Ukraine war: Why Iran's hope of replacing Russian gas exports to Europe is a pipe dream
Iran has the second largest gas reserves in the world, with 34 trillion cubic metres of natural gas - about 17 percent of the world's total reserves.
While some believe this means Iran has genuine potential to replace Russia, Iranian analysts and energy experts remain doubtful.
'If there is no investment in gas production and utilisation of resources, Iran will become dependent on gas imports despite all its reserves'
- CEO of Iranian gas company
The CEO of an Iranian gas engineering and development company said that the country is technically unable to export gas to Europe.
“A comparison of the production and exports of Iran and Russia shows a huge difference,” he told Middle East Eye, on condition of anonymity due to security concerns. He pointed out that while Iran's daily production is about 800m cubic metres per day, Russia's is about 2bn cubic metres.
“This huge difference naturally manifests itself in the exports," the gas expert said.
Russia's annual gas exports are approximately 180bn cubic metres, of which about 130bn go to Europe and Turkey. Meanwhile, the annual export of Iranian gas is at best 25bn cubic metres.
The expert added that if Iran wants to double its gas production over a 10-year period to about 1.5bn cubic metres per day, it must invest $90bn over that period. “If there is no investment in gas production and utilisation of resources, Iran will become dependent on gas imports, despite all its reserves,” he said.
Meanwhile, a former senior Iranian official in the ministry of energy told MEE that given that Iran has the second-largest gas reserves in the world, and is also the third-largest producer of gas, it has the potential to increase its share of the global market from 1 percent to 10 percent and claim a huge share in gas exports to Europe.
“For this to happen, we should focus on exports, not domestic consumption,” he said, adding that at present, however, “most of the gas produced in Iran is consumed domestically, and for this reason Iran's share in world markets has sharply decreased”.
The former official recommends that Iran should invest in liquefied natural gas (LNG) in order to diversify its gas industry, so that the country’s export market can expand to different parts of the world, including Europe, Japan and China.
“This requires increasing the power of Iran's gas diplomacy, connecting to global markets, establishing peaceful relations with countries, and increasing the rate of investment in gas infrastructure, namely pipelines and LNG, including liquefaction facilities,” he added.
This can all start with a nuclear deal with Washington that would involve the US lifting sanctions, he pointed out. He also said Iran needs to attract foreign investment, and more importantly decrease domestic consumption, as while production stands at about 800m-810m cubic metres per day, approximately 750m cubic metres of gas is consumed daily within the country.
“Reaching a consensus inside the Islamic Republic’s establishment over exporting gas to Europe is of paramount importance, as hardliners or some other factors may hinder any attempts by the Iranian government to export gas," he said. "However, I believe since the government is run by conservatives, they can easily persuade the hardliners, as their allies, to stop their opposition to the likely plan.”
Meanwhile, Iran and the US are engaged in talks in Vienna and are close to reaching a deal over the lifting of sanctions, he added.
Bloomberg reported on 21 March that delegates at the European Gas Conference in Vienna discussed the possibility of using Iran’s gas to fill the void in Russian gas. “This means the grounds are being prepared for Iran’s entry into the European gas market. We should wait to see what happens next,” the former official said.
Unsuccessful export attempts
There have been several attempts to export Iranian gas to Europe in the past.
The first was the Turkish and Iranian proposals to transport Iranian gas to Europe via the aborted Nabucco pipeline, which was planned to supply gas from the Caspian Sea to Austria via Erzurum, Turkey. The project was essentially aimed at reducing Europe’s dependence on Russian gas, but the US and EU opposed Iranian involvement.
Another project was the Islamic Pipeline, intended to cross Iran, Iraq, and Syria, and from there to Lebanon, Turkey and Europe. It has yet to materialise, however, due to the war in Syria and the crippling financial sanctions on both Syria and Iran.
The most serious plan for exporting gas to Europe was the Persian Pipeline. The idea was pursued in 2007 and was supposed to transport gas from the South Pars field in Iran to Europe via Turkey, but due to sanctions and the withdrawal of the project contractor, EGL, the plan fell apart.
Exporting Iranian gas to Europe has been a thorny issue, one that has divided the political establishment in the Islamic Republic. In 2014, Iranian President Hassan Rouhani assured top officials in Austria that Tehran could be a reliable supplier of gas for Europe and that it was ready to build a network to Europe via Austria.
In the same year, Hossein Shariatmadari, the influential chief editor of the Kayhan daily, attacked the reformist-backed government of Rouhani for expressing its readiness to export gas to Europe. Shariatmadari, appointed by the Supreme Leader Ali Khamenei, accused Rouhani officials of serving western interests and of incompetence, calling for them to be sacked.
Meanwhile, Yasser Jabraili, a hardline figure, told the Revolutionary Guards-affiliated Tasnim news agency in 2014 that “Iran's participation in the transfer of gas to Europe is an example of sending food to the enemy in times of war.”
However, tensions between Europe and Russia have prompted such debates in Iran, as reformists reiterated their call to export gas to Europe. In January 2020, Resalat, a hardline newspaper, criticised statements made at the time about the need to compete with Russia in supplying Europe with gas, saying that “Iran does not need to export gas to Europe, nor is it economically useful for it to do so.”
'The Russians will use all their means to prevent Europe from losing its gas dependence on Russia'
- Iranian journalist
Last month, Javad Owji, Iran’s oil minister, stated that his country has the capacity to supply gas to Europe, and expressed his hope that it would be able to increase its two percent share of the world gas trade in the coming years.
One Iranian energy journalist, however, said that Iran, which portrays Russia as a strategic partner, will not seek to upset or provoke Moscow over European gas.
“The Russians will not easily allow Iran to enter the European gas market and will use all their means to prevent Europe from losing its gas dependence on Russia,” the journalist told MEE on condition of anonymity.
“While the current government is controlled by conservatives, some hardliners may oppose any idea and plan by the state to export gas to Europe," he said. "They will probably argue that Iran shouldn’t save the US and Europe from a crisis.”