After a long hiatus, the US-Iran policy
logjam is showing encouraging signs of breaking.
On the US front, President Barack Obama
has now been inaugurated, and is both free from
worrying about another term and not unhappy at
"Bibi" Netanyahu's setback in the recent Israel
election. Obama has made pragmatic appointments in
John Kerry and Chuck Hagel while his deputy, Joe
Biden, is now offering direct US talks with Iran
for the first time in many years.
For its
part, Iran has now agreed to meet the P5+1 (the
United Nations Security Council permanent members
plus Germany) in Kazakhstan on February 25, which
is a feather in the cap for President Nursultan
Nazarbayev. Meanwhile, in Iran the continuing
plunge of the riyal below 40,000 to the US dollar is
exacerbating ferocious
in-fighting between the faction of President
Mahmud Ahmadinejad and the two conservative
factions who repelled the president's power grab
early last year.
One of the key reasons
for the collapse of the riyal is that vast amounts
of riyals are being printed to finance Iran's
energy subsidies, which now reflect crude oil
prices at the financial bubble level of over
US$115 per barrel.
The US is realistic
enough to know that until the Iranian presidential
election scheduled for June 14 is out of the way,
there is no Iranian regime with whom they may meet
and negotiate. But that need not mean that
progress by the P5+1 is impossible prior to such
bilateral US-Iran talks.
No deal It
has been clear for some time that the terms
offered to the US via the Swiss in 2003 - but
which were spurned by the powerful US vice
president Dick Cheney at a time when "Real Men Go
to Tehran" was the neo-conservatives' war-cry -
are still on the table as the basis for a US/Iran
deal, and if so it is likely to be acceptable to
the P5+1, including President Obama's
administration.
The problem is that the
Iranians do not believe that the conservative
Republican-dominated US Congress will agree to
lift sanctions without regime change in Iran, and
having heard Richard Perle and John Hannah, among
others, speaking in London last week at an
ultra-conservative event in respect of Iran
policy, I find it hard to disagree with Iran's
pessimistic view. Clearly something new will be
required to transcend this impasse, and I believe
this may be found in energy co-operation.
20th century energy
co-operation In the same way that the lion
and the gazelle may be seen together at the same
water-hole, so it is that the most hostile of
nations may co-operate in relation to energy. So
for 40 years throughout the Cold War, the USSR
reliably supplied natural gas and oil products to
the West, who reliably paid for it. It is deeply
ironic that it was only after privatization by
oligarchs that gas supply to the West became less
reliable due to the market presence of opaque
middlemen.
Similarly, during the radical
and often bloody period between 1979 and 1993
which followed the Iranian revolution, Ayatollah
Khomeini's regime supplied oil to arch-enemy
Israel using Marc Rich as an intermediary.
For various reasons, a resumption of
Iranian oil supplies to the US is unlikely even if
oil supply sanctions were lifted , but it is the
painful financial sanctions that are the real
blockage which must be addressed.
Software is the new oil In my
view one of the "big trades" of the 21st century
is the exchange of the value of skills, knowledge
and intellectual property for the value of
renewable energy (megawatts) and for the value of
carbon fuel saved - nega-therms of gas, and
nega-liters of gasoline, diesel, and so on.
We have seen, post-Fukushima, how Japan
has been investing massively in these areas while
Germany is also closing down nuclear energy
production in favor of renewables. The best
example of the big trade is Denmark, which was
hard hit by the 1973 oil shock and drastically
changed its strategic energy policy to mandate
"least energy cost" rather than "least dollar
cost" energy production.
The result has
been that while the country's gross domestic
product has risen by 78% since 1980, Denmark's
energy use has stayed the same, and its carbon
fuel use has actually declined, through major
investment in renewable energy and community heat
infrastructure.
A Caspian energy
accord The energy ministers of the 10
Economic Co-operation Organization (ECO) nations
are due to gather in Tehran between March 4 and
March 6 for their Third Meeting, which was
postponed from last October because of confusion
in respect of Iran's proposal for an ECO "Energy
Charter". This proposal for ECO energy
co-operation was widely assumed to be competitive
with the existing Energy Charter Treaty and
associated Organization, when in fact it is
complementary to them.
A more focused and
gas-specific energy co-operation proposal is now
being formulated that would involve the four ECO
Caspian littoral states: Azerbaijan, Iran,
Kazakhstan and Turkmenistan, all of which are gas
producers with claims over Caspian resources.
Azerbaijan at present holds the ECO
presidency and is the pivotal gas hub nation for
exports of Caspian gas with a variety of pipeline
projects mooted to transport gas to the West.
Kazakhstan has been relatively slow to develop its
resources but has good relationships with the
P5+1, and its president is no stranger to radical
policy proposals extending to a "petro" energy
currency.
Turkmenistan, always a wild
card, now appears to wish to avoid over-reliance
on China as a customer for its gas and is looking
for additional routes to market such as the
ambitious Turkmenistan, Afghanistan, Pakistan,
India (TAPI) pipeline.
So the time may now
be ripe for a proposal for a Caspian Gas Accord,
which would create a regional market framework,
benchmark price, and gas "prepay" instrument,
which could together be instrumental in
stimulating regional energy co-operation.
Energy diplomacy Perhaps one of
the subjects on the table in Kazakhstan on
February 25 might be a proposal to declare the
Caspian a neutral and de-politicized zone for
energy co-operation not just by the littoral
nations but by other nations whose companies are
active in development projects such as the Shah
Deniz field, which is struggling for investment.
For its part, Iran - which is in
difficulties as an investor in Shah Deniz - could
perhaps contribute the use of its giant
semi-submersible drilling rig as a shared Caspian
resource.
Trust cannot be re-built
overnight, but I believe that there is an "energy
diplomacy" route available through energy
co-operation for Iran and the P5+1 to begin to
rebuild trust, so that in years to come,
international investment in Iran's renewable
energy, and the massive Iranian potential for
carbon fuel savings, may come to render Iran's
nuclear power plant at Bushehr an expensive
anachronism.
Moreover, having mastered the
technology Iran's immense intellectual resources
may be re-deployed from the dead end of nuclear
research to the greater challenge of making the
transition to a low carbon economy through
research into renewable energy technology and
above all, the cheapest energy of all - carbon
fuel saved.
Chris Cook is a
former director of the International Petroleum
Exchange. He is now a strategic market consultant,
entrepreneur and commentator.
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