As Iran and the US sit down to play chess, which I discussed in the previous article, do you expect the grandmaster of Chess – the Russians to just sit and watch from the sidelines. Far from it!!
ANATOLY KARPOV, Russian GM. Don't miss the USSR flag :)
Most of the material for this article has been sourced from STRATFOR.
Iran suffers from severe energy problems, despite ranking among the top three countries in proven oil and natural gas reserves. The main problem is Iran’s lack of refining capacity, but another large problem is that the Iranians send crude northward for refining in the country’s population centers, while the export routes are mainly in the south. This is a costly arrangement. The oil swap program was meant to solve this problem, but none of the Caspian oil producers would fill the contracts because they had better alternatives. With all of Azerbaijan’s alternative energy routes threatened, things have changed for Iran.
This leads to the second situation: Iran will be able to export more oil instead of using so much domestically. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries, behind regional rival Saudi Arabia. However, thanks to a more favorable investment climate, Saudi Arabia produces nearly triple the amount of oil. Iran freeing up some of its oil for export is something Riyadh will definitely notice — and not happily.
Though Iran is a major energy producer, it is also the world’s second-largest gasoline importer due to inadequate refining capabilities, and currently lacks the infrastructure to both supply the domestic market with its own natural gas and export enough natural gas to turn a profit.
RUSSIA COUNTERING US MOVES TO LET IRAN PUMP GAS INTO NABUCCO
The Moscow-planned South Stream pipeline, which will run Russian gas under the Black Sea to the south-eastern Europe, avoiding Ukraine, was put forward in order to stop the construction of the EU-backed Nabucco project.
The Ukrainian ambassador accused Russia of trying to secure all gas supplies from Azerbaijan so that no gas would flow if Nabucco is completed. “Nabucco is difficult, but it is possible. Look what the Russians are doing. It is not just South Stream; the Gazprom delegation spent months last year in Azerbaijan trying to persuade (Azerbaijan President Ilham) Aliyev to sell their gas to Gazprom. Tell me please why they needed gas from Azerbaijan?” Korsunskyi asked. Answering his own question, he said: “To put zero in Nabucco. If Azerbaijan is out of the game forget about Nabucco forever.”
SOUTH STREAM VS NABUCCO
OF A BURST PIPELINE AND POLITICS THEROF:
ON April 9, 2009 a natural gas pipeline running from Turkmenistan to Russia burst. Though Russia denied the explosion was politically motivated, it also conveniently failed to inform Turkmenistan earlier that it was reducing its intake of Turkmen natural gas. Since Turkmenistan was pumping more natural gas into the pipeline than Russia was taking out, the pipeline burst, leaving Ashgabat extremely irritated with Moscow.
To express its displeasure with Russia, the Turkmen government then made a very public demonstration of reaching out to the West by signing a major energy deal with German energy firm RWE. The Kremlin, however, was thinking two steps ahead and put Turkmenistan back in line when it threatened to withdraw security support for the extremely isolated and paranoid country. Soon enough, Turkmenistan was at Moscow’s feet again and the Turkmen government offered Russia ownership of a natural gas pipeline that runs from Turkmenistan to Iran.
The Iranians have ample reason to be concerned about this. Much of Russia’s geopolitical clout is derived from its array of energy networks that snake through former Soviet territory to supply the Western market. The Europeans have grown tired of Russia’s use of energy as leverage and have been seeking out alternative energy supplies and routes, such as the Baku-Tbilisi-Ceyhan (BTC) and Nabucco pipelines that circumvent the Russian network. For Russia to ensure its long-term survival, it must follow a strategic imperative to block such projects every chance it gets.
Iran, which possesses the world’s second-largest natural gas reserves, offers a solution to the West’s energy problems with Russia. That is, of course, if Iran can first work out the plethora of thorny political issues with the West, thus allowing sanctions to be lifted and letting Western firms in to upgrade Iran’s creaking energy infrastructure and bring its massive untapped energy reserves online. Political complications notwithstanding, both Iran and the West are looking down the line at a prospective easing of tensions that would allow such an energy relationship to be reborn.
But not if the Russians have anything to do with it.
Should this deal with Ashgabat become final, Russia will then have control over two of Iran’s major energy arteries: the Turkmenistan-Iran pipeline and another pipeline that supplies Iranian natural gas to Armenia.
The Iran-Armenia natural gas pipeline, completed in 2007, was Iran’s way of opening up another avenue to extend its influence into the Caucasus. The pipeline has a capacity to carry 10 million cubic meters daily, but Iran so far supplies 1 million cubic meters per day, according to an agreement signed in early 2008. However, this pipeline was brought under Russian control before the Iranians even began pumping natural gas. Back in 2006, Russian state-owned energy firm Gazprom took control of ArmRosGazprom, the operator of the Iran-Armenia natural gas pipeline, which delivers natural gas to Armenian power plants that Iran in turn relies on for electricity.
The Turkmen-Iranian pipeline allows Iran to supply natural gas to the bulk of its population, located in its mountainous northern region. Iran imports about 8 billion cubic meters (bcm) of natural gas from Turkmenistan through this pipeline annually, but has had a series of squabbles with Ashgabat during the past year over pricing that has led Turkmenistan to shut off the pipeline on a whim, much like the Russians do with the Europeans when Moscow feels the need to make its demands heard.
Any disruption to the supply from Turkmenistan puts Iran in a most uncomfortable spot. So, when Turkmenistan shuts off natural gas to Iran, Iran has to tap into the 7.3 bcm of natural gas that it sends annually via pipeline to Turkey, cutting deep into Iran’s already declining energy revenues. The Iranians were already having trouble with the Turkmen in ensuring a steady natural gas supply. Now that the Russians are expected to take ownership of this pipeline, Iran’s energy options appear even more restricted.
Russia wants to ensure that any Western dream of re-engaging with Iran to develop energy links and circumventing Russia remains just that — a dream. By taking ownership of Iran’s existing external energy links with Central Asia and the Caucasus, Moscow is now better equipped to influence Iranian actions.
Meanwhile, the Russians have an array of other tools — from nuclear fuel shipments to Bushehr to potential weapons sales — to encourage Iran to continue its belligerence against the West. After all, the longer the West remains preoccupied with the Iranians and related threats in the Islamic world, the less attention it can give to Russian moves in Eurasia.
Russia will not have a "problem" with US / NATO to ship arms through Iran's Chahbahar port – but only to a certain point to win against Taliban and see that Taliban do not overrun Afghanistan. After all, it is not in Russia's interest that Taliban overtake Afghanistan again. And in the bargain if US / NATO bleed in Afghanistan - better for Russia.
Russia's ambassador to NATO, Dmitry Rogozin, said: "I can responsibly say that in the event of NATO's defeat in Afghanistan, fundamentalists who are inspired by this victory will set their eyes on the north. First they will hit Tajikistan, then they will try to break into Uzbekistan ... If things turn out badly, in about 10 years, our boys will have to fight well-armed and well-organized Islamists somewhere in Kazakhstan". And, with a touch of irony, Rogozin insisted Russia wanted the military alliance to succeed in Afghanistan.
But Russia will not allow Iran to get swayed by West into pumping gas into Nabucco pipeline. Not at the cost of their South Stream – no way !