Some Reasons to Materialize Iran, Iraq, and Syria’s Gas Pipeline
Iran, Iraq, and Syria are working together on a gas pipeline project that will transport gas from the South Pars Field in Assalouyeh, Iran to Damascus via Iraq. Fars Press Agency announced the 1,6000 kilometer pipeline’s transfer capacity would be 110 million cubic meters of natural gas a day, upon completion.
This tri-partite gas pipeline project has two different names. Iran and Iraq's governments have dubbed it the “friendship pipeline”, while some Western media sources call it the "Islamic pipeline”. This double naming belies two different interpretations of the project. From an Iranian perspective, this gas pipeline represents a first step towards a new energy road. From some Western perspectives, this project represents an enlargement in Iran’s sphere of influence.
The Iran-Iraq-Syria gas pipeline project became a cause for discussion on July 25, 2011, with a preliminary agreement signed in Assalouyeh, in Iranian southern province of Bushehr, to transport natural gas from the South Pars field to Iraq and Syria for the short term, with Jordan and Lebanon joining in the longer term.
On January 31, 2013, Alireza Nikzad Rahbar, a spokesman for Iran’s oil ministry, announced that “Iran will start exporting natural gas to Baghdad by next summer via an under-construction pipeline between the two countries.” He went on to underline the fact that “the friendship pipeline project between Iran, Iraq and Syria is the most important project currently pursued by the ministry”. Rahbar also noted this pipeline is designed to be able to deliver gas to other Muslim countries, like Jordan and Lebanon, in the future.
The South Pars gas field is world's largest, amounting to some 9,7000 square kilometers. It is shared between Iran and Qatar in the Persian Gulf. According the project manager, Pars Oil and Gas Company (POGC), which is a subsidiary of the National Iranian Oil Company, the field holds 14 trillion cubic meters of gas reserves. This makes it twelve times larger then the Shah Deniz gas field, which is estimated to hold 1.2 trillion cubic meters by BP, the leader of the Shah Deniz consortium.
The Iran-Iraq-Syria gas pipeline project is ambitious, with a transit capacity of 110 million cubic meters of natural gas per day, a length of about 1,600 kilometers, and an investment cost of $10 billion. It is worth comparing it with some of the West's ongoing international gas pipeline projects aiming to transport Caspian gas to Europe.
Concerning the length, the Iran-Iraq-Syria gas pipeline would be three times longer then Trans-Adriatic Pipeline (TAP) project, which Shah Deniz Consortium selected to transport Azeri gas to southern Europe. The pipeline would be as long as Nabucco West and the Trans-Anatolian natural gas pipeline (TANAP) project, running from the Caspian to northern Europe via Turkey.
The comparison becomes more flagrant when examining expected gas transport capacity. Iran’s oil ministry spokesman said the pipeline would carry 110 million cubic meters of natural gas per day, equivalent to some 40 billion cubic meters per year. The average expected annual gas transport capacities of the TAP, Nabucco West and TANAP gas pipeline projects are about 20 billion cubic meters each. Based on those numbers, Iran (which is banned from exporting oil and gas to the EU) expects to soon export to Syria and the Islamic world twice as much gas as its Caspian counterparts do to Europe. To achieve this objective, Iran, Iraq, and Syria are ready to invest as much money as the EU and US-backed projects have seen.
The original Nabucco gas pipeline project was expected to cost $10 billion. But the Nabucco Pipeline Company considered this expensive, as did its Caspian partners, and Nabucco West was drawn up, costing only $5 billion. The EU-backed TAP is expected to cost $1.5 billion, and the US-backed TANAP $7 billion. However, one may ask where the money will come from for Iran-Iraq-Syria gas pipeline projects.
When Iranian officials raised this issue in November, 2012, Victoria Nuland, a spokeswoman for the US State Department, said that “Washington has seen similar reports six or seven or 10 or 15 times before, and it never seems to materialize.” However, in today’s political arena Iran is closer than ever to achieving its objective.
Today, the Syrian uprising is in its 20th month. Bashar al-Assad, Syria's president, is losing his control over national territories and is in search of support to help him keep his hold on power. The crisis has created a bi-polarity in the region. Ankara and Erbil are on one side, supported by the US, while Damascus, Tehran, and Baghdad are on the other side, supported by Russia and China. This political bipolarization has given new momentum to standing problems, especially inside Iraq. Iraq’s national unity is already being tested by an internal oil and gas revenue sharing dispute.
Since the 2005 ratification of the constitution, the Iraqi central government in Baghdad and the Kurdistan Regional Government (KRG) in Erbil have been unable to reach an agreement on oil and gas revenue sharing. The dispute derives from different interpretations of the constitution. In 2007 the KRG passed its own regional oil and gas investment law, according to its interpretation of the constitution. Since then, Baghdad has declared international energy companies’ direct trade with Erbil and investment in KRG territories to be illegal under Baghdad's interpretation of the constitution.
Since the beginning of 2013, the tension has increased, with the Baghdad central government warning Exxon it had to choose between developing Kurdistan's oil fields or the West Qurna oilfield in the Iraqi south, an area under Baghdad's control.
Exxon Mobil’s decision could shift the balance of power between Erbil and Baghdad. If Exxon opts for the southern investment, Baghdad remains world’s most important oil supplier and could soon become a gas exporter as well. But if the firm opts for territory controlled by Erbil, the KRG will gain a boost to its energy and economic autonomy, which might encourage Iraqi Turkmen, in the country's south, to demand their own autonomy in their territories, which also contain Iraq’s main oil fields. Indeed, the KRG's increased energy autonomy is risky for the Iraqi central government, as it could lead to multiple losses in oil revenue. Baghdad, therefore, feels it needs to build an energy partnership to counterbalance the KRG.
Iran has suffered from embargoes placed on it since 2012 by Europe. The sole country to have bypassed these embargoes is Turkey – Iran today sells 90 percent of its natural gas to Turkey, making it Ankara's second largest supplier after Russia. These new actions may also put the gas trade with Turkey at stake. Since 2001 Turkey has been importing the equivalent of some $10 billion worth of gas per year under the gold-for-gas trade formula. To respect the international trade ban against Iran, Turkey pays for its gas in Turkish lira, and Tehran then buys gold with the Turkish lira payments it receives. In early January, to stem the gold flow between Iran and Turkey, US President Barack Obama signed a law banning the sale of precious metals to Iran, and the country is now searching for new roads and new consumers.
All in all, Iran-Iraq-Syria gas pipeline project fulfills needs for all three parties – Iran’s search for new energy roads, Iraq’s need to counterbalance foreign deals made with the KRG’s, and Syria’s search for sources of support. One may neglect or not, Iran, Iraq, and Syria gas pipeline project has today has some reasons to materialize even not all means, only if Russia or China does bring some funding.
By Olgu Okumuş
Olgu Okumuş (olgu.okumus@sciences-po.org) is finishing her PhD on "Turkey’s energy transit strategies" at Sciences Po-CERI in Paris. She is also an affiliated lecturer in energy diplomacy at Collège Universitaire de Sciences Po, Paris.