suggested that India is expressing reluctance to participate in a South Asian venture, dubbed the Peace Pipeline, due to pressure from Washington.
According to a US-based energy analyst, who spoke on condition on anonymity, there are several factors that could increase the appeal of a Pars pipeline from the European point of view. Perhaps the foremost factor is the foreign policy aggressiveness exhibited by Russia both during and after its incursion into Georgia, as well as its unilateral recognition of the separatist territories of Abkhazia and South Ossetia. [For background see the Eurasia Insight archive]. Weather could also shape up as an important element in the European energy calculus. Another bitterly cold season like that experienced in 2007-08 would heighten European interest in cooperation with Iran.
To give the prospects for the Pars pipeline a boost, Iran needs to take immediate steps to improve its energy export image, some experts say. Ciszuk explained that Iran currently has a relatively poor reputation among investors. "Iran is known to retroactively change its agreements," he said. Tehran is also known for its "hawkish pricing" practices in which Iranian officials tend to set a high price for natural resources and then shows little negotiating flexibility, Ciszuk added.
Ultimately, Tehran's export ambitions don't stand a chance of being realized without some sort of agreement among the United States, European Union and Iran on the nuclear issue.
According to experts in Tehran, at least some powerful factions in Tehran, including one centering on Iranian parliament Speaker Ali Larijani, remain open to exploring a deal under which Iran would adopt a more cooperative stance on its nuclear program, and perhaps modify some of its ambitions in this sphere, in return for the opportunity to expand energy contacts with the West, in particular EU states.
The opaque nature of Iranian politics makes it difficult to gauge Iran's actual ability at this point to strike a nuclear concessions-for-energy exports bargain. Perhaps the biggest unknown at present is whether Iranian neo-conservatives, led by President Mahmoud Ahamadinejad, could back any proposal that would place restraints on the country's nuclear program. Also unknown is the stance of Supreme Leader Ali Khamenei, whose position on the issue could prove decisive.
In recent months, Ayatollah Khamenei has appeared to express support for Ahmadinejad's policy course. However, experts in Tehran believe that the Supreme Leader is potentially open to throwing his support behind a grand bargain involving energy exports.
In 2003, before the United States became bogged down in Iraq, Iran conveyed a diplomatic note to the Bush administration, sent via Swiss intermediaries, voicing a desire to explore a comprehensive solution to all outstanding issues between Tehran and Washington. The note clearly indicated that Iran would be willing to make tradeoffs concerning its nuclear program in return for US concessions in other areas. Experts in Tehran say the note would never have been dispatched without Ayatollah Khamenei's consent. In the end, though, the Bush administration flatly rejected the invitation to engage.
Conditions today are, of course, far different than in 2003. Ahmadinejad was not the president of Iran at that time, and the United States was still universally respected as a world power. Under the geopolitical circumstances that existed before August of this year, there seemed no chance of Iran and the United States finding any time soon the common ground necessary for comprehensive discussions on bilateral issues.
It is somewhat ironic, then, that Russia's incursion into Georgia created a potential opening for Iran to again consider a comprehensive deal. The potential economic benefits of the Pars pipeline would be big enough that Iran might be willing once again to consider compromises in the nuclear sphere.
Before making a public commitment to substantive talks with the United States, Tehran would likely want to receive some signal from Washington that such an initiative would be favorably received. While the Bush administration remains disinclined to probe a rapprochement with Iran, the same might not be the case with the next presidential administration that will assume power in January.
Iran would want a clear-cut indication that talks with the United States could bear fruit because any substantive engagement could have considerable repercussions for Iran's relations with Russia. "Iran has come to depend on the Russians' support in a variety of areas. Considering how jealously the Russians want to guard their monopoly of gas supplies, I don't think they would take a liking to this idea at all," said the US energy expert.
Editor's note:
Kamal Nazer Yasin is a pseudonym for a freelance journalist specializing in Iranian affairs.
