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Friday, September 27, 2013

The Potential Implications of US-Iranian Rapprochement on Caspian Energy Policy

Washington and Tehran's relationship appears to be thawing. President Rouhani has taken a conciliatory tone proclaiming:

"Nuclear weapons and other weapons of mass destruction have no place in Iran's security and defense doctrine, and contradict our fundamental religious and ethical convictions. Our national interests make it imperative that we remove any and all reasonable concerns about Iran's peaceful nuclear program."

He has also stated that he wants a resolution on Iran’s nuclear program reached within the next three to six months.

President Obama has stated:

"We are not seeking regime change, and we respect the right of the Iranian people to access peaceful nuclear energy."

At the moment we are looking at rhetoric. However, both countries have interests in rapprochement. Certainly Iran needs to see economic sanctions lifted or at least lessened. Though there are still issues to resolve, specifically Iran's nuclear program, the climate for discussions is favorable and both sides have incentives for pursuing détente. It is true that significant obstacles exist. Internal opposition in both countries must be overcome and US allies, such as Israel and Saudi Arabia, will not want to see closer ties between Washington and Tehran. Though the rapprochement is anything but guaranteed, an improvement in Iranian-American relations is a very real possibility and investigating some of the implications of détente is a worthwhile exercise. Despite the reality that the re-establishment of full diplomatic relations will likely take time, other forms of cooperation could occur more quickly. The transfer of oil and natural gas from the Caspian Sea is one such area.

In addition to the potential economic and security benefits that could result from improved relations with Iran, the Obama administration has an incentive to try and erode some of the gains that Russia has made since Putin came to power. When we look at international relations we constantly see situations in which one country tries to weaken another country whose interests run counter to theirs. Though the US and Russia are not enemies in the sense that they were during the Cold War, the reality is that the United States has little interest in allowing Moscow to regain the power that it had in Soviet times as Russian and American interests often do not align. One way to limit Moscow’s influence is by allowing countries such as Azerbaijan and Turkmenistan to export oil and natural gas through Iran.

Iran's geographic location makes it an ideal location for linking oil and natural gas pipelines from the Caspian Sea to the Persian Gulf. In fact oil companies such as Exxon lobbied for the construction of such infrastructure in the 1990s. These proposals never became a reality as US sanctions on Iran prevented such actions. Instead a variety of pipelines were built. Some, such as the Baku–Tbilisi–Ceyhan (BTC) pipeline bypass Russian Territory. The intent of such pipelines was to weaken Russia’s control over its former republics. Despite the efforts to undermine Russian interests Moscow still retained enough power to ensure that some lines, which passed through Russian territory, were also constructed. This afforded Moscow a great deal of control over the access to energy in its Near Abroad. The ability to control energy supplies in many of parts of the former Soviet Union has allowed Moscow to re-establish much of the influence that was lost in the 1990s. This reality has been augmented by the United States involvement in Afghanistan and Iraq which reduced Washington’s ability to counter Russia's re-emergence, a fact made clear when the US stood idly by when Russia invaded Georgia in 2008 as a response to the West supporting the independence of Kosovo (There were of course other reasons for the invasion). The message was loud and clear, "Western promises mean nothing." The development of a Customs Union composed of Belarus, Kazakhstan, and Russia (with Armenia scheduled to join) that for all intents of purpose is led by Russia indicate that the Near Abroad is listening.

Putin has demonstrated that he is not afraid to turn off energy supplies to countries whose actions displease Moscow. Ukraine, Belarus, and Georgia can attest to this. The problem is that pipelines do not end in these countries. Cutting off energy supplies to transit countries has impacted European customers which has caused concern over the reliability of Russian Energy. The Nabucco Pipeline (which was supposed to stretch from Turkey to Austria) was to bypass Russia thus addressing some of these concerns. However, the Romanians have pulled out of the proposed project, which casts a great deal of doubt as to its future. This gives Russia some breathing room and the opportunity to promote the South Stream Pipeline (the alternative to Nabucco). That said, the ability to access new energy sources, which would allow more leverage when dealing with Moscow, is a still a concern in many European capitals. The fact that we are seeing a Pro-Russian shift in Georgian leadership could in theory also impact the BTC pipeline, making an alternative route through Iran even more desirable. If the US and Iran improve relations, pipelines and related infrastructure, such as LNG facilities, could become a reality within the coming years.



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