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3 Gas: Iran turns up the
heat By M K Bhadrakumar
It is seldom that the Russian president is
publicly contradicted by officials in Moscow. But
in the Russian reaction to Tehran's proposal for
formal cooperation among the major gas-producing
countries, it happened.
Supreme Leader Ali
Khamenei conveyed the Iranian suggestion to the
visiting secretary general of Russia's National
Security Council, Igor Ivanov, in Tehran on
January 28. The next day, Russia's Gazprom reacted
in Moscow that "establishing a gas
OPEC
[Organization of Petroleum Exporting Countries] is
impossible because of different structuring of the
oil and gas business".
A spokesman of the
Russian Economic Development and Trade Ministry
also reacted sharply: "I do not understand why
Russia would need to create a gas cartel - I do
not see any sense in it. The more so as Iran is
now coming under serious external pressure." The
official asked: "Why should we undertake
commitments to synchronize our actions, why force
ourselves into regulatory frameworks which could
boil down to setting quotas?"
Then came a
structured Russian position when Ivanov put the
Iranian proposal in perspective at a press
briefing in Moscow this Tuesday. He said the
Iranian side mentioned the idea "not as a question
or proposal for discussion, but as a general idea
that natural-gas producers should seek such forms
of cooperation, which fully supports their
interests. As far as I know, no talks on setting
up a cartel are under way."
But two days
later, at a press conference in Moscow, President
Vladimir Putin took a giant leap forward. He said,
"A gas OPEC is an interesting idea, and we will
think about it. In this initial stage we will
agree with the Iranian specialists, with our
Iranian partners and with some of the other
countries that are large suppliers of fossil
fuels, above all gas, to world markets, and we are
already trying to coordinate our activities on the
markets of third countries. We plan to continue
doing so in future."
Putin added, "We have
no plans to create some kind of a cartel, but I
think it would be a good idea to coordinate our
activities, especially in the context of achieving
our main aim of ensuring a certain and reliable
supply of energy resources for our main
consumers."
However, five days later,
Russian Energy Minister Viktor Khristenko was
still at Square 1. "Fantasies about cartels and
'gas OPECs' are products of a sick imagination,"
he said.
So what's the problem? First,
Moscow wanted to see that alarm bells didn't ring
in Western capitals, especially when a top-level
European Union delegation was due to visit Moscow.
In the West, sweat breaks out at the very mention
of "cartel", invoking images of production quotas,
price rigging, and so on. Second, Moscow knows
that a "gas OPEC" is still a decade away from
realization, given the regional structure of the
market, absence of a floating gas price (gas is
mostly price-indexed to petroleum), double
dependency resulting from the transportation
through pipelines (gas-carrier ships are nowhere
near meeting the needs of transportation) and the
prevalence of long-term contracts between the
supplier and the consumer, and, of course, the
absence of a developed gas-liquefaction
infrastructure.
Third, a masterly stroke
in ambiguity doesn't do Russian interests any
harm. The North Atlantic Treaty Organization has
visualized that it is a matter of time before a
"gas OPEC" takes shape. On the sidelines of the
last NATO summit, in Latvia in November, there
were calls for the formation of a "gas NATO" that
is geared to safeguarding the energy security of
Western consumer countries.
Thanks to
Russian ingenuity, between the illusion and the
reality of a "gas OPEC" a gray zone has appeared,
with no certainty that this zone will not
incrementally become the reality itself.
Iran-Pakistan-India pipeline Putin and Khristenko were not contradicting
each other. Putin had just returned from a visit
to India (January 25-26), where the focus of
discussions was on restructuring the
Russian-Indian strategic partnership into a new
paradigm with energy cooperation at its core.
Putin paid special attention to cooperation "in
building facilities for gas production and
transportation in India and the adjacent
region" (emphasis added). This is a reference
to the highly politicized US$7 billion project for
a 2,100-kilometer Iran-Pakistan-India gas
pipeline.
Putin's visit to Delhi came
closely on the heels of the latest round of
negotiations over the price of gas for the Iran
pipeline project. According to a new formula
proposed by Iran, the cost of gas will translate
at the Pakistan-India border as $4.93 per million
British thermal units (mBtu), plus $1.5 per mBtu
that India would have to pay to Pakistan as a
transit fee. Indian officials have since expressed
optimism that the signing of India's $145 billion
gas mega-deal with Iran might take place by June.
Iran has shown extraordinary flexibility
by lowering its original price offer by 30%. The
geopolitics of energy security has seldom sailed
into view with such elan. What needs to be noted
is that Tehran's keenness to forge energy
cooperation with its South
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