Bottom Line: As Iraqi, Syrian and Iranian oil ministers meet in southern Iran to sign an MOU for the construction of the tri-country gas pipeline; a new picture emerges from the rubble of the Syrian conflict.
Analysis: On 25 July, Iran, Iraq and Syria signed a deal for the construction of what would end up being the largest gas pipeline in the Middle East, running gas from Iran’s South Pars field to Europe, via Lebanon and the Mediterranean Sea. The Memorandum of Understanding was signed by Iraqi Oil Minister Abdelkarim al-Luaybi, Syrian Oil Minister Sufian Allaw, and Iranian caretaker Oil Minister Mohammad Aliabadi in Assolouyeh, southern Iran. The deal will see Iranian gas transited to Greece and elsewhere in Europe via a 6,000-kilometer pipeline that traverses Iraq, Syria and Lebanon under the Mediterranean. The project will cost around $10 billion and will take between 3 and 5 years to complete. Right now it’s in the feasibility study stage, with a final agreement hoped for by the end of this year. Once complete, it should be able to handle about 110 million cubic meters of natural gas per day.
Recommendation: We have stressed numerous times that this is one of the main reasons for the conflict in Syria. Right now there is a race on to get gas through this region, to Europe. This was Qatar’s main goal of meddling in Syria—and now Qatar has been largely sidelined having extended its reach a bit too far. (Qatar shares the Pars field with Iran). Israel—fresh on new massive finds in the Levant Basin—is also toying with a pipeline to Turkey, which itself seeks to be the Middle East’s key energy hub. But Israel and Turkey are dawdling, and the Iran-Iraq-Syria triumvirate is much more decisive in knowing what it wants. The reality is that (politics aside) this Iran-Iraq-Syria pipeline would be a major boon for Europe, pesky sanctions aside (more on that below). This is the answer to the Gazprom plague for Europe, but for now it can’t rejoice—publicly. But watch as the atmosphere starts to change color, slowly but surely.