IranMania News, Iran
March 1 2008
Analysis: Russia, others eye Iran ties
Saturday, March 01, 2008 – ?2005 IranMania.com
LONDON, March1 (IranMania) – While it has been a cornerstone of US
foreign policy since the 1979 Iranian Islamic revolution to contain
and isolate Iran, Washington’s increasingly factious relations with
Moscow and record-high oil prices are beginning to ripple through the
relations of the five Caspian nations, producing several developments
that all point to the increasing failure of Washington’s containment
policy against Tehran, UPI reported.
The Bush administration’s rising hostility against former "Evil
Empire" Russia and charter "Axis of Evil" member Iran has infuriated
both nations and driven them closer together.
In perhaps the most striking recent development, on Feb. 20 Gazprom
Chairman Alexei Miller held talks in Tehran with Iranian Oil Minister
Gholam-Hossein Nozari. While little was released about the meeting,
the pair agreed on increased Russian involvement in developing Iran’s
massive South Pars and North Kish offshore gas fields in the Persian
Gulf as well as laying oil and natural gas pipelines. Further
agreement was apparently reached on mutual cooperation in the oil and
gas sectors in the Caspian Sea. Gazprom also agreed to build a gas
reservoir in Iran as well as constructing a refinery in Armenia.
Moving swiftly ahead, the two sides agreed to hold expert-level
meetings and sign agreements within the next two months.
Since 1997 Russia’s state-owned Gazprom has been participating in a
joint venture, working on the development of South Pars field’s
second and third (out of 18) blocks with France’s TotalElf and
Malaysia’s Petronas. Gazprom and Petronas hold 30% shares in the
project and Petronas the remaining 40%. When development is complete,
the complex will produce and process 20 bln cubic meters of natural
gas annually. Four years ago the complex was sold to National Iranian
Oil Co. for $2 bln.
Gazprom is now poised to begin development of two to three additional
blocks of South Pars, the world’s largest gas condensate deposit,
estimated to hold 450 tcf in reserves. The massive South Pars project
consists of 24 phases of development and by 2014 is projected to
produce 751 mln cubic meters per day. Gazprom’s agreement with Iran
reportedly includes exploration, development, transportation,
processing and marketing.
The natural gas deposit on the island of Kish is equally impressive,
as it has estimated reserves of 10 trln cubic meters. Part of the
allure of the project for Gazprom is that production costs in the
Persian Gulf are a fraction of the expenses incurred in developing
gas fields in West Siberia or on Russia’s Arctic coastal shelf.
The resources that Gazprom can devote to its Iranian projects are not
inconsiderable; besides being awash in cash, the world’s largest
natural gas company employs nearly a half-mln people. Gazprom’s
increased involvement in the project is a blessing for Tehran.
Decades of US-sponsored sanctions have left Iran largely unable to
exploit its valuable resource, due to a lack of access to
sophisticated equipment. In 2006, Iran produced 105 bln cubic meters,
but as indigenous consumption totaled 105.1 bcm, the country was
forced to import natural gas from Turkmenistan, which in early
January suspended exports due to inclement weather.
In yet another striking piece of news that will have American
producers weeping into their martinis, the director of the Iran
Contemporary Studies Center in Russia, Rajab Safarov, said that in
the coming months, Iran wants to privatize its oil companies, a
development, which if it occurs, will see American companies
effectively locked out from the bidding by Washington’s sanctions
regime against Iran. Rubbing salt in the wound, Safarov added that
some European middlemen are considering forming conglomerate
companies with the Iranian ones to prepare the ground for
participating in the Iranian Oil Exchange market scheduled to open
later this month, a not inconsiderable effort, seeing as Iran sells
$70 bln worth of crude annually.
The final disconcerting piece of news for Washington is that Gazprom
is considering repricing its crude and gas production in rubles
rather than dollars. Last November Gazprom Deputy Chief Executive
Officer Alexander Medvedev said in New York, "We are seriously
thinking about selling our resources in rubles."
There is a faint silver lining for Washington in this otherwise
jet-black cloud. While both Gazprom and Iran are apparently willing
to thumb their nose at Washington’s economic sanctions, some
thoughtful Russian analysts believe they could still have a
detrimental effect, if not on production then on European customers.
Moscow-based Troika Dialogue analyst Valerii Nesterov believes the
threat of punitive fines resulting from the sanctions may well give
potential EU customers pause. But the recent Gazprom-Iran agreements
are proof, if any is needed, that the State Department’s belated
appointment of a special envoy on Caspian and Central Asian energy
issues is a classic inside-the-Beltway case of "too little too late."