The ending of international sanctions against Iran could soon send Iranian gas flowing across and through the South Caucasus, amping up the region’s strategic significance and possibly changing the dynamics of its energy trade.
For Azerbaijan, getting Iran on board with TANAP, the Trans-Anatolian Natural Gas Export Pipeline, could bolster Baku’s largest energy-export undertaking, the Southern Gas Corridor, a chain of three big pipelines, stretching across more than 3,400 kilometers and seven countries from the Caspian Sea into Europe. TANAP is the largest and costliest section of the Corridor.
Yesterday, on January 20, Iranian Ambassador to Baku Mohsen Pak Aein declared that “Iran may join . . .TANAP, with an aim of exporting its natural gas to the European markets.” He met with Azerbaijani President Ilham Aliyev today to talk non-energy projects as well, adding for good measure that “Iran can join all the large-scale projects in the region.” Related: Goldman Sachs Sees Oil Markets Turning Bullish Soon
As a transit country, Georgia would get a share of any Iranian gas flowing through the Southern Gas Corridor. But with more Iranian gas in the region, Tbilisi fears losing the share of gas it receives from another pipeline — run by Russian energy behemoth Gazprom for shipments to Armenia from Russia.
Citing talks with Gazprom, Georgian Energy Minister Kakha Kaladze alleged this week that Russia wants to stop giving Georgia gas as a transit fee (10 percent of the country's annual supplies) and instead to pay cash. If Georgia declines, Russia has threatened to stop supplying gas to Armenia via Georgia altogether, Kaladze said in a January 19 interview on Rustavi2. Instead, he claimed, gas supplies to Armenia will come from Iran.
Iran is Armenia’s fourth-largest trade partner and the only alternative to Russia for natural gas supplies. Armenia and Iran have been swapping gas for electricity. An existing, 1.1-billion-cubic-meter-capacity pipeline owned by the Armenian branch of Gazprom links the two countries and, if upgraded, could supply most or all of the roughly 2.5 billion cubic meters of gas that Armenia needs annually. Related:10 Reasons why Sub $30 Oil Is A Major Problem
Kaladze’s allegation came as the latest explanation for a series of highly controversial negotiations between Georgia and Gazprom over gas supplies. The talks have stoked fears that the pro-Western country could end up again dependent on Russian energy and thereby susceptible to political pressure from Moscow. Contradictory statements by Kaladze have only fed the concerns.
The alleged Gazprom threat has not entirely dispelled them.
Armenia cannot switch from Russian to Iranian gas overnight and such a move would require pricey infrastructure upgrades. It still would not remove Russia from Armenia’s gas market. The country’s entire pipeline infrastructure is owned or operated by Gazprom's local subsidiary. Related: Oil Markets Are Balancing Faster Than IEA Would Have Us Believe
Moscow also had gone out of its way to ensure Armenian dependency on Gazprom energy and, by extension, Yerevan’s geopolitical loyalty. For that goal, Moscow even insisted on putting on a diameter limit on the Armenia-Iran pipeline. Letting Armenia fully slide away toward supplies from Iran will leave Russia with fewer options for influence-peddling. Moreover, Armenia just recently asked Russia to lower its price for gas.
Either way, the return of Iran has put all sorts of energy and political dynamics in motion in the South Caucasus, though opinions diverge about how far-reaching these changes will prove to be.
by Giorgi Lomsadze via Eurasianet
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