An interesting cat-and-mouse game is on! Washington is using all its might to thwart Iran’s effort to optimise returns from its considerable energy resources. The US administration is endeavoring hard not to provide enough breathing space to Tehran, so as to compel it to accept things on Washington’s terms.
The US imposed broad economic sanctions on Tehran in the immediate aftermath of the 1979 revolution. The sanctions have definitely hampered the growth of the energy sector in Iran. In 1996, the US Congress passed the Iran-Libya Sanctions Act (ILSA). It forced the US-based Conoco to give up $550 million contract for offshore oil field development, which eventually went to the French company Total and Petronas of Malaysia.
In 1997, these regulations were tightened further to provide for mandatory or discretionary sanctions on foreign companies that provide investment of more than $40 million for the development of energy resources in Iran. According to some estimates, Iran is said to have the world’s second largest natural gas reserves, estimated at around 812 trillion cubic feet (tcf). Hence Tehran seems to have an interest in exporting gas to energy customers all around. Tehran began making efforts to promote gas exports shortly after the discovery of huge natural gas reserves in its South Pars field in 1988.
India and Pakistan were the most natural markets for this gas and with their economies starting to make rapid strides, their need for energy resources was obvious. Iran could easily have met these requirements, almost next door, with a pipeline.
The US has publicly assured both New Delhi and Islamabad that it would help them meet their energy requirements. The recent signing of the Indo-US deal on peaceful use of nuclear energy is being regarded by many analysts as one of the carrots held out. In fact, immediately after the signing of the agreement and despite the assertions to the contrary of the Indian energy minister, the Indian prime minister came out with question marks about the Iran-Pakistan-India gas pipeline. The timing and the venue of the negative pronouncement on the pipeline by the Indian prime minister was not missed out by the energy fraternity.
Some analysts are also pointing out that the US eagerness to keep the Unocal assets within the US could also be linked to this issue. And the US is not contented with just thwarting the Iranian attempts to export its gas to Pakistan and India. Besides hurting the growth of the Iranian energy sector through its sanctions regimen, it is also trying to block all its exit routes.
The US is also exerting pressure on some Japanese companies to opt out of Iran. According to recent reports, because of potential pressure from Washington, the Japanese government might have to pull out its political support for the Azadegan development project. A Japanese company Inpex Corp. is currently undertaking development of the Azadegan project. As per the current arrangements, Azadegan fields are to be developed in two stages of roughly six years each. Inpex was to invest $1 billion in the first phase.
During this first phase, which began in March 2004, the consortium is to raise production to 150,000 barrels a day. The second phase scheduled to start in 2010, the production is to be raised to 260,000 barrels a day.
Tehran is reportedly embarking on a project to broaden its gas export strategy to pipelines running to Europe via Ukraine, after encountering problems in talks to pump gas across Turkey — another staunch US ally in the region. The talks between Ankara and Tehran on the issue of exporting gas via Turkish pipeline broke down a couple of weeks ago on issues related to who controls the taps, and hence the quantity to be shipped across the pipeline.
Indeed the US decisions to try and thwart Iranian energy ambitions have dimensions linked to geo-strategic political considerations and the perceived strategic interests of Washington in the region. Indeed one has to concede, politics and energy go hand in hand!
