Tensions between Russia and Ukraine has shifted the European global spotlight towards Iran. Amidst the prevailing conflicts between Moscow and Kiev, Gazprom has ceased the supply of gas to Ukraine due to unpaid bills this week. As a result, Russia stated that there could be occasional disruptions in Europe over gas supplies which pass through Ukraine.
Some say that in reply to President Vladimir Putin’s adamant stance over Ukraine, the European Union could decide to forego gas from Russia thus bringing a 40 year cooperation that was begun during the stagnation era of Leonid Brezhnev to an end. This would open doors to Iran which is on the lookout to be a part in the global community. Iran holds the 2nd largest gas reserve in the world, next to Russia. This would be a great opportunity to make its resource available in the European market. But this is highly unlikely since Russia is seen completing its European delivery contracts despite the crisis in Ukraine. Moscow will try to prevent the flow of Iranian gas to Europe somehow which would otherwise eat away the Gazprom’s market shares which comprise about one quarter in the European consumption. Though ancestral rivalry exists between Russia and Persia, Iran will not disregard its military, economic and diplomatic relationship with its neighbour. Iran dreams of getting back to the game of global energy diplomatically. Mohammed Reza Nematzadeh, the Industry Minister of Iran recently stated that they do not wish to compete with Russia. However, Iran can be a long term secure and a reliable partner as the gas demand is increasing in Europe.
The west will have to lift the sanctions imposed on the nuclear program of Tehran before using Iranian gas against the president of Russia. Iran, along with the UN Security Council’s 5 permanent members and Germany continued their talks on May 14 in Vienna. It is expected that an agreement could be reached prior to July 20. Another factor to ponder would be whether different religious and political groups of the Islamic Republic would agree about the freedom provided to the companies of west and they being the only ones entitled to hold LNG (Liquefied Natural Gas) technology in which exportation is allowed in full scale.
Ayatollah Ali Khamenei is seen insulting the west periodically in his speeches as he is so sure that talks in Vienna and Geneva would fail. Hence he asks Iran to focus on developing their resources. Some think Iran being the substitute for Russia is just ‘nonsense’.
An increasing amount of gas is consumed by the Islamic Republic. According to BP, a British firm, a significant rise in the consumption of oil is seen from 1990. The various uses of oil include electricity generation, improving extraction through oil well pumping, raw materials and fuel for industries, vehicle fuel and a source of heat generation. It appears that Iran is incapable of producing its very own resources as it is seen exporting gas that is 40 times less to Turkey when compared with Russia to Europe. The country even has regular imports from Turkmenistan. Total’s Gas and Power president, Philippe Sauquet states that 150 billion m3 of gas is imported from Russia to Europe every year. Hence it is quite impossible to decline such large quantities as replacement of it with some other sources could result in a rise of 20% – 30% in costs. This is because costly infrastructure has to be built. But Russian pipelines have been paid already. If we are to go with replacement, both Russians and Europeans will be at the losing end. Scepticism prevails within experts about the ability of Iran becoming a large exporter of gas in so little time.
Sauquet points that in 2001, Qatar did accelerate their policy but the LNG production took 9 to 10 years to really take off and give out 70 million m3 for exportation. This was possible because unity existed within emirates and they had the back up and money of major companies of the west.