THE ROVING
EYE Russia gas pact energizes
Iran By Pepe Escobar
While Washington, facing European Union
discomfort and frank opposition from Russia and
China, remains obsessed with another round of
United Nations sanctions against Iran, the facts
on the ground spell an overwhelming "expansion of
mutual cooperation" in the energy sector between
Iran and Russia.
Iran holds the world's
second-largest proven natural gas reserves, behind
only Russia. Alexei Miller, chief executive of
Russia's state-run gas exporter Gazprom, recently
visited Tehran and met with Iran's Oil Minister
Gholam-Hossein Nozari. The result is that Gazprom
will develop "two or three" blocks of the
monstrous South Pars gas field in Iran; and its
daughter company, Gazpromneft, will also be part
of a huge oil project in Iran. Gazprom has been in
South Pars since 1997, alongside
TotalFinaElf of France and
Malaysia's Petronas.
For Iran, this is
really big news. Reza Kasaeizadeh, the managing
director of Iran's National Gas Company, now
insists that Iran will supply no less than 10% of
the world gas market in the next 20 years;
currently it's only 1%. Iran at the moment exports
gas only to Armenia and Turkey. When South Pars
phases 17, 18 and 19 are developed by 2013 that
will be a whole different ball game. South Pars -
which Iran shares with Qatar - is the largest gas
field in the world. Annual output of its eight
blocks on the Iranian side stands at 73 billion
cubic meters; in the next few years it will easily
reach 200 billion cubic meters.
Sanctions? What
sanctions? Hardcore Washington political
pressure on European giants such as TotalFinaElf
and Royal Dutch Shell as well as on European banks
is leading Gazprom to make a killing in Iran.
Russia is left virtually alone to develop the
second-largest (after Russia) gas reserves in the
world. Gazprom's technology may not be as state of
the art as Western Europe's, but Iran is in a
hurry. And so is Gazprom, while it is able to
extract fabulous deals thanks to lack of
competition.
As any European Union
negotiator in Brussels is forced to admit over a
few bottles of Morte Subite beer, the EU is a
virtual hostage of Gazprom. Adding to European
angst, both Russia and Iran want the formation of
a gas equivalent of the Organization of Petroleum
Exporting Countries (OPEC) sooner rather than
later - a likely scenario at least from the point
of view of Russian-Iranian coordination in
investment policy and pricing.
Teymur
Huseynov, head of the Eurasia department at the
Exclusive Analysis risk consultancy, confirms
"Gazprom's vulnerability to US sanctions is
minimal". Gazprom supplies over 25% of Western
Europe's gas. Much of Iran's future production
will also go to Western Europe anyway. Russia and
Iran are competitors in the world gas market - but
up to a point: Europe needs both.
Gazprom
has already invested at least US$4 billion in Iran
since 2000. The Russian company will also help
Iran to develop its pipeline system - which will
finally link the north (where Tehran is located)
to the oil and gas fields in the south and
southwest. This means Iran won't need to import
gas from unreliable neighbor Turkmenistan, prone
to cut off supplies over endless arguments about
unpaid bills.
Let's hit the Caspian
Iran is also basking in good news in the
oil front. The first phase of early production
from the giant Azadegan oilfield, west of Ahvaz in
Iranian Khuzestan, is already on. According to
Iranian estimates, Azadegan holds no less than 33
billion barrels of crude oil. For the moment it's
pumping only 25,000 barrels a day - but the point
is that the whole technology was Iranian.
According to the deputy manager of
technical affairs at the National Iranian Oil
Company (NIOC), Hamid Deris, the Iranians had to
take over when experts of Japan's largest oil and
gas explorer, INPEX, under no-holds-barred US
pressure, balked at investing in the enormous
project. The Japanese share was initially 90%; in
the end it fell to 10%.
On the Caspian
front, the Alborz semi-floating drilling rig -
able to drill at 6,000 meters under the seabed -
will soon be operational. That means exploration
of oil and gas in the deep waters of the southern
part of the Caspian - which holds at least 32
billion barrels of oil - is a go. Brazilian oil
giant Petrobras is very much interested, and not
in the least mindful of UN or US sanctions.
Iran and Russia have also signed a letter
of understanding to speed up construction of power
grids. Iran was represented by Energy Minister
Parviz Fattah, Russia by the chairman of the board
of RAO UES, the export arm of OAO Unified Energy
System, Anatoly Chubais.
This means that
Iran - already exchanging energy with Azerbaijan,
Armenia and Turkmenistan - will also connect to
Russia's national power grid. Fattah said Iran and
Russia would cooperate in the construction of two
power plants in Tajikistan. The results are
obvious: the merging of Russian and Iranian
electricity networks will cover virtually all the
demand in Central Asia and the Caucasus. Most of
the new investment will be Russian.
Now
about that bourse As Iran strengthens its
position in the region's oil and gas networks, the
outlook for its newly opened oil exchange,
intended among other things to reduce the
influence of Western interests in the oil trading
business, may be less substantial. (Slouching towards
Petroeurostan, Asia Times Online,
February 21, 2008)
The Iranian
International Petroleum Exchange - the first oil,
gas and petrochemical exchange in the Islamic
Republic, and the first within OPEC and launched
earlier this month, is intended eventually to
compete directly against London's International
Petroleum Exchange (IPE) and the New York
Mercantile Exchange (NYMEX).
Chris Cook, a
former director of the London International
Petroleum Exchange (IPE) and now a strategic
market consultant after being involved from the
beginning with the Iranian oil bourse, told Asia
Times Online "the trading 'system' is the
rudimentary one [not much more than a spreadsheet]
used by the Tehran Metal Exchange. As far as we
know it is not even web-enabled". Iranian
ministers say the bourse will soon be online.
Cook said, "There may be the odd 'spot'
trade in petrochemicals, but these will probably
be existing business - done over the phone - which
would use the system for registration. There is no
clearing house, nor is there likely to be, as the
skills do not exist in Iran: therefore you can
forget forwards or futures trading, even were they
Islamically sound, which they are probably not.
"We were told by the Iranian OPEC rep in
London a few years ago that the trading of crude
oil on any system was a medium-term project, at
best." In fact, Iranian ministers insist this is a
medium-term project.
According to Cook,
"The long and short of it is that the recently
launched Iranian oil bourse is an illusion. There
is no real interest among the Iranian elite in any
further transparency than exists now."
Even so, Rajab Safarov, the director of
the Iran Contemporary Studies Center in Moscow,
has told the Vermianovesti daily that oil deals in
the recently opened bourse will be on in only a
few months' time. According to Safarov, European
middlemen are about to form companies with Iranian
firms and will then start operating in the bourse.
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