Iran can't compete with Russia for Europe’s gas market

Iran can't compete with Russia for Europe’s gas market

Baku, Azerbaijan, Aug. 5

By Elena Kosolapova - Trend:

Despite the nuclear deal with the P5+1, Iran has very little chance to deliver its gas to the European market in the years to come, Vladimir Yevseyev, the expert on Iran, the director of Russian Center for Public Policy Research, told Trend August 5.

"Moreover, in the medium term, Iran's gas will not be able to compete with the Russian gas in the European market," the expert added.

He said there are several reasons for this.

"Firstly, Iran, in order to bring its gas to the European market, needs the lifting of sanctions, and so far the matter rests in only their mitigation," said Yevseyev. "It is premature to say that in the near future there will be the lifting of sanctions or defrosting of significant assets of Iran."

Even in the most favorable case, the process of easing the sanctions will only begin the next year. Yevseyev added.

"And the US will for eight years only suspend the sanctions, while Europe, perhaps, may stop them. In any case, it is necessary to wait for a report of the IAEA director general, and on this basis only some proposals will be developed to mitigate the sanctions."

Secondly, the expert said, as of now Iran has no free volumes of gas that it could deliver to Europe.

Domestic gas production, especially for electricity generation is growing very fast in Iran and in fact, the whole volume of production in the country is used in the domestic market, he said.

Some free volumes are supplied to Iraq and these supplies will be expanded, according to the expert.

Moreover, there are plans on laying an underwater pipeline to Oman and the issue of gas supply to Pakistan also remains open, he added.

"Under these conditions, I can't see even a theoretical possibility that there can emerge any considerable volumes of Iranian gas which could be delivered to Europe," he said.

Although Iran has huge gas reserve, considerable amount of investments - $50 billion to 80 billion - as well as new technologies will be required for processing it, according to estimations, said the expert.

He added that Iran will not be able to get them in the near future.

The expert said he is more than confident that even if the Iranian assets worth about $130 billion in the US are unfrozen, Iran won't get this money in a short time.
Unfreezing these funds will take long time, if it at all, according to the expert.

"Foreign investors will be afraid of investing in the projects in Iran as the agreement signed between Iran and the "Six" is reversible and there is no guarantee that it will not be canceled," the expert said.

"Nobody knows what will happen in the US after the new president is elected next year," he said. "There is no understanding of the situation in two years. In such circumstances, big business will not work."

He said that in such circumstances, most likely, Iran would be unable to obtain Western technologies in the required quantities.

"In such circumstances, it is impossible to rapidly ramp up the production of natural gas," the expert said.

"Moreover, Iran wants to sell its gas at a high price," he said. "The buyers, including European ones, are not pleased with this."

"Thus, the gas pipeline from Iran to Turkey, which allows to supply at least 10 billion cubic meters, has been filled by only six billion cubic meters mainly because of the high price of Iranian gas," he said.

"At present, if we compare the prices at which Turkey buys natural gas, the most expensive gas is Iran's gas," the expert said. "By its price Russia's gas ranks second. And the cheapest gas is Azerbaijan's gas."

"As for Iranian oil, then, its supplies to Europe are more real," he said.

"A part of Iranian oil is located in tanks: either in tankers or in storage on the territory of Iran," he said. "The volumes of this oil are nearly 40 million barrels per day. It could appear on the market if the oil embargo is lifted," he said.

However, in order to further have a serious impact on the oil market, Iran will need to increase production volumes.

"Now, Iran can increase its oil production by about 500,000-800,000 barrels per day," said Yevseyev. "It is not so critical for world prices. Therefore, it is premature to say that Iran will be able to have a serious impact on the oil market."

As for any other Iranian products, in addition to oil and gas, Iran currently doesn't produce anything that is very necessary to Europe in large volumes, according to the expert.

He went on to add that Iranian business is mainly of a regional nature and doesn't seriously depend on Europe.

In addition, the technologies in Europe are higher than in Iran, and, accordingly, the Iranian products won't be in great demand on the European market. However, they are popular in neighboring countries, he said.

"All the production they have for export to Europe has relatively modest volumes," the expert said. "Maybe, pistachios are the only exception. The only thing that Iran can export in large volumes at the moment is pistachios."

Edited by CN
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Follow the author on Twitter: @E_Kosolapova

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