After the inauguration of a full-scale partnership between Gazprom and National Iranian Oil Company (NIOC) along the entire gas value chain, including possible collaboration on the $4bn Iran LNG Project, energy issues were also at the epicenter of the 14th meeting of the Permanent Russian-Iranian Joint Trade and Economic Commission. Following conclusion of the session, which was held on March 6 and was co-chaired by Russia’s Energy Minister Alexander Novak and Iran’s Finance Minister Masoud Karbasian, implications for bilateral trade, in the event of the Islamic republic joining the Russian-led, but regulatorily and institutionally flaccid, Eurasian Economic Union (EAEU) by May, immediately made the headlines.
However, the news that three agreements based on Iran's new model of oil contracts (Iranian Petroleum Contract -IPC), that has already replaced the old-type buyback contract, will have been signed by March 21, i.e. by the end of the current Iranian calendar year, should be given equal, if not grander, importance, in the context of the Russian-Iranian energy cooperation. That is because Russian companies’ interest has been kept fervent in a certain number of onshore oil and gas fields that ended up in NIOC’s investment list. For instance, Lukoil has submitted a proposal for developing Ab-Teymar and Mansouri oilfields in western Iran, while Gazprom Neft has presented its own plan on Azar and Changuleh oilfields on the border with Iraq. To top it all off, Gazprom inked in January 2018 separate memoranda of understanding with Iran in order to be able to carry out technical studies for three offshore gas fields in the Persian Gulf, namely North Pars, Kish and Farzad-B, which was to be developed by its initial discoverer, an OVL-led consortium, prior to an impasse in negotiations with Tehran that forced Indian state refiners to halt Iranian oil imports in 2017-18. According to Minister Novak, Russian firms are going to invest over $20bn in Iran’s oil and gas sector and are eager to partner with international energy players on future projects.
Moreover, it was in the course of the Joint Trade and Economic Commission’s meeting that a special working group, formed out of the two countries’ Energy Ministry representatives, convened for the first time on Russia’s potential participation in the implementation of Iran-Pakistan-India gas pipeline, running from South Pars gas field to Karachi. NIOC chief Ali Kardor has since late 2017 revealed that the company is considering joint realization with Gazprom of both the abovementioned line, as well as of a second deep-water connection to India passing through Oman, but bypassing Delhi’s neighbor and arch-foe Pakistan. Finally, another memorandum of understanding allowing for geological exploration activities regarding hydrocarbon prospectivity of the Iranian sector of the Caspian Basin by Rosgeologiya and Iran’s Geology and Mineral Resources Organization was also signed at the outcome of the Commission’s meeting. It should be noted that Russian and Iranian positions differ from each other as for the preferred delimitation of the Caspian Sea, following adoption of the median line sectoral division by Tehran, but both states oppose to pipeline laying operations being carried out before the definitive settlement of the Sea’s legal status, this way impeding implementation of the Turkmen-Azerbaijani Trans Caspian Gas Pipeline (TCGP).
One day ahead of the Russian-Iranian Commission’s session in Moscow, the High-Level Group on Trade and Investment Support, operating under the aegis of the Intergovernmental Turkmen-Russian Commission for Economic Cooperation, gathered in Ashgabat. Energy relations between the two countries are far from ideal, as a result of Gazprom’s 2016 decision to stop buying Turkmen gas, leaving the Central Asia-Center pipeline network practically empty and prompting a sharp decline in the country’s hard currency revenue. Now both countries are focused on China’s gas export option. Turkmenistan has agreed to up its gas exports to Beijing to over 60BCM by 2020 (from today’s 30BCM), as soon as Line D of the Central Asia-China gas pipeline network is commissioned. However, the price for this gas has still not been made public and Turkmenistan will have to compensate China for financing the pipeline building, a fact that raises a question mark over the exact profit margins for Ashgabat. For its part, Russia is preparing to send gas from the Irkutsk and Yakutia gas production centers to China via the Power of Siberia gas transmission system. Besides the particular regional antagonism over the Chinese clientele, Turkmen President Gurbanguly Berdimukhamedov has never ceased to seek restoration of broken energy ties with Russia, as was proved by his suggestion that Moscow should contribute to the materialization of Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, another eastward export gas project, made during a phone conversation with Russian President Vladimir Putin in December 2017 and still remained unanswered. Of course, Ashgabat can always rely on EU and its financial institutions’ support of the TCGP, through which one more supplier-state will be added to the Southern Gas Corridor pipe network, however chronic delays in this project have resulted in Turkmenistan searching for additional energy alliances within the strictly limited Eurasian and Southeast Asian space. Around 80 sector projects have been so far incorporated in the intergovernmental Russian-Turkmen program of economic cooperation from 2017 to 2019, with the addition of energy-related ones.
Overall, two distinct conclusions can be drawn out of these recent initiatives of regional rapprochement between Iran and Russia and Turkmenistan and Russia, in the mantle of economic and trade cooperation. With respect to Iran, Russia clearly wishes to put into effect a containment strategy of its neighbor in the post-nuclear-pact era through the steady set-up of energy bonds, ranging from subsoil exploration and pipeline diplomacy to thermoelectric power stations and railway electrification. The new wave of US sanctions against Iran that could further choke off the foreign investment the country needs to rehabilitate aging energy assets and boost oil and gas production, as well as EU’s relative idleness on the formulation of a cohesive partnership plan for Iran, in lack of a more decisive American ally, are two things Russia takes advantage for this purpose. Lastly, Russia’s stance pertaining to Turkmenistan is based on the usual sphere-of-influence thinking that it applies to the whole former CIS area. Witnessing Gazprom restoring gas flows from Turkmenistan at some point in 2018 will be part of this theoretical conception and will mean Russia will have previously secured important Turkmen concessions in return.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-march-16-2018/#4
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