Regnum, Russia
April 20 2006
Antagonism of Iran and Gazprom in the South Caucasus: interview with
Noravank Foundation expert Sevak Sarukhanyan
REGNUM: Mr. Sarukhanyan, it is known that in its analysis of
international and regional developments the Noravank Foundation gives
a special place to the processes over Iran. After the UN Security
Council’s relevant decision, the process has gone back into the
framework of the IAEA. But Iran firmly reiterates that it will never
renounce its nuclear program. Is there any way-out of this situation,
and what do you think of this process in general?
I would like to note from the very beginning that the international
community and, first of all, the UN SC will do their best to prevent
Iran from becoming a nuclear power and still have much time for that
– for, despite its great progress in the nuclear technologies, Iran
is yet very far from its first nuclear bomb. From this point of view,
2006 will be a period of active diplomatic talks and active
diplomatic pressure upon Iran. If by the UN SC’s meeting in late
April Iran fails to fulfill Security Council’s recommendation to stop
uranium enrichment, there is a very small possibility that the SC
will apply some sanctions – but more likely political than economic:
for example, the SC may restrict the movement of Iranian political
figures. But this possibility is very small. The SC may also set up
an ad hoc commission who will negotiate with Iran outside the
framework of the IAEA or will send back the nuclear dossier to the
IAEA for revision to consider it once again and, this time, possibly
to suggest much tougher sanctions. Still, I am sure that no economic
sanction can influence Iran’s policy unless it affects the country’s
oil sector. However, now that the oil prices are as high as never
before, the Western society simply can’t limit imports of Iranian
gas. And so, no economic sanctions outside Iran’s key export item can
actually force that country to abandon its plans to enrich uranium.
The global way-out of this situation is in some indirect agreements
between Iran and the US. The Americans should pledge that they will
not plot a coup in Iran and will not try to solve the nuclear problem
by war. But this is hardly possible: given US security guarantees,
Iran will turn into a regional leader and will gain strength in
Afghanistan and the Shi’a parts of Iraq – something Washington will
hardly agree to even if Iran agrees to certain concessions in the
nuclear issue. So, in the mid-term prospect, the present tensions
over Iran will be certainly preserved, if not escalated. It should be
noted here that seemingly fraught with war, such high tensions may,
at the same time, be pregnant with a political solution. In fact, the
conflict is not frozen, which is a good prerequisite for a
compromise. Theoretically, the US and Iran may even totally improve
their relations – this is scarcely, but possible.
REGNUM: You have said nothing about the full stoppage of Iran’s
nuclear program – is it absolutely impossible?
In principle, it is possible, especially as the very structure of
Iran’s uranium enrichment cycle gives nothing to it in economic or
military-political terms. Today Iran insists on being allowed to
enrich uranium in limited quantities. That is, the question is about
centrifuges that will not allow Iran to get a nuclear bomb. Iran will
stop the program only if it gets tangible guarantees and dividends
from the world community.
REGNUM: Much has been said about the possibility of joint ventures
for uranium enrichment in the territory of Iran. Is it possible that
the US will get a share in such projects for its companies?
This is hardly possible for the Americans but is quite possible for
the Russians and the Europeans. Recently Iran has offered such
cooperation to Russia, France and Germany, but, given the present
tensions, the latter two countries will hardly agree.
REGNUM: What was the reason for the last large-scale military
exercises in Iran, and what military potential does that country
have?
Despite the last 10-15 years’ progress, the military potential of
Iran is comparatively weak. Of course, it is stronger than that of
the Hussein-time Iraq, but it is still much weaker than those of
Turkey and Pakistan (even exclusive the latter’s nuclear capacities).
The military exercises in Iran were supposed to show that that
country is ready to give – if not full – but rather tough rebuff to a
possible attack by the US – a rebuff that may lead to quite serious
political and economic consequences. The key emphasis was on the
navy. Iran displayed its new project – anti-ship missiles to be
launched not so much against US ships as against oil tankers passing
the strait. Thereby, Iran has shown that the war can bring to ruin
the whole international energy security system and can put an end to
the oil imports from the Middle East – an end not only to the
supplies of Iranian oil but to the supplies of any fuel from the
Middle East. And this is a very serious threat for the world economy.
REGNUM: Europe is actively developing the idea of diversifying its
fuel import sources. In this project the South Caucasus and Armenia,
in particular, may play the role of a transit corridor. With its
present parameters, the Iran-Armenian gas pipeline cannot be used for
transit, but many say that a new wider pipe may be laid. Does this
mean that Iran and Russia will get into a tougher rivalry in the
South Caucasus?
In fact, the European vector of the Iranian policy and the Iranian
vector of the European energy policy are two very important factors.
By 2015-2020 the EU will face very serious gas shortages even if
Russia continues its gas supplies and even augments them due to the
new Northern-European gas pipeline. Given its growing demand for
natural gas, the EU is seeking not so much to diversify its gas
sources as to find new free gas resources in the Middle East, more
precisely, in Iran and Qatar. The latter is off-side because of its
geographical situation: one can’t lay a pipe from Qatar to Europe
bypassing the territories of unstable Iraq and also Saudi Arabia.
Iran is a special case. Since 2003, the EU Troika has negotiated with
Tehran not only about the nuclear problem but also about
trade-economic cooperation. Before the victory of Mahmoud
Ahmadinejad, the EU proposed that it would become the key buyer of
Iranian gas if Iran gave up its nuclear plans.
The point with South Caucasus is that if before the “democratic
revolutions” in Georgia and Ukraine Europe gave preference to the
Turkish route, now, after the victory of Mikhail Saakashvili in
Georgia and Viktor Yushchenko in Ukraine, the belt of the EU partners
has come very close to the Iranian borders. And so, loyal Ukraine and
Georgia and also the Iran-Armenia gas pipeline are a new gate for
Europe to the Iranian gas resources. And even though the presently
built Iran-Armenian gas pipeline is not able to transit gas, it is
certainly regarded as a technological and political basis for a new
stronger pipe.
REGNUM: At what price is Iran ready to sell its gas to Europe?
Iran wants to sell its gas to Europe at no less than the European
price. Let’s remember Nabucco 2003, a project planning that Turkey
would buy Iranian gas and resell it to Europe at a higher price. Iran
rejected the project and since then has raised its gas price for
Turkey by 25%. In fact, Iran does not want any country to resell its
gas and is interested in the South Caucasian route exactly because
the small countries of that region are less significant in the
international energy security system than Turkey.
Of course, Iran wants to be the key seller of its gas in the EU. But
it is also considering the possibility of consortiums with the
countries that will be en route to Europe. Last year Iran proposed
creating an Iranian-Armenian-Georgian-Ukrainian-Russian commission
for considering the expediency of a gas pipeline to Europe via those
countries. But recently Iran has tended to exclude Russia from this
project and to prefer laying the pipeline via the bottom of the Black
Sea. A gas pipeline from Iran to the Ukrainian territory will cost $5
bln – but only if connected to the already existing pipelines in
Ukraine. But the problem is that Ukraine’s pipelines have small
transfer capacities. Today they can pump 180 c/m of gas: they already
pump 115 bln cubic meters of Russian gas to Europe and can pump only
50 bln cubic meters more, while the above project is about 100-150
bln cubic meters. So, Europe, Iran and Ukraine will inevitably have
to lay new pipelines in the Ukrainian territory, which will cost them
a pretty penny.
Of course, the launch of Iran’s gas supplies to South Caucasus will
cut Russia’s energy influence on that region. But this is not so much
about Armenia, where Russia has a serious presence, as about Georgia,
where Russia’s gas supply monopoly is an effective economic lever for
Moscow to correct the radical policy of the local authorities.
REGNUM: Why then during the last energy crisis did Iran sell gas to
Georgia at a very unprofitable price? Does this mean that Iran is not
interested in the Georgian market?
The supply of gas to Georgia is by no means a political advantage for
Iran. Purely politically, Iran is not interested in Georgia.
Economically, it will be interested in Georgia only if it remains in
an export blockade – then it will welcome any buyer. But, even then,
it will not sell its gas to Georgia at $110. As regards the
preferential export of gas to Armenia, here Iran is, first of all,
interested in the electricity import and is, in fact, laying the
basis for a bigger transit route.
Iran does not want to lay a local pipeline and to supply cheap gas to
Georgia because it knows that this gas will not go farther than
Georgia. And the $233/1,000 cubic meters is a kind of a signal for
Georgia, and likewise for Azerbaijan: that Iran does not regard it as
a transit territory. The price for Georgia was a sing of certain
problems between Iran and Azerbaijan and also a response to the high
price Baku asked for the transit. The Armenian route is more
acceptable for the Iranians, but only if they start supplying gas to
Ukraine and Europe. The Georgian market as such is of no interest for
them.
REGNUM: Russia has got deeply wedged in the Armenian-Iranian “gas for
electricity” scheme. In fact, the gas received from Iran will be
turned into electricity at the Russia-owned 5th unit of the Hrazdan
Thermoelectric Power Plant and be later imported to Iran through a
Russia-owned network?
Unfortunately, Iran regards Russia’s presence in Armenia’s energy
system as a threat to its plans to export gas to Europe. The sale of
the 5th unit of the Hrazdan TPP to Russia can impact Iran’s readiness
to build a wider pipeline in Armenia (the diameter of the
Iran-Armenia gas pipeline is 700 mm – REGNUM). It is known that Iran
has laid a much wider pipe to the Armenian border. Yes, the Iranians
agreed with Armenia to get electricity in exchange for gas, and, in
fact, it should make no difference for them who will produce that
electricity. For Armenia its agreement with Iran is crucial for its
economic and energy security.
By late 2003, Russia was interested in the building of a wide
Iran-Armenia gas pipeline, but when the talks started, Gazprom left
the project, seeing some threat in it. It was exactly this project
that forced Gazprom to replace Itera as the key gas supplier to
Armenia and, thereby, to get levers for a more active policy. Gazprom
was against the project, first of all, because it was afraid to lose
its positions in Georgia.
Meanwhile, they in Armenia neglect the fact that Iran is afraid of
Gazprom’s further strengthening not so much in South Caucasus as in
Central Asia. Iran will try not only to supply its own gas to Europe
but also to ensure the transit of gas from Turkmenistan and
Uzbekistan, i.e. to slash Russia’s monopoly there. So, the key reason
for the present antagonism between Gazprom and Iran is exactly the
Central Asian gas. By 2010 Turkmenistan will produce 100 bln cubic
meters a year, which is a very attractive figure for Iran and the EU.
The Europeans would prefer to see this gas coming through Iran rather
than Russia, and this makes Central Asia a key frontline between Iran
and Gazprom. The tiny market of the South Caucasus, as it is, cannot
be an object for Iran-Gazprom rivalry, while as a transit route for
the Central Asian gas, it may well be.
REGNUM: Your words suggest a conclusion that the aggravation of
relations between the EU and Iran is good for Russia in any case:
Iran will not get a nuclear bomb and will not enter into gas and
transit dialogue with the Europeans…
In fact, Russia is certainly interested in a compromise in the
Iranian nuclear problem, but not in the compromise proposed by the
EU. A “Troika” agreement between the EU and Iran will lead to an
improved energy dialogue between Europe and Iran. This will make Iran
a rival to Russia on the European gas market. Today Moscow is trying
to take the initiative and to agree with Iran on its own. But Iran
perfectly understands what consequences it may face if it agrees with
Russia and not with the EU. That’s why despite its demonstrative
interest in the talks with Russia, Iran still prefers to agree with
Western Europe.
REGNUM: Could you specify what consequences Iran may face if it
agrees with Russia?
There will be the following consequences: though the West will no
longer be able to criticize Iran for its nuclear program as now
uranium will be enriched in the Russian territory, it will still have
problems with that country; though Iran will get cheap uranium, it
will lose its global political dividends. If Iran agrees with Europe,
it will get a serious economic and political carte branch. In other
words, an agreement with Russia will lose Iran its key trump with no
dividends instead.
REGNUM: What prospects does Russia have as an exporter of Iranian gas
or the operator of such an export to Europe?
In its time, Russia wanted to take part in certain gas projects in
Iran, particularly, in the development of the Southern Pars fields.
But then Iran used various bureaucratic levers to force Gazprom out
of its gas market. Moscow still wants to strengthen its positions on
that market but Tehran does not want that. Iran has opted for
independence in its gas policy and will by no means let Russia in.
The Iranians are quite ambitious here, they also want a share in
transit projects. Even the biggest international gas companies become
just ordinary, not very profitable construction companies in Iran. On
the other hand, Tehran is not against using the transit potential of
Russia and Gazprom, in particular, and is also considering creating
and having a big share in gas consortiums.
REGNUM: But is it right for Iran to act so in its present hard
situation? Isn’t this why Iran’s gas export is so low now that the
demand for fuel is so high? Does Iran have necessary political
resources for such ambitions?
Today Iran’s political resources are as strong as never before, and
this is due greatly to the US policy in the Middle East. The
overthrow of Hussein in Iraq and Taliban in Afghanistan has played
into Tehran’s hands. But, at the same time, it can’t be aggressive in
its gas policy – the political situation over Iran and in the whole
region does not allow that country to push its interests forth.
As regards joint projects by Iran and Gazprom, they are quite
possible, especially as the international gas market has absolutely
no organization. And so, Russia and Iran, the first and second gas
powers in the world, can well organize a kind of gas OPEC. Unlike the
oil sector, the gas one has no strict organization and, if founded,
it should be based on mutual respect of interests. If tomorrow the
conflict is over and Iran gets a chance to improve its energy
dialogue with the EU and to export its gas to Europe, objective
realities will make possible a Gazprom-Iran agreement in the South
Caucasus. But today, when the situation over Iran is tensed and the
country’s gas policy is unpredictable, the antagonism between Russia
and Iran will continue, and the South Caucasus will be one of the key
geographical grounds of their rivalry and misunderstanding.