Eurasia Daily Monitor, DC
The Jamestown Foundation
July 27 2005
UKRAINE IN QUEST FOR IRANIAN GAS
By Vladimir Socor
Wednesday, July 27, 2005
Ukraine’s National Security and Defense Council Secretary, Petro
Poroshenko, and Naftohaz Ukrainy chairman Oleksiy Ivchenko paid
little-noted visits to Iran on July 14 and July 24-25, respectively.
The visits in quick succession evidenced Kyiv’s sense of urgency
about reducing its dependence on Russian energy supplies, as well as
its medium-term ambition to increase Ukraine’s role as an energy
transit corridor to European Union countries.
Poroshenko and Ivchenko held talks with Iran’s Oil Minister Bijan
Namdar-Zanganeh and Deputy Oil Minister Hadi Nezhad-Hoseyinian.
Poroshenko was also received by Iran’s newly elected President Mahmud
Ahmadinejad. Poroshenko and Ivchenko recalled that President Viktor
Yushchenko had in 2000, while prime minister, initiated discussions
with Iran for energy supplies to Ukraine. Prime Minister Yulia
Tymoshenko has also spoken more than once recently in favor of
discussions with Iran for oil and gas.
The Tehran meetings discussed options for delivery of Iranian natural
gas to Ukraine and farther afield into Europe. Three possible transit
routes were considered: a)
Iran-Armenia-Georgia-Russia-Ukraine-Europe; b)
Iran-Armenia-Georgia-Black Sea-Ukraine-Europe; and c)
Iran-Turkey-Black Sea-Ukraine-Europe.
Under any of these versions, Iran would finance the pipeline
construction on its own territory. Presumably, this would enable the
countries participating in such a project to steer clear of violating
the Iran-Libya Sanctions Act of the United States, which penalizes
any sizeable foreign investment in energy projects on Iran’s
territory.
It was agreed during these meetings to form expert groups, exchange
information on feasibility of projects, identify participant
companies and the shape of a possible consortium, select a transit
route, make preliminary calculations on investments, determine
volumes of gas for delivery to Ukraine and EU countries, and set
prices for the amortization period.
A six-party meeting among the aforementioned countries has been
scheduled for September. Meanwhile, Ukraine proposes moving ahead
bilaterally with Iran to select a transit route. Ukraine and Iran can
then invite other countries to participate, depending on the choice
of route.
Each of the three options poses daunting problems. The route out of
Iran through Armenia will almost certainly be opposed by Gazprom. The
Russian company will defend its position in Ukraine, and has ample
means to pressure Armenia to act as a buffer, rather than as a
conduit for competing gas. Moreover, it is Gazprom policy at present
to restrict access of Iranian gas in the South Caucasus as well. At
Moscow’s insistence, the Iran-Armenia gas supply pipeline now under
construction will have a small diameter, so as to keep its throughput
capacity to a minimum.
The route out of Iran through Turkey seems less subject to Russian or
other strong-arm political interference. Moreover, an Iran-Turkey gas
pipeline already exists, and is being underutilized because the
Turkish gas market is oversubscribed. However, laying a pipeline
across mountainous Anatolia to the Black Sea coast, and then a seabed
pipeline to Crimea, is a proposition that investors will receive with
great caution. Construction of a large-capacity transit pipeline
through Ukraine will then be necessary, as there is no spare capacity
in existing pipelines.
Iranian gas is high-priced already at the country’s border, as
Armenia has learned. If inordinate transportation costs are added,
Iranian gas might price itself above Ukraine’s paying ability and out
of competition on European markets.
(Iran Daily, July 16; IranMania, July 17; Interfax-Ukraine, July 15,
25)