Expert: With its reserves, Iran has potential to upset Russian Gazprom’s natural gas strategy

Baku, Azerbaijan, Jan. 27

By Saeed Isayev - Trend:

With the second-largest natural gas reserves in the world, Iran does have the potential to upset Russia Gazprom's natural gas strategy, member of Centre for Iranian Studies of London Middle East Institute, political analyst Dr. Ghoncheh Tazmini told Trend.

"With access to proper technology, Iran could conceivably increase its production," she said, commenting on whether Iran could become Russia's gas rival.

Tazmini went on to add that Russia's traditional dominance of natural gas markets has been challenged by both Iran and Qatar, both of which are two leading international natural gas producers.

"Of the two, however, Qatar has proven more of a rival for Russian gas giant Gazprom," she said. "Since liquid natural gas (LNG) rose to the forefront of the natural gas industry in the mid-2000s, Qatar has targeted the primary market for Gazprom's international gas exports: Europe."

"In addition to supplying increasing amounts of LNG to Western European countries by ship, the tiny Persian Gulf state has also announced a desire to build a pipeline to Turkey, challenging Gazprom's business there as well," Tazmini said.

However, analyst says there's a difference between Russia's and Iran's gas exports.

"Russia's export strategy is aimed at Europe, a vital market. Practically-speaking, Iran is neither geographically, given its distance from Europe, nor politically, in view of ongoing international sanctions, positioned to export natural gas to Europe, which is the region most vital to Gazprom's export strategy," she explained.

"For decades, Iran announced ambitious plans to export gas but in reality the country became a net-importer in 1997 and has remained so," Tazmini said.

"In 2011, 9 bcm in exports were surpassed by imports of more than 10 bcm, almost exclusively from Turkmenistan," she said. "Last year, Iran year asked Turkmenistan for more supplies to help ease shortages that were forcing Iranian power plants to burn billions of dollars of expensive and polluting oil products."

Iran imported 4.5 billion cubic meters of gas worth $3.5 billion from Turkmenistan in the last solar year - which indicates a 50 percent decrease, compared to the previous solar year.

Tazmini believes that Iran has little chance of becoming a significant gas exporter for at least a decade. All because of high domestic demand and internal obstacles to developing reserves, which were a problem, well before the sanctions pushed foreign investors out.

"The previous government of President Mahmoud Ahmadinejad signed numerous gas export deals with Arab neighbours, devised plans to supply Europe via several pipelines, and planned gas-freezing LNG export plants to supply gas to Asia," she said.

She went on to add that so far Turkey has been the only country to receive significant volumes, and because of Iran's own winter heating needs, it has been unable to supply the volumes contracted with Turkey.

"As such, any gas that Iran can spare in the future is likely to go to neighbours with existing contracts," Tazmini said.

"Still, Gazprom remains suspicious of the Iranian potential to undercut its supply lines. Nothing could be more disconcerting to Russia than for Western natural gas companies to begin investing in Iran's natural gas fields and to pump out natural gas to be sold in traditionally Gazprom-dominated natural gas markets," she said.

The analyst went on to add that conciliation in the US-Iran relationship would also take away Russia's ability to bargain with the West on arms exports and nuclear issues that relate to Iran.

"It is unlikely that Iran and the international community will achieve this level of rapprochement and cooperation any time soon, given the hard-line Republican positions in Congress and among conservative elements Iran, and last but not least, the Arab states that will do their utmost to thwart this process," she said.

On Jan. 20, the EU has agreed to suspend some economic sanctions against Iran as part of a ground-breaking nuclear deal under which Tehran has scaled back its nuclear work.

The decision included softening restrictions on trade in petrochemicals and precious metals and on the provision of insurance for oil shipments, among other measures.

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