Bottom Line: Iraq’s agreement to allow Iran to build a pipeline through its territory and on to Syria is in direct competition with Qatar’s similar designs for a Syria pipeline that would connect to Turkey. This pipeline is another proxy in the Syrian conflict theater and Iran’s response to its loss of ground here. It is also a sign of Iran’s growing foothold in Iraq. Qatar will respond in kind.
Analysis: This week the Iraqi Cabinet green lighted Iran’s $10 billion pipeline project, which will supply gas from the South Pars field (which is the largest in the world, and which, as mentioned above, it shares with Qatar) to Syria and beyond to other export markets. There is talk of extending the pipeline to Lebanon.
The first part of the pipeline—some 225 kilometers—through Iraq will reportedly be completed in June 2013. The pipeline will connect the southern Iranian port of Assolouyeh to Iraq and then to Syria—for now. It will have a 110 million cubic meter/day capacity. The plan is to give Iraq 20 million cubic meters/day of Iranian gas for its power plants, with 20-25 million cubic meters/day going to Syria.
In a direct slap in the face to Qatar’s plans, Iraqi authorities also said the pipeline could eventually be extended to Europe. This is where it gets quite interesting: the current sanctions regime of course would not allow this Iranian gas into the European market, but it certainly will be tempting for Europe, starved for gas and beholden to Russia. As such, this pipeline could be Iran’s best play yet. It will have something to bargain with that everyone wants.
As we have noted before, right before the Syrian conflict broke out, in July 2011, Iran had clinched a preliminary deal to build the 1,500-km pipeline. Work on the project had already begun in November 2011. This is when the Qataris stepped into to the Syrian conflict on the side of the rebels and to arm Salafi jihadists to overthrow the Assad regime. For Qatar and Iran, the Syrian conflict is first and foremost about securing this pipeline to the South Pars field.