Iran and Energy Diplomacy

Iran has signed a contract with Turkmenistan according to which it will import gas from this country based on an agreed floating price from 2009. This has been called a success for Iran’s energy diplomacy by some domestic and foreign media. 
 

Saeed Leilaz, economic expert comments on this contract for Iranian Diplomacy: 
 

This contract is the direct result of mismanagement in the last four years. In fact, it’s a consequence of economic dysfunction and diplomatic debility. How do we understand diplomatic power? Is it when Israel attacks Gaza and Benetton store is set on fire in Tehran? Or when we have to purchase gas twice the real price? I think this contract is a humiliation. We are buying a once $75 per cubic meter gas for $350. Iran is selling gas to Turkey at a lower price. 
 

Thirty years after the Islamic Revolution, Ahmadinejad’s government has turned Iran into absolute importer of energy. This has two reasons: on the one hand, with investment fall in gas industry and rejection of realigning the fuel prices since 2005, we have witnessed an increasing consumption of gas inside the country. On the other hand, Iran’s is passing a period of fragility in its diplomatic position. 
 

Impermanent contract, unclear price 
 

Renewal of this contract and agreement on the price of the gas depend on various factors in future. One influential factor would be Iran’s plans for the South Pars gas field. The development plans have been abandoned since 2005 and expectations about gas production increase weren’t fulfilled. Therefore, the amount of investment by government in development plans of gas industry will have an impact on gas contract with Turkmenistan. Bad news is that we shouldn’t truly await this to happen. Even the ninth and tenth phases of South Pars that are due to run from next summer had to start operation since summer 2006. Another factor that will affect the future of this contract is economic growth and climate in 2009. As to temporariness of the contract, I have to say at least this is a positive point and it will limit mismanagement. 
 

Turkmenistan, trustworthy or opportunist? 
 

There are not reliable partners in diplomacy. If we think of ourselves as trustworthy partners for our neighbors we are also wrong. Last year we exactly acted like Turkmenistan. Using pipeline repair as an excuse, we stopped gas export to Turkey in the coldest days of winter. The Turkmens acted based on their national interests and we should seek the fault in our own diplomacy. 
 

Tehran-Moscow economic ties in the shadow of Iran and Turkmenistan 
 

I don’t think Russia will show a kind face towards Iran when it comes to energy. Russians apply one of the toughest energy policies in the world. Definitely they don’t want Iran to turn into a major international actor. Iran’s weakness in domestic investment and diplomacy has been advantageous for Russia up to now, reinforcing their global position. 
 

One of the reasons Russia has become powerful and is exerting pressure on Europeans energy-wise is Iran’s weakness. If Iran stepped into the scene of energy diplomacy as an international actor, it could have better interactions with Russia and rest of the world. In fact, Iran has conferred its diplomatic potential to Russia, while it could use energy diplomacy in favor of national interests it opted becoming a major energy exporter to Europe and other countries.