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The Pipeline Paradox

Why is the United States helping Iran sell natural gas?

MARTIN SHAKHBAZYAN/AFP/Getty Images
MARTIN SHAKHBAZYAN/AFP/Getty Images
MARTIN SHAKHBAZYAN/AFP/Getty Images

Despite the harsh sanctions imposed on it by the United States and United Nations, Iran continues to steadily accumulate geopolitical clout. Many commentators point to the fact that the cascading series of revolutions in the Middle East has given the region's Shiite communities, which are allied with Iran, greater influence. But even more important is Tehran's recent success in strengthening its role as an indispensable international energy supplier. By focusing on financial sanctions rather than the Islamic Republic's plans to become a global energy superpower, Washington policymakers have enabled Iran's rise.

Despite the harsh sanctions imposed on it by the United States and United Nations, Iran continues to steadily accumulate geopolitical clout. Many commentators point to the fact that the cascading series of revolutions in the Middle East has given the region’s Shiite communities, which are allied with Iran, greater influence. But even more important is Tehran’s recent success in strengthening its role as an indispensable international energy supplier. By focusing on financial sanctions rather than the Islamic Republic’s plans to become a global energy superpower, Washington policymakers have enabled Iran’s rise.

Hundreds of millions of people are dependent on Iran for their energy. But while the West tends to associate Iran with oil, of which it is the world’s fourth-largest producer, Iran’s real power derives from its vast natural gas reserves, which are second only to Russia’s. Driven by technological breakthroughs in the United States and demand in China and elsewhere, natural gas is already ascendant as a source of energy for power generation that is substantially cleaner than the old standby coal; in a post-Fukushima world, it is likely to be second to none.

The international natural gas trade is different from those in oil and coal in that natural gas is for the most part delivered by an expensive pipeline infrastructure, rather than by more malleable sea routes or rail lines. This means that once an importer enters a long-term contract with an exporter, the relationship becomes all but unbreakable — if Western Europe gets sick of dealing with Russia, for instance, it can’t just pick up its pipeline and drag it over to North Africa. This is a big advantage for politically unpopular exporters, which explains why in recent months Iran inked gas deals with all of its seven neighbors, except Afghanistan. In doing so, it hopes not only to become a critical transit country for Central Asia’s energy, but also to ensure that Europe and South Asia are beholden to its gas for many years to come.

In June 2010, Iran and Pakistan signed the final deal for a connecting pipeline that would carry 21.5 million cubic meters per day of natural gas. Both countries hope to extend the pipeline into either India or China, enticed by the prospect of millions of dollars in transit fees. If this happens, Iran would gain an economic lifeline — and enjoy diplomatic protection from three Asian giants. If New Delhi refuses to extend the Iran-Pakistan pipeline into its territory, Tehran has a backup passage to India, via Oman. In 2008, Iran and Oman agreed to develop jointly Iran’s offshore Kish field. Meanwhile, Oman and India are negotiating a deep-water pipeline that would bring Persian Gulf gas to India across the Arabian Sea. Should this project come to fruition, Iran’s gas will undoubtedly provide the lion’s share of the piped product.

No less important for Iran is the European market. Here, Iran is trying to position itself as an alternative to Russia — which supplies a quarter of Europe’s natural gas — as a major exporter to the European Union. Europeans have been acutely aware of their vulnerability: Five years ago, a spat between Russia and Ukraine — through which 80 percent of Russia’s natural gas exports to Europe travel — disrupted supplies to Hungary and Poland. Ever since, they have tried to establish a range of Plan Bs for gas delivery. Chief among them is Nabucco, a pipeline that aims to bring gas from the Caspian Sea to the heart of Europe by way of Turkey, Bulgaria, Romania, and Hungary. Iran wants to ensure that no matter which new corridor to Europe is chosen, its gas will be fed into it. For this, Iran needs to be fully integrated into the gas pipelines of its relevant neighbors: Azerbaijan, Syria, Turkey, and Turkmenistan.

This is exactly what Tehran is doing. In January, Iran and Syria signed an agreement to build the so-called Islamic pipeline, which would carry gas from Iran to Europe via Iraq, Syria, Lebanon, and the Mediterranean basin. That same month, Iran signed a long-term contract with Azerbaijan to import Azerbaijani gas to Iran in exchange for exporting Iranian gas to the Nakhchivan Autonomous Republic, the Azerbaijani exclave between Iran and Armenia. Iran has also built a pipeline to Armenia itself, which opened in 2008. In February, Iran and Turkey announced that they are planning to increase the amount of gas flowing through the Tabriz-Ankara pipeline from 18 million to 23 million cubic meters per day. Last November, Iran inaugurated a new pipeline with Turkmenistan, the world’s fourth-largest gas reserve.

These deals will determine the contours of the new geopolitics of energy — and it is Iran, not the United States or its allies, that is drawing them. In fact, U.S. President Barack Obama’s administration, like George W. Bush’s before him, is holding the easel for Tehran.

For example, Washington has long believed that for the sake of European energy security, Europe needs an alternative to Russian gas, and accordingly it has been extremely supportive of the idea of a southern natural gas corridor. U.S. policymakers have reassured themselves that such a corridor would exclude Iranian gas and were gratified by Turkmenistan’s announcement in November that the country would commit 40 billion cubic meters of gas annually to Europe through the pipeline. But this wishful thinking ignores market realities. Once Nabucco, or any other southern corridor, is constructed, who will prevent Iranian gas from flowing into Europe?

Fortunately, there is a regional alternative. U.S. interests would be better served if Turkmenistan’s gas were instead directed south to the Turkmenistan-Afghanistan-Pakistan-India pipeline (TAPI) which would — if built — extend from Turkmenistan, through Herat and Kandahar in Afghanistan, to Quetta in Pakistan, and on to India. TAPI, which is also supported by the United States, would contribute to the economies of all four countries, particularly Afghanistan’s, which desperately needs it. More importantly, TAPI would effectively kill the Iran-Pakistan-India pipeline as it would allow India to meet its energy needs without Iran. But the pipeline faces many challenges, mostly to do with lack of security in Afghanistan. If Washington is serious in its support for TAPI, it should help secure the funding for the pipeline and work with the Afghan government on creating a safe environment for the project — as the U.S. military did in recent years in Iraq and Colombia, two similarly war-torn countries. It should also encourage Turkmenistan to direct its gas southward rather than westward.

Instead, by supporting Nabucco and by giving a nod to Turkmenistan to divert its gas to Europe, the United States is not only facilitating the creation of two new economic lifelines for Iran, but also compromising its relations with Russia — outcomes that run contrary to Washington’s declared positions toward both Tehran and Moscow. Alternatively, by joining forces with Russia, which has expressed interest in financing TAPI, the United States can help shape the geopolitics of energy in South and Central Asia in a way that helps the economic development of its allies in the region while undermining Iran. Washington’s current course, however, will only make Tehran richer and more geopolitically indispensable. 

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