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Iran: New Gas Pipeline Boosts Regional Ambitions

London, 6 January 1998 (RFE/RL) -- Analysts say the opening last week of the first natural gas pipeline linking Iran with the energy-rich Caspian Basin region via Turkmenistan is a boost to Teheran's ambition to play a more important regional role.

The 200-km pipeline will initially link gas fields in western Turkmenistan to industrial markets in northern Iran. It marks the first stage in Iran's ambitious drive to build a 3,200 km natural gas pipeline from Turkmenistan to Turkey -- potentially its largest international energy project since the 1979 Islamic Revolution.

Analysts at a recent London conference on Caspian energy prospects said if the $1.6 billion pipeline goes ahead, it could eventually lead to the export of Caspian gas to Western Europe.

The project would involve the expansion of Iran's present gas pipeline network, already connected to Azerbaijan as well as Turkmenistan, to Armenia and eastern Turkey.

A related agreement involving Iran, Turkmenistan, Turkey and the giant multinational oil company, Royal Dutch Shell, was signed last month. It will lead to a nine-month feasibility study into the proposed Turkey pipeline link.

The developments highlight Iran's strategic importance as the only country bordering the world's two most crucial sources of oil and gas, the Persian Gulf and Caspian Sea, and itself the possessor of 10 percent of the world oil reserves and 15 percent of gas reserves.

One analyst told the London conference: "The riches of the Caspian Basin need an outlet to the open seas. . .the countries around the Caspian Sea do not have many alternative land routes except those through Iran."

Teheran itself argues that it offers the landlocked Central Asian countries the best route for reaching world markets for their oil and gas exports. President Mohammad Khatami, who came to power last May, has stepped up ties with his central Asian and Caucasus neighbors and is encouraging international oil and gas firms to do business with Iran.

However, analysts say Iran's drive to be a key player in the opening up of the huge Caspian oil and gas reserves is limited by U.S. efforts to isolate the country. The U.S. has charged that Iran supports international terrorism, is pursuing weapons of mass destruction, and has undermined the Middle East peace process.

The U.S. also cites Iran's "aggressive attitude" toward its Gulf neighbors, and its "repression" of human rights at home.

The U.S. Iran-Libya Sanctions Act passed by Congress in 1996 requires President Clinton to impose sanctions on any firm investing more than $20 million a year in either countries' energy sector. Iran says the sanctions are illegal under international law, and threaten the sovereignty of other countries. (Washington has said it will not object to the Turkmenistan gas link)

Analysts say the opening of the gas pipeline between Turkmenistan and Iran underscores the difficulties faced by the U.S in trying to prevent Iran play a bigger role in the region.

A western diplomat in Teheran, quoted by the Financial Times, said: "Iran's great advantage is that its energy resources and its own internal development happen to coincide with tremendous interest from western oil and gas companies in central Asia." Last September, a consortium including the French energy giant, Total, threw a direct challenge to the U.S. legislation when it signed a $2 billion deal with Iranian oil and gas officials to develop the huge South Pars gas field. The other partners in the consortium are Russia's Gazprom and Malaysia's Petronas.

The French government warned Washington against retaliation, saying it would constitute a serious precedent in international trade. Prime Minister Lionel Jospin said: "No-one accepts that the U.S. can now impose their laws on the rest of the world."

But the U.S. State Department said the Total-Gazprom-Petronas deal would "make more resources available to Iran to use in supporting terrorism and pursuing missiles and nuclear weapons."

On a recent visit to the Caucasus region. U.S. Energy Secretary Pena reinforced the U.S. opposition to investment by western energy companies in the Iranian oil and gas sectors, as well as to Iranian transit corridors for Caspian oil and gas.

And William Ramsay, U.S deputy assistant secretary for energy, sanctions and commodities, said that the U.S. sanctions are in place not to frustrate U.S friends in the Caspian Basin, but because Iran "has not yet chosen to cease its unacceptable behavior."

However, U.S. oil and gas companies, eager to step up their business with the Caspian region, complain that the U.S.'s uncompromising line against Iran is giving European-led and other giant energy multinationals an unfair trading advantage.

They have been encouraged by a recent remark by President Khatami when he spoke of his respect for the "great people of the United States" -- widely seen as a bid to warm relations. Western analysts regard Khatami, a 54-year-old cleric, as a moderate compared with Iran's other post-revolutionary leaders.

Still, the London Financial Times last week said that the new gas pipeline linking Iran with Turkmenistan is, for Teheran, "a symbol of its ability to circumvent US efforts to isolate the country." The report added: "It is also a reminder that Iran is at the center of oil and gas export routes from the Caspian region."