(Clarifies reference to Crimea, para 6)
* EU-Russian gas relations hurt by Ukraine crisis
* Iran has world's second biggest gas reserves
* Sanctions need to be eased before Iran exports can start
By Jonathan Saul and Henning Gloystein
LONDON, Sept 24 The European Union is quietly
increasing the urgency of a plan to import natural gas from
Iran, as relations with Tehran thaw while those with top gas
supplier Russia grow chillier.
Two "ifs" - the removal of sanctions on Iran and the
addition of some pipeline infrastructure - are not preventing EU
planners preparing, a European Commission source involved in
developing EU energy strategy told Reuters.
"Iran is far towards the top of our priorities for mid-term
measures that will help reduce our reliance on Russian gas
supplies," the source said. "Iran's gas could come to Europe
quite easily and politically there is a clear rapprochement
between Tehran and the West."
Russia is currently Europe's biggest supplier of natural
gas, meeting a third of its demand worth $80 billion a year. The
EU has imposed sanctions on Moscow over the conflict in Ukraine,
increasing the need for gas from elsewhere.
While sanctioned itself, Iran has the world's second largest
gas reserves after Russia and is a potential alternative given
talks between Tehran and the West to reach a deal over the
Islamic Republic's disputed nuclear programme.
"High potential for gas production, domestic energy sector
reforms that are underway, and ongoing normalisation of its
relationship with the West make Iran a credible alternative to
Russia," said a paper prepared for the EU's Directorate-Generale
for External Policies following Russia's annexation of Crimea.
However, the paper added that Iran was not a credible
alternative energy supplier in the short-term due to sanctions
and large infrastructure needs before exports become viable.
Internal EU energy security documents seen by Reuters also
describe plans to tap new non-European gas import sources in
central Asia, including Iran.
Iran, exploiting the reversal of old enmities caused by the
upheaval of the Islamic State militants in the Middle East, is
also keen to sell its gas.
"Iran can be a secure energy centre for Europe," its
President Hassan Rouhani was quoted on Wednesday telling
Austrian President Heinz Fischer in New York.
Tehran's assertions over reliable supply are likely to ring
alarm bells at Russia's giant Gazprom, after
interruptions to its exports via Ukraine in previous disputes
"Iran is trying to position itself in Europe as an
alternative to Russian gas. It's playing a very sophisticated
game, talking with Russia on the one hand about cooperation on
easing sanctions and also talking to Europe about substituting
Russian gas with its own," said Amir Handjani, an independent
oil and gas specialist working in Dubai.
"Given Russia's current strategy politically, which is one
of confrontation with Europe, I see the EU having little choice
but to find alternative gas supplies," he added.
SANCTIONS AND ROUTES
The lifting of sanctions on Iran - the game changer - is
unlikely to be soon. Diplomats are pessimistic over the odds
that Iran and world powers will conclude a final agreement by a
Nov. 24 deadline.
Iran and six world powers - the United States, Britain,
France, Germany, Russia and China - are trying to hammer out a
long-term nuclear accord that would bring an end to
international sanctions that have crippled the Iranian economy.
Analysts say Iran has already lost out on lucrative
liquefied natural gas (LNG) exports in Asia, where customers pay
the highest prices, to Gulf rival Qatar, so Tehran has to look
"Iran's interest to deliver gas to Europe is very big. Parts
of Iran's economical and political elite as well as Western
companies are preparing for an end of the sanctions," said Frank
Umbach, energy research director at King's College in London.
Mark Dubowitz, of U.S. think tank Foundation for Defense of
Democracies, said Iran was looking to exploit the situation in
both Iraq and Russia to get concessions out of the West on the
"Washington should be wary of any attempt to further erode
its negotiating position by opening up any more economic escape
hatches for Iran until a comprehensive deal is reached, and
enforced, that dismantles Tehran's military-nuclear programme,"
said Dubowitz, who has also advised U.S. lawmakers on sanctions.
The U.S. State Department had no immediate comment.
The most feasible route for Iranian gas to Europe would be
via Turkey, already a customer, although the existing
Tabriz-Ankara pipeline would not be big enough for major
Iran has long lobbied to build a designated pipeline that
would connect its huge South Pars gas field with European
customers - the so-called Persian Pipeline.
"It's an extremely ambitious project," Handjani said. "Even
if half of it gets built it would be major accomplishment for
both Europe and Iran."
Investors in Europe, as well as the European Commission,
favour the cheaper, and politically less controversial, option
of importing Iranian gas to the EU via Turkey through extended
pipelines that already exist or are currently being developed.
Energy majors Total of France and Italy's Eni
have in the past expressed interest in developing South
Pars, one of the world's biggest gas fields, shared by Qatar and
Iran, with total reserves estimated around 50 trillion cubic
metres (tcm), enough to meet European demand for over 100 years.
Independent feasibility studies show that, if sanctions were
to be eased and investments started soon, Iran could supply
10-20 billion cubic metres (bcm) of gas a year to Turkey and
Europe by the early 2020s.
Diplomats are in place to ease a potential major shift in
global energy trade.
"Our main point of contact with the Iranian government is
through its embassy in Berlin, and its new ambassador there is a
former member of Iran's energy ministry," the Commission source
Ali Majedi was named in July as Iran's ambassador to
Germany. Before that he was deputy oil minister in charge of
international affairs. Majedi could not be reached for comment.
(Additional reporting by Parisa Hafezi in Ankara, Rania El
Gamal in Dubai and Arshad Mohammed in Washington; Editing by