31.10.2008
October 29, 2008 (the date of publication in Russian)
Sergey Pravosudov
THE "BIG THREE" IS NOT YET A CARTEL
Russia pursues a balanced architecture of international gas markets
The October 21 meeting in Tehran, involving the team of Russia's Gazprom, headed by CEO Alexei Miller, the delegation of Qatar, chaired by Deputy Prime Minister, Industry & Energy Minister Abdullah Hamad al Attiyah, and Iran's Oil Minister Golamhossein Nazori, was the first top-level discussion of three nations, disposing around 60% of the world's reserves of natural gas.
In his concluding comments, Mr. Nozari claimed that Russia, Iran and Qatar have elaborated the format of the future "gas OPEC". "In the process of the talks, we have made important decisions. There is a necessity in a "gas OPEC", and we've reached accord on its foundation". The other sides of the negotiations were not so categorical. Alexey Miller emphasized: "We have common interests, based on possession of the world's largest reserves of gas, common strategic goals, and, especially, a high potential of trilateral projects. These common interests have shaped the basis of important agreements. We have agreed on regular meetings of the "big gas three" – three-four times a year – for discussing crucial problems of the gas market. We believe that such consultations are likely to become an important contribution into the agenda of the Forum of Gas Exporting Nations. We share views on the purposes and tasks of the Forum, on the necessity of its swiftest transformation into a permanently functioning organization, serving to reliability and stability of gas deliveries worldwide. We are also going to establish a High-Level Technological Committee, involving specialists from Gazprom and the Ministries of Iran and Qatar for coordination of particular joint projects, encompassing the whole chain of creation of the value – from exploration and extraction to transportation and joint marketing of natural gas".
Russia's Foreign Minister Sergey Lavrov characterized that the intention of Russia, Iran and Qatar to continue the discussion of gas cooperation as "a healthy phenomenon". "These wild fluctuations of oil prices are definitely abnormal, and they affect pricing of natural gas. Therefore, coordination of work of the three gas exporters, Russia, Iran, and Qatar, are a positive achievement", he said. Mr. Miller confirmed that fluctuations of oil prices don't doubt the fundamental assumption that the era of cheap energy resources is over, and the sides are going to base their approach on this viewpoint".
The idea of a "gas OPEC" is naturally unwelcome in gas-consuming nations. "We are generally against cartels in trade, and hydrocarbons are not an exception. Most favorable conditions for gas trade can be provided with a free and transparent market", said EC's spokesman Ferran Tarradellas. He emphasized that such a cartel agreement would force Europe to revise its energy policy.
Iran's rhetoric over a "gas OPEC" is understandable: the country that is subject to joint US-EU economic sanctions has nothing to lose and therefore makes the harshest political statements. Russia and Qatar, seeking to improve their performance at the international energy market, prefer to avoid conflicts with consumers. However, all the producing states are interested in higher prices for "blue fuel", and therefore to prevent oversupply in particular markets.
Russia has traditionally served as the major supplier of natural gas for Europe, delivering around 160bln cub. m of natural gas to EU states. Russia and the European Union are connected with the world's largest system of gas pipelines. In the north of Europe, Russia encounters competition with Norway, and in the south with Algeria. However, these two countries don't possess large undeveloped deposits of natural gas, and are unlikely to increase extraction.
In 1990s, Iran was perceived as a probable supplier of natural gas to Europe, alternative to Russia. Iran's gas reserves are the second largest in the world comprising 28.130 trillion cub. m (Russia possesses 47.650 trillion). Today, the only European market of Iranian gas is Turkey, but this export route is unstable due to Kurdish unrest on Turkey's territory. From time to time, deliveries are disrupted by terrorist subversions, and the persistent secessionist sentiment in Kurdistan does not guarantee stability of Iranian- Turkish gas trade.
At the same time, US companies wish to return to Iran, where their property was nationalized in 1980s. Washington's objections to Europe's partnership with Iran are obviously based on this desire.
Pursuing a rational balance of political and economic interests with Europe and Iran, Russia supports the project of Iran-Pakistan-India gas pipeline. This project, however, is stalled due to persisting Indo-Pakistani tensions. Moscow tries to serve as a mediator in the political solution of the problem, while Gazprom is ready to serve as an operator in construction and further maintenance of the Iran-India pipeline.
Political and economic interests are closely interwoven in these relations. On the one hand, political support from Russia is favorable for Iran. At the same time, Russia has got an extensive background of economic cooperation with both Tehran and New Delhi. Implementation of the Iran-India pipeline project involves interests of Russian metallurgic and pipeline-producing companies.
The Turkmen-Azerbaijani transit project, advertised as the most favorable alternative to Russian supplies, has not been implemented, while Turkmenistan, Kazakhstan and Uzbekistan have signed an agreement on delivery of their gas to Europe via Russia. Azerbaijan's own gas reserves on the Caspian shelf, comprising around 1trln, are required by Georgia and Turkey, but not sufficient for the whole European continent.
During over 15 years, Washington had been pushing various projects of alternative gas deliveries, playing Europe against Russia. These efforts have played a significant role in Caucasus wars, as well as in deterioration of Russia's relations with supposed transit countries. As soon as the attempts of establishing a viable alternative to Russian deliveries proved to be inefficient, Washington insisted that energy resources be viewed as global commons, similarly to the Earth's atmosphere, and that therefore countries that possess the largest reserves provide unrestricted access to international – in fact, mostly US-controlled corporations. Quite naturally, Russia argued that countries, possessing oil and gas reserves, should have a right to make independent decisions on development of carbon deposits. Russia agrees to provide access to Western companies to its reserves of gas, but only under conditions of exchange for access to distributing networks. Political pressure upon Russia, along with the instability of oil and gas prices on the background of the financial crisis emerging from the United States, urges Moscow to intensify its diplomacy with other gas providers like Iran and Qatar.
Sergey Pravosudov is the Director of National Energy Institute, Moscow
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