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Iran Should Compete with Russia in Gas

There is an interesting article posted today at Eurasian Home, making the argument that the EU has not done enough to foster healthy competition between Russia and Iran in the gas sector. The recent news from Armenia has generated a lot of discussion on the Moscow-Tehran relation, and I hope to put in some thoughts later today on the issue.

Iran should resist an energy alliance with Russia, the EU should argue, because Russia will always be in the driving seat. Gazprom only ever takes a controlling stake in projects, and it will involve itself in Iranian projects precisely with the object of protecting itself from Iranian competition and stymieing the development of Iran’s gas resources. If Iran wants to develop its resources quickly, it should look to a more efficient and technologically developed partner, such as Total, OMV or Statoil. Western banks can bring far more capital to support Iranian energy projects than Russian banks ever could. But we are not seeing this energy alliance with Iran happen. Instead, we are seeing the EU once again outmanoeuvred by Gazprom, because Gazprom thinks two moves ahead, and the EU merely reacts, usually with panic and indignation. This weekend, Gazprom bought a controlling stake in its joint venture with Armenia, ArmRosGas, which controls Armenia’s domestic gas distribution network and a soon-to-be-completed gas pipeline with Iran. That pipeline could have helped free both Armenia and Georgia from dependence on Russian gas, and also have been a conduit for Iranian gas into western Europe. But the Armenians, unwooed by the EU, sold the controlling stake to their Russian masters for $119 million. The same week that this deal was being signed in Moscow with Armenia’s president, the petroleum minister of India, Murli Deorla, was also in town. He announced yesterday that India had agreed to let Gazprom join a planned pipeline from Iran to India and Pakistan. He said: “Russia will join the Iran pipeline. I spoke to Pakistan minister for petroleum and natural resources Amanullah Khan Jadoon (on Russian participation) on Tuesday and will be speaking to the Iranian minister later”. So on the two most important new projects bringing Iranian gas to the outside world, Gazprom is involved, and possibly even in control. A good weekend’s work, fellows. These appear to be the first decisive steps in a Kremlin initiative to forge an energy alliance with Iran. Also last week, Valery Yazev, head of the Duma energy committee and Gazprom’s top lobbyist in the Duma, called for the creation of a gas cartel involving CIS countries, and including Iran, to counter the ‘cartel’ of European consumers. The plan was prompted, he said, by the refusal of France and Germany to be played off against the rest of Europe by president Putin, who offered Germany the chance to be a hub for Russian supplies to the rest of Europe when he visited Germany in September. Merkel refused, sensible lady. Alexander Medvedev, deputy chairman of Gazprom, yesterday told me that he viewed participation with Iran as “very profitable. We hope to use the joint venture to become involved in extraction and development [of Iranian gas], and possibly help supply gas through the joint venture to Western Europe, as well as Pakistan and India”.