As a game-changer, Geneva's accord is apparently reviving old energy schemes that were just a few months ago thought to be dead after years of intense diplomatic confrontations between Tehran and Western powers. Although the crystallizing Iranian-Western rapprochement does not mean that issues are finally solved, but it gives a green light to different players to take some steps since gas projects take time to come online on the assumption that negotiations are proceeding positively.
Amid Insatiable Asian demand for gas and an increasingly threatened Europe that is striving to diversify its gas imports by heading to different energy suppliers, Iran is willing to enter the global gas market and present itself as a pivotal and reliable player which is obliged to fill the vacuum.
Nevertheless, Iran's entry to global gas markets is not only restrained by its troubled relations with the West and the imposed draconian sanctions, but also restrained by internal factors. Iran is suffering from ever-increasing gas consumption levels that prevent it from exporting large amounts of gas. While Iran was producing approximately 180 bcm of gas annually, about 160 bcm were consumed internally. However, Iran is currently pursuing a two-pronged strategy to overcome this obstacle: 1- cutting energy subsidies to gradually curb intense energy consumption in order to make room for a gas surplus. 2- Developing its massive South Pars offshore gas field which could bring more amounts of gas for export.
The other problem that Iran is grappling with is its stalled LNG projects, because it is lacking the technology to build liquefied natural gas facilities that would enable it to enter a lucrative market.
Turkeytizing Iran's gas geopolitics
Turkey has actively contributed to underpin Europe's energy security by serving as an energy-hub carrying Caspian gas and oil to Europe, giving post-soviet countries the opportunity to export their gas and oil, bypassing Russia. Following the inauguration of the BTC and the BTE pipelines in 2006, Turkey planned for building more pipelines to transmit Eastern gas to Europe. Actually, more pipelines are likely to operate soon.
Similarly, Iran is looking forward to become an energy-hub to transmit Caspian gas eastwards to the Asian consumers. As India's energy shortage is looming, the Middle East to India deepwater pipeline (MEIDP) scheme is currently being re-discussed by Iran, Indian and Oman. This mega pipeline is planned to run from Omani waters and pass via Iran – bypassing Pakistan - to reach its final destination in India.
The project was recently discussed in a meeting between the Indian foreign minister Salman Khurshid and his Omani counterpart Yusuf Bin Alawi Bin Abdullah. The project was discussed on Iran's foreign minister's visit to India where talks were held between Mohamed Javad Zarif and his Indian counterpart.
The pipeline would not only allow Iran to export its gas to the energy-thrust India, but it would enable Iran to carry Turkmen and Azerbaijani gas to India. The MEIDP will give Tehran significant leverage and prestige in the Eurasian arena to mark its active re-enter into Central Asian & Caucasian politics if the project will be carried out.
Moreover, revitalizing the project could be translated to an Iranian maneuver against Islamabad which is reluctant to complete the construction of the IP pipeline. Virtually, it seems that US-Saudi pressure on Pakistan is working.
The Russian & Chinese stance isn't yet obvious although it can be predicted since Turkmenistan exports its gas to both countries. Mostly, they won't favor Ashgabat's move in the future to make room for exporting its gas to a third player such as India. Nevertheless, if the scheme is given a green light by the main players, Russia's Gazprom could put pressure to secure a major stake in the project's consortium to shape the output.
However, it is unapparent whether such a project could be implemented or not given India's withdrawal from the Iran-Pakistan-India gas pipeline project (IPI) in 2009 due to US pressure. Similarly, India could potentially withdraw from the MEIDP project later and repeat the same scenario given that the TAPI gas pipeline project (Turkmenistan-Afghanistan-Pakistan-India) is a US-backed rival.
Ultimately, it seems that the Indian project is more lucrative and suitable to Iran than the IP gas pipeline since the unstable security situation on the Iranian-Pakistani likely to jeopardize the sustainability of the project. Most importantly, Iran will gain significant geopolitical leverage with the involvement of various players affecting the existing balance-of-power in the region.
Entering European markets
The escalation of EU-Russian tensions over the Ukrainian crisis is accelerating the energy geopolitical shift in Europe and benefiting new players. Given that Russia's agreement with Ukraine to export its gas to Europe through its territories will end in 2019, the EU commission's endeavour to hamper Russia's efforts to build the South Stream pipeline means that Iran is likely to enter the European gas market alongside other players.
Considering Iran's lack of LNG technology at the current moment, Turkey is virtually Iran's only route to export its gas to Europe on the short and medium run. Baring in mind that the Iran-Turkey-Europe (ITE) gas pipeline is unlikely to be on the Turkish agenda, the Azerbaijani Trans-Adriatic gas pipeline (running from Turkey and passing via Albania and Greece to Italy and Europe) and the Trans-Anatolian pipeline (TANAP) are the suitable routes to deliver Iranian gas to Western Europe as well as South Eastern markets.
However, delivering Iranian gas to Europe through the mentioned pipeline depends on the state of Iranian-Azerbaijani bilateral relations and the Israeli position where both Baku and Tel Aviv enjoy deep-seated relations. Since, Tel Aviv is fiercely opposing Geneva's accord and easing Western sanctions; it could put pressure on Baku to rule out Tehran's potential participation.
Baku is making inroads in the European markets through acquiring European assets. In late 2013, Baku acquired 66% of DEFSA (Greece's transmission and network gas entity). Baku is now a de jure pivotal player in South Eastern European gas markets that Iran has to deal with.
Notwithstanding, if Iran is able to push the MEIDP project forward and agree with Azerbaijan to carry its gas to India (baring in mind that Azerbaijan doesn't possess massive gas reserves), this could be a bargaining tool to facilitate Iran's entry to South Eastern European gas markets. Also, establishing a state of energy inter-dependence between Tehran and Baku.
Iran-Iraq-Syria gas pipeline (The Islamic pipeline)
Although Iran is considering exporting its gas to Europe through Turkey on the short run, Tehran has been working on a mega project to export its gas to Iraq, Syria, and Lebanon and ultimately to Europe on the long run.
However, the Islamic pipeline – which is currently under construction – is bogged down in the chaotic situation in Syria. It's unapparent whether the project could be completed or not, despite the fact that Al-Assad's forces scored significant gains and re-captured strategic routes.
Geostrategically, Turkey and Qatar were at loggerheads with Tehran compel Iran to abandon its ambitious project. The completion of the project would jeopardize Turkey's planned quasi-monopolistic position to carry Eastern gas to Europe. Also Doha had plans to export its gas to Europe through Syria but apparently Bashar Al-Assad refused the Qatari proposal.
Iran's ambitions exceed exporting its gas to Europe through Lebanon. Iran is probably looking forward to reverse the gas flow and export Syrian gas to Pakistan through the IP pipeline or to India through the MEIDP (if the IP pipeline is dead), also both pipelines could end up in China, allowing Iran to export gas to Beijing. The project would allow Iran to serve as a bridge between the Mediterranean Sea and the Indian Ocean.
Regarding exporting Iranian gas to Europe, if the Islamic pipeline ends in Greece as planned, Baku will potentially be involved since it currently plays a significant role there.
Nearly a decade ago, several schemes were proposed to carry Azerbaijani, Turkmen and Iranian gas to Europe through pipelines crossing the Black sea through Azerbaijan and Georgia (Bypassing Russia). Despite the fact that these plans were unlikely to be implemented due to financial and political difficulties. However, these schemes could have been revived subsequent to Geneva's accord, but with Russia's annexation of Crimea these plans are virtually dead, as Ukraine was the main route and Crimea was its gate. Consequently, Russia scored a valuable geostrategic gain by annexing Crimea.
The White Stream was among the proposed plans between 2005 and 2008 to transmit Caspian gas via Georgia to Ukraine and Romania. Another plan was the Azerbaijan-Georgia-Romania gas interconnector (AGRI).
Iran can still reach East European gas markets via the envisaged Bulgarian – Romanian gas interconnector.
Nevertheless, building extensive gas pipelines costs billions of dollars while selling LNG supplies on spot markets is more efficient and less costly to consumers on the long run.
At the current moment, European countries are seeking to build LNG terminals to thwart Russia's gas weapon.
The re-configuration of Iranian gas geopolitics is significantly complicated and involving different players and contrasting agendas. Iran has to intensify its diplomatic efforts to bring all players together if it is looking forward to be a major energy-hub.
Maintaining a balanced approach and policy in its talks with P5+1 is required because all Iranian energy ambitions depend profoundly on the output of the negotiations. A negative output will hamper Iran's energy ambitions.
The major obstacle that Iran is grappling with is its stalled LNG projects that are under construction. Iran has to overcome this obstacle as soon as possible to enter the LNG market. But Iran plans to export LNG via Oman, which could only solve Iran's LNG problem on the short run.
Also, one of the most serious threats to gas exporting countries is shale gas exploration in Europe, Asia and the U.S.
Curbing intensive gas consumption in Iran is a prerequisite for exporting massive amounts of gas, as the continuation of the current situation can't help Iran's efforts even if Western sanctions were eased or lifted. However, curbing intense consumption through the neoliberal policies of reforming energy will have negative social implications.
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