Q&A-What are Russia's energy interests in Iran?
MOSCOW, July 22 |
MOSCOW, July 22 (Reuters) - Russia, the world's largest oil producer, must carve a careful path between its efforts to improve ties with Washington and its historic relationship with Iran, a fellow oil and gas power.
WHAT IS RUSSIA DOING IN IRAN'S ENERGY SECTOR?
Russia's main energy project in Iran -- the Bushehr nuclear power plant, which is under construction by Russian firms -- is also at the crux of U.S. fears that the Islamic Republic could acquire nuclear weapons.
Russia has long said the reactor is purely for civilian electricity supply, but President Dmitry Medvedev recently said Iran was close to acquiring nuclear weapons, sparking speculation that Russia was distancing itself from Iran.
In hydrocarbons, state-controlled Gazprom's (GAZP.MM) contribution to a $2 billion consortium investment in Iran's giant South Pars gas field is a major cross-border investment.
Its oil arm also has a memorandum of understanding to develop two Iranian fields.
But Gazprom has indicated that deals can be finalised only when it is not at risk of sanctions.
One Russian company was engaged in business specifically targeted by the sanctions regime -- LUKOIL (LKOH.MM), the country's No.2 oil producer. Earlier this year it ceased deliveries of petrol (gasoline) to Iran, leaving Tehran bereft of a key supplier of the fuel it subsidises heavily.
WILL THE THREAT OF SANCTIONS DRIVE RUSSIA OUT OF IRAN?
LUKOIL is an example of a Russian company with extensive business in the United States. It has 2,000 U.S. petrol stations, with its logo on pumps just a few kilometres (miles) from the White House, as well as a large investor base including U.S. institutions.
"It is clear that this law is designed to force foreign oil and energy companies to chose between doing business in the United States and doing business in Iran," said Dechert partner Tom Bogle, a Washington lawyer who practices in the area of U.S. sanctions.
Iran is also pressing its partners to choose. Last week, the National Iranian Oil Company announced it would blacklist companies that abandon their business with Tehran, starting with LUKOIL.
Whether the U.S. administration would take action against Russia, a valued back-door channel to Tehran, is an open question, however,. The U.S. president can waive sanctions if he can argue it is in U.S. national interests.
"Even prior to its adoption, the support that was given by Russia and China to the Security Council on the next wave of sanctions would support a finding by the president to invoke waiver authority," Bogle said.
"My own instinct is that it would be likely to do so ... You can't enhance multinational efforts against Iran without support from Russia," he added.
DOES RUSSIA NEED IRAN?
Russia took steps to soothe Tehran last week when Oil Minister Massoud Mirkazemi came to Moscow to meet Russian Energy Minister Sergei Shmatko and sign a "road map" for energy cooperation, preserving a key diplomatic link.
Closer to Russia's own heart -- and its state coffers -- are Iran's gas reserves and its potential role as a rival supplier to Europe.
"As long as Iran remains in the corner, Nabucco cannot be implemented. But if things change on this front, that might be a major headache for Russia," said Sergei Lukyanov, editor of Russian in Global Affairs magazine.
Russia, which supplies a quarter of Europe's gas, has repeatedly said the European Union-backed Nabucco, a rival to Russia's South Stream pipeline project, lacks gas to become a +commercially viable project unless Iran joins it.
SO RUSSIA IS TAKING THE LONG VIEW?
If Iran's Russian partners are looking far enough ahead, they may be contemplating a different political landscape and opportunities unencumbered by sanctions.
Russia may simply be hoping that, by maintaining friendly ties with the current political regime, as it tried to do with Saddam Hussein's Iraq, it might be first in line to develop Iran's untapped resources when the sanctions threat lifted.
"Not only Russian but all international companies will step up, and it will be the same as in Iraq," Troika Dialog analyst Valery Nesterov warned. "It will be very strong competition." (Reporting by Melissa Akin and Dmitry Zhdannikov, editing by Jane Baird)
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Diplomatic correspondent, BBC News.
The US and its European allies like to see Iran as an increasingly isolated country; its economy hobbled more and more by economic sanctions and with the pressure growing weekly.
There is no doubt that Iran is to a large extent isolated from key markets and that the sanctions are beginning to act as a significant brake on its economy.
This was already in a bad way due to mismanagement and structural problems.
Iran’s inability, for example, to import Western technology for its oil and gas industry is seriously reducing its ability to exploit this vital natural asset over time.
However, as this week’s gathering of the Developing 8 (D8) in Nigeria shows, there is isolation and there is isolation.
Strong sympathy
Iran is no North Korea. It maintains strong economic ties with both Russia and China.
Iranian President Mahmoud Ahmadinejad is something of a globetrotter, pursuing an active diplomacy in Africa, Asia, Latin America and the Balkans.
The D8 gathering brings together a diverse collection of countries, including a number who are significant players in their own regions – Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey.
All are predominantly Muslim countries or have large Muslim populations.
While principally a trading or economic grouping, politics is never really far away and they are set to give a resounding endorsement of the need for all countries to be able to secure the benefits of peaceful nuclear energy.
This will be taken by Iran as an endorsement of its efforts to master various nuclear technologies. It insists that this is for civil, not military, purposes.
The meeting underlines the fact that many governments – especially in the developing world – still have strong sympathy for Iran’s aims.
They view its battle with the United Nations Security Council over the enrichment of uranium in very different terms from those perceived in Washington and European capitals.
Dynamic diplomacy
The meeting highlights the fact too that Iran has a dynamic and active diplomacy of its own; something that is often forgotten with the focus on US coalition-building to back each new round of UN-imposed sanctions.
Mr Ahmadinejad received a warm reception from the D8 delegates At many levels Iran’s diplomacy has actually been quite successful.
It recently engaged with two of the key emerging regional powers – Turkey and Brazil. They had intervened to try to find a compromise deal that would enable the fuelling of a research reactor in Iran used to produce medical isotopes.
The US and its supporters would argue that it is wrong to see its differences with Iran as a battle between Tehran and the West.
It is, after all, the demands of the UN – the International Atomic Energy Agency (IAEA) and the Security Council – with which Iran is failing to comply.
But that is not how it is seen in many parts of the world and Mr Ahmadinejad’s warm reception among the D8 is evidence that many still have a very different view of Iran and its nuclear struggles.
In short term Iran may have to spend more money and use up her favors, but it will start a a new movement and trend that will have significant effect globally.
The night is still young.
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