Abbas Maleki: Iran stands out prominently as the largest and most populous Islamic nation in the oil-rich region of the Western Asia. The country possesses major attributes of a regional power in the Western Asia by virtue of its geo-strategic location, geographical land mass and human resources. It has sizeable revenues from oil and gas exports. Despite the fact that Iran has only 1% of the world’s population (70 million), the country owns 7% of the world’s natural reserves including 11% of proven global oil reserves and 16% of the world’s natural gas resources which translates into 133 billion barrels of oil (17 billion tons) and 27 trillion cubic meters of gas, totaling to $4000 billions by current price of oil and gas.
Iran‘s geo-strategic location draws significant attention from all major powers. It has an appreciably long coastline on the North Arabian Sea and it dominates the entire eastern flank of Persian Gulf. It has long borders with Iraq, Turkey, Afghanistan and Pakistan. It also borders on the residual republics of the former Soviet Union. In the North, Iran also has a coastline on the Caspian Sea and it shares borders with the Republics in the Central Asian region. Iran could rightly be termed as the “enter port” for the Central Asian Republics.
The country’s geo-strategic position and long borders have led to conflicts in the last quarter of the 20th century. Under Saddam Hussein, Iran fought a bloody eight-year war with neighboring Iraq. Afghanistan under the Taliban also figured as a strategic concern for Iran in the last decade. Significantly, Iran as the potential regional power of the Western Asia is an Islamic Shi’a state in marked contrast to most of its neighbors who are Sunnis.
Iran‘s geo-strategic location and its potential as a regional power led to the United States building it into one of the “strategic pillars” of American grand strategy in West Asia. This was during the Shah of Iran’s regime in the 1970s. However, the ouster of the Shah in 1979 and the military failure of the United States in the Iranian hostage crisis ensued led to Iran figuring significantly as a “strategic threat” to U.S. security interests in the Western Asia. From then onwards Iran has been persona non grata with the United States.
Iran‘s approach towards its neighbors is remarkably free of ideological influence. The best example is the role of Iran during civil war in Tajikistan (1992-1997), where Iran undertook mediation between the Tajik government and Tajik Islamic Renaissance Party. All of Central Asian countries never referred to any support of Iran to Islamic groups in this region. Iran‘s highest priority in regard to Central Asia is to safeguard its security, and, above all, its territorial integrity.
In contrast to the geopolitical dimension of Iranian regionalism, the functional dimension on the whole has been well received by neighboring states, forming the basis for the actual development of both bilateral and multilateral regional relations. Iran has few difficulties in finding partners for the construction of roads, railways, pipelines and power grids to link its infrastructure with that of the countries of the Central Asia and Caucasus. It also has no problem with furthering programs to remove trade barriers in all directions, and for environmental protection in the Caspian Sea.
2-Regionalism as a Priority in Iran‘s Foreign Policy
The combination of a unique geo-strategic location and energy resources has made Iran a focus for the great powers and competition among them, throughout the modern period. This fact has profoundly affected the way Iranians view the world and their perceptions of the historical process and international relations. Iran is situated at the heart of the world’s most important petroleum hub. Iran advantage’s is that the Iranians are sitting on huge land mass controlling the transportation lines which pass between the landlocked countries and high seas. The geographic diversity, skilled and semi-skilled workforce, and communication routes all contribute to this country’s standing.
Since the end of the war with Iraq (1988) and the death of Ayatollah Khomeini (1989), the Islamic Republic of Iran has accorded regional relations and coalition building an increasingly important place in its foreign policy. This was hardly a promising background for regional cooperation, either with western allies such as Saudi Arabia, Turkey and Pakistan, or with the small and vulnerable states of the Persian Gulf. The prospects for Iranian engagement in multilateral regional cooperation with its new northern neighbors following the dissolution of the USSR in 1991 looked hardly more promising.
Regionalism first began to assume prominence in Iranian foreign policy during the presidency of Akbar Hashemi Rafsanjani (1989-97), which was a period of significant change in foreign policy goals and strategies. Following the war with Iraq, the urgent need for reconstruction and the necessity of social and economic development to meet the needs of a young population, led policy-makers to focus more on material national interests in all areas. In foreign relations this was expressed in an emphasis on expanding trade and attracting investment through the development of mutually beneficial state-to-state relations and integration into the global economy.
Thus Iran‘s geopolitical situation in the early 1990s was one in which the possibility of a balance between the superpowers of the bipolar global system was suddenly removed just as U.S. policy was becoming increasingly threatening. Countering Washington‘s efforts to isolate it, Iran became an important objective on its own. In search of the ways to frustrate Washington’s policy of containment, Tehran looked towards cooperation with neighbors, with other nearby and Muslim states, and with possible alternative major centers of power (Europe, Russia, China, and India), and sought to use those regional and international organizations that were not susceptible to western domination – for example, the Non-Aligned Movement, the Organization of Islamic Conference (OIC) and the Organization of Petroleum Exporting Countries (OPEC) – for the same purpose. More recently Tehran has gained observer status at the Shanghai Cooperation Organization (SCO). One of the constant themes of Iranian statements on regionalism has been self-reliance among regional states and the exclusion of extra-regional powers (meaning the United States).
Iran‘s geographical position, size, economic stature and military muscle give it the potential to play a leading or pivotal role in a number of regional configurations: the Persian Gulf, Greater Central Asia and the Caspian basin, among others. The collapse of the Soviet Union gave rise to a new awareness in Iran of the possibilities presented by the combination of the country’s strength relative to other regional states and its geographical location at the heart of the Eurasian continent. Iran‘s natural role as a major regional power has increased, not only in governing circles but across a wide spectrum of elite and popular opinion. Participation in groupings that exclude extra-regional powers holds out the prospect of allowing Iran to fulfill its proper role in a way that it cannot currently do within the international system, given the nature of its relations with the United States.
In this respect, Iran‘s conversion to regionalism perhaps can be best understood in terms of the systemic theory, as the response of a relatively weak state to the external challenge posed by the strong, in circumstances when the balancing option was taken out of play by the end of the Cold War. President Rafsanjani, his successor President Muhammad Khatami, and the new President Mahmoud Ahmadi-Nejad have placed a strong emphasis on regional relations. President Khatami’s foreign minister, Kamal Kharrazi, stated in his first address to the UN General Assembly in 1997 that ‘[the] highest foreign policy priority… is to strengthen trust and confidence and peace in our immediate neighborhood’. The new Foreign Minister of Iran, Manouchehr Mottaki stated that Iran‘s foreign policy orientation is towards the “Asian identity,” meaning Iran‘s intention to see itself as an Asian country rather than a Middle Eastern country.
It is interesting to consider why the regional dimension has achieved a high level recognition and generally positive evaluation in the Iranian foreign policy. Iran‘s interest in regionalism in the 1990s had a faint coloring of Third Worldism, along with its rejection of hegemony and the negative impacts of globalization, as exemplified by its membership of the Eight Developing Countries Group (D8). But the main driving force is not globalization so much as the changes in the post-Cold War international system that worries Iranian policy-makers. The end of the bipolar world order presents the Islamic Republic with special difficulties, difficulties that it shares with only a select few other states identified by Washington as ‘rogues’, dangerous proliferators, sponsors of terrorism and points on ‘the axis of evil.’ For this reason Iranian policy debate refuses to accept the emergence of an international system dominated by a single hostile superpower and it rejects the ideas of a unipolar world order, arguing that the bipolar should rather give way to a multi-polar order.
Regionalism figures in this debate through a conception of the world as a set of interlinked and overlapping regions. The emergence and reinforcement of these regions and their internal and mutual linkages is held to be a part of a benign globalization process that will limit the capacity of any single power to dominate the system. Iranian conceptions of regionalism generally attach importance to culture both as a defining feature and as a basis for cooperation.
3-Opportunities in the Asian Trade
Iran is carefully changing its economic strategies toward Asia. In the recent years, Iran has tried to have closer relations with Asian countries. For instance, the trade volume between Iran and China in 2007 reached to $14 billion. In the past major Iranian partners were Europeans and Japan. Currently, France, Germany, Britain, Italy rank third to fifth as trade partners, while Russia and South Korea rank sixth and seventh. The value of Iran‘s total trade volume from March 21 to July 22, 2006 stood at $17.81 billion, with the United Arab Emirates, Germany, and China being its three major trading partners. Iran‘s total trade exchanges with the UAE over the mentioned period reached $3.645 billion, consisting of $2.964 billion of imports and $681 million of exports. Iran’s trade exchanges with China stood at $3.306 billion for the period, while the Islamic Republic also had significant trade exchanges with Italy ($805 m), France ($690 m), South Korea ($600 m), the Netherlands ($565 m), Japan ($560m), Switzerland ($550 m), India ($450 m), Turkey ($429 m), and the United Kingdom ($370m) over the four months. Iran has so far imported 14.3 million tons of goods valued at $13.6 billion in the current Iranian calendar year (began March 21), while 9.9 mtons of merchandise valued at $4.4 billion has been exported. Iran‘s revenues from the export of crude oil, oil products and condensates surpassed $18 billion during 21 March-22 July 2006, most of them from the Asian countries like China, Japan, Turkey and India.
Iran‘s export also shifted to more Asian and Middle Eastern countries. The UAE, China, India, Iraq, Japan, Italy, Singapore, Saudi Arabia, and Afghanistan were major importers of goods from Iran over the period. Iran exported 15% of its non-oil products to UAE, China 6.8%, India 4.8% and Iraq with 2.6 respectively.
For the countries in Central Asia, Iran is their main link to international markets. The states of Central Asia and Afghanistan have all requested Iran to connect its railway network to rails in Turkmenistan, through which the other countries in the region could gain access to Iran’s railways, linking Central Asia, Russia, and the Persian Gulf. In March 1995, the Iranian and the Central Asian presidents opened the 700 km railroad connecting the Iranian city of Bafq to the Iranian Persian Gulf port of Bandar Abbas. The construction of this line completed the rail link between the Iranian city of Mashad and the Persian Gulf. The line that connects Iran with Turkmenistan (the Tejen-Sarakhs-Mashad line) was completed in March 1996. It is 140 km long and enables Central Asia and Russia to access Europe via Turkey and to reach the Persian Gulf, Pakistan, and India by a short and time-saving route. With the inauguration of this transport link, the countries of Central Asia now have access to the Persian Gulf, Caucasus and Turkey; it provides an alternative rail link to the Russian railway system. A major project under way is the Trans-Asian Railway (TAR), which will connect Singapore with Istanbul. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) initiated the TAR in the 1960s. The main direct route will have a length of 14,000 km; currently the total length of missing part is 1550 km, of which 1400 km extends between Bangladesh and Thailand.
4-Energy as a New Way for More Cooperation
In the foreseeable future the Middle East, particularly the Persian Gulf producers, will continue to be the driving force to ensure global energy security. The world will grow more dependent on oil supplies from the Middle East. The region has the hydrocarbon resources to meet growing global demand. Yet, regional conflicts, military operations, and continued political tension in the Middle East have prompted calls to reduce dependence on supplies from that region. Security of supplies can be enhanced by an overall diversification of supply. Put differently, the more producing regions, the more stability in international oil markets. Thus, increasing supplies from Russia, Caspian Sea, West Africa, and other regions would reduce the vulnerability of over-dependence on one single region. But again Iran has presence in Caspian Sea also.
The oil and gas wealth is important for economic prosperity in different regions, containing Iran and its neighbors. One problem is to get to the market of high-income importing countries. Iran plays an important role in the exploitation and export of these resources. It has the world’s second largest proven oil and natural gas reserves. It also has an extensive pipeline network to which possible pipelines from Caspian Sea, Central Asia and Caucasus could be connected. Iran is working with its neighbors on energy dialogue seriously.
We are discussing here some parts of Iran’s interaction with its neighbors:
On June 2006, the Russian oil giant, Gazprom announced that it is considering the possibility of setting up a joint venture with Iran to take up oil and gas projects and engage in mutual cooperation in exploration, transportation, use and sale of natural gas. Lukoil, Transneft and other Russian companies are also active in Iranian oil and gas projects. But in some area two countries have different views. Despite the intensified talk about the formation of a gas cartel, an idea seriously pursued by Iran, the fate of such an organization remains uncertain with Qatar and Russia showing varied degrees of hesitation. Iran’s Minister of Petroleum Kazem Vaziri Hamaneh commented on February 2007 that, “Russia has given different answers to Iran’s idea to set up a gas cartel.” Meanwhile, Qatar’s Energy and Industry Minister al-Attiyah opined that the establishment of such a body “is impossible” under the current situation. According to Hamaneh, the three countries will discuss the issue during the upcoming Gas Exporting Countries Forum (GECF) in Qatar, scheduled for 6 March 2007. This is while the next day on 7 February, al-Attiyah contradicted his Iranian counterparts, saying that, “since establishment of a gas cartel is not a priority, the issue will not be discussing the meeting.”
Iran is not so active in the Caspian oil and gas exploration and production, because of the U.S. sanctions against any activities of Iran in this region. But at the same time Iran is eager to find ways and routes to escape from U.S. pressures which are tenser in the Persian Gulf. For this reason, despite of the insistence of Iran’s government to contract with buy back regime, which is a service contract, Iran’s High Economy Council has approved exploration activities in the Caspian Sea, marking the first serious steps taken by this country to find oil reserves with a new format, which is more similar to Production Sharing Agreement (PSA). Iran has been in talks with Brazil’s Petrobras, which is known for its experience with deep water offshore projects. The word is that Petrobras is close to finalize a deal to purchase liquefied natural gas (LNG) from Iran, in return for a contract to conduct exploration operations in the Caspian Sea.
In contrast of the East-West pipelines in Caspian region which the U.S. supports, Iran, Russia, and China are looking to other routes from the North, East and South. In particular, the KTI pipeline is a long-term export option for delivering Kazakh oil to the Asian markets via Persian Gulf. The study is in process in accordance with the Agreement on Joint Studies concluded between KazMunayGas, Total, Japan National Oil Corporation, and Inpex. Swapping oil via Caspian Sea is also working and the capacity of Neka-Ray pipeline inside Iran has reached to 170 000 b/d.
Iran also swaps gas between Azerbaijan and Nakhichevan. It is operational from 2005 quantities are 300-350 million cubic meter per year.
The Iran-Pakistan-India pipeline would run about 1,115 km in Iran, 705 km in Pakistan and 850 km in India, and total investment is estimated at $7 billion and may take 4 to 5 years to complete.
Australia’s BHP, the National Iranian Gas Company, Petronas and Total have expressed interest in building the pipeline. The three countries have yet to decide whether to firm up separate consortiums for the 2,670-km pipeline in their respective territories or a joint consortium. New Delhi’s may prefer to be a gas buyer without sharing any responsibility of the project execution. Islamabad has agreed to allow Tehran to keep the proprietorship of the project excluding the terra firma in Pakistani territory. India will not have to be concerned about a twofold increase in its gas demand over the coming 10 years after signing contract with Iran which allows it to import Iran’s gas through pipeline.
However, the project is facing a strong American opposition. The U.S. Secretary of State Condoleezza Rice told Indian NDTV: “Our views concerning Iran are very well known by this time, and we have communicated to the Indian government our concerns about gas pipeline cooperation between Iran and India.” The U.S. has also made it clear to the leadership of India and Pakistan that the proposed project will result in U.S. sanctions under the Iran-Libya Sanctions Act (ILSA).”
The pipeline came one step closer to becoming a reality after India’s announcement on February 2007 that it has accepted the latest pricing formula suggested by an independent consulting firm. Indian Petroleum Minister Murii Deora said, “India hopes to sign a final deal with Pakistan and Iran on building a much-delayed $7 billion gas pipeline by the end of June 2007 after all three countries agreed on a key pricing formula.” This follows an earlier announcement by Pakistan that it has also agreed the pricing formula suggested by Britain’s Gaffney, Cline & Associates (GCA), the firm appointed by the three countries to devise and suggest a pricing mechanism.
Despite this important stride forward, the fate of the so called “Peace Pipeline” remains unclear. There were voices inside and outside India which opposed the contract. On February 2007, Subramanian Swamy, the national president of India’s Janata Party, claimed that by launching the gas pipeline project India would become Pakistan’s “hostage.”
Europe and Iran
Despite of the fact that Europe is not Iran’s neighbor, there are several opportunities for both sides to work in the regions like Caucasus, Caspian, Central Asia and Persian Gulf. Concerns about shortage of natural gas reserves and recent moves by major suppliers of natural gas, have greatly troubled the European countries. Europeans have been studying various routes for taking gas to Europe for many years and have come to conclusion that Qatar is too far, while Turkmenistan cannot meet their long-term needs and therefore, they should woo Iran. Though global hegemony has changed over years, they are still eyeing Iran as the most strategic country in the region in view of its transit route, neighborhood with countries that can influence regional equations as well as existence of huge oil and gas reserves.
Iran enjoys the world’s second biggest gas reserves after Russia and plays an important role in the future in supplying needed gas to European Union. By taking advantage of various phases of South Pars gas field, Iran will be capable of producing 8 billion cubic feet gas per day from the said field and will earn, at least, 11 billion dollars over 30 years. This has nothing to do with Iran’s potential to produce liquefied natural gas (LNG). Also, differences among European countries with regard to gas imports from Russia have made them conclude that finding a good source for sustainable supply of natural gas is the most crucial step they can take in energy sector. Intense competition for energy consumption in Asia and Europe has imparted great importance to Iran’s oil and gas resources.
A new gas supply route to Europe from Turkey to Austria via Bulgaria, Romania and Hungary is under study. The gas supply of Nabucco pipelines should be from Iran, Azerbaijan, Egypt and Iraq later. In Central Europe, market for 45 billion cubic meter of gas is estimated. Iran can send 10 to 20 bcm to Turkey for feeding to this pipeline. Other countries also showed their inclination to join the project. For example, in an obvious attempt aimed at reducing reliance on Russian gas and boost energy security, Ukraine announced on January 2007 that it is considering joining the Nabucco pipeline project. On the same day, a senior Turkish official commented that his country intends to engage in talks with Iran over the construction of the pipeline. Turkey wants create a company with Iran or Austria to sell gas to European markets via the Nabucco pipeline.
5-Iran and Central Asia/Caucasus
Turkmenistan’s gas is exported to Iran by the 200 km pipeline from Korpedzhe in Turkmenistan to Kordkuy in Iran, which became operational in 1997. The pipeline initially had the capacity to export some 8 bcm per annum of gas to Iran. This amount was increased to 12 bcm after the completion of a development project on the pipeline in 2005. Although already sitting on huge gas reserves, Iran considers imports from Turkmenistan as an advantage. This is mainly because Iran can add value to gas and export it as electricity or other forms of energy to other countries besides using it to satisfy domestic demand in northeastern provinces. Currently part of the gas imported from Turkmenistan is accounted for as exports to Turkey and the other part is paid for by Iran and used in domestic ventures.
Armenia and Iran signed an intergovernmental agreement in 1995 establishing the route of the pipeline, which stretches 141 km, including 41 km in Armenia and 100 km in Iran. The agreement also sets the price for gas to be transported through the pipeline at $84 per 1,000 cubic meters. The cost of the project was estimated at $120 million. This pipeline has already been tested and will inaugurate on March 21, 2007, the Iranian New Year.
The supply of gas from Iran to the Ukrainian and European markets is in line with these countries’ plans to find access to alternative natural gas supplies. In 2000 the institute VNIPITransgaz developed a feasibility study for the Iran-Armenia-Georgia-Ukraine-Europe gas pipeline, with an underwater section of 550 km from the Georgian port of Supsa to the Crimean city of Feodossia. The cost of the project at $5 billion, with gas supply volume of 60 billion cubic meters per annum, including 10 bcm for Ukraine.
Iran built two trunk pipelines to former Soviet Union during Cold war, desiring to send its gas to European countries. After revolution, Iran cut exporting gas to Soviet Union because of shortage in domestic consumption. Iran has started annually exporting 1.8 bcm of natural gas to Azerbaijan since October 2006. This exportation is a result of the Memorandum of Understanding, calling for gas to be transported to Azerbaijan through a pipeline located at the border city of Astara.
Iran’s strategic geographical position allows it to be considered a country in the Middle East, Persian Gulf, Central Asia, and the Caspian region. Iran’s foreign policy is therefore regionalist and takes advantage of its location at the crossroads of these areas. A major change took place in this regionalist policy after the breakup of the Soviet Union. During the Cold War, Iran did not have relations with half of its neighbors.
Iran joined to Shanghai Cooperation Organization (SCO) to reduce its concern over military and security threats from two sides. First from extremism and radicalism in the region (Taliban, al-Qaeda), second, the case of American presence in the region. Most of the Iran’s neighbors are the nest for American military bases.
Finally, intense competition for energy consumption in Asia and Europe has imparted great importance to Iran’s oil and gas resources. It can easily be concluded that at this stage Iran is more like a giant, with one foot in the Persian Gulf, and another in the Caspian Sea.