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23.03.2009

ARMENIAN-IRANIAN RELATIONS AND ENERGETIC AND TRANSPORT PROGRAMMES OF IRAN

   

Sevak Sarukhanyan

Armenian-Iranian relations entered into an active development stage in recent years and this is conditioned by the fact that the implementation of economic programmes began to play an important role in the interstate cooperation. Armenia-Iran gas pipeline, which construction has already been over, is only a pert of the economic cooperation. The oil refinery, built on the territory of Armenia, the construction of Armenia-Iran railway can give a fresh impulse to interstate relations. At the same time, the implementation of these programmes cannot only be a part of exclusively Armenian-Iranian relations. Their implementation is directly connected with the regional, and in some aspects with the global strategy of Iran, which has definite political and economic components. The article touches upon the issues relating to energetic and transport spheres of that strategy, the significance of those issues for the Republic of Armenia is examined.

Energetic policy

Iran-Armenia gas pipeline

The energetic policy of contemporary Iran is based on two basic principles:

  • to modernize the energetic system that belongs to the state, to take steps to achieve a high level of oil and gas supply and refinement,
  • to use its vast oil and gas resources to strengthen its political and economic positions from political and economic points of view.

If we observe the cooperation of Iran with other countries and foreign companies, which is constituent part of Iranian energetic policy, then we can say that the cooperation develops positively in conditions, when it meets two aforementioned principles. Here we can point out the entry of French and Turkish companies to “South Pars” gas field, the special conditions created in Iran for the National oil company of China, the fact that in recent years Iran has become one of the main exporters of electric power to Iraq, and this is at a time when the Islamic republic has problems with the generation and import of electric power.

At present the most important problem for Iran is the creation of export capabilities for the vast gas resources1. To solve this problem the works are carried out in two directions:

  1. the provision of international investments for the “South pars” gas field development and, at the same time, maintenance of the state property on that field.
  2. the provision of Iranian gas supply to the international market of energy carriers by preserving the direct connection between the sellers and the buyers and the minimal influence of the transition country in the gas import2.

The second direction, of course, should be regarded as most important relating to Armenia as it is directly connected with the functioning of Armenia-Iran pipeline. After the signing of the contract on gas pipeline construction there were many speculations in Armenian saying that Iran wants to use Armenian territory and Armenia-Iran gas pipeline to export gas to Georgia and the EU. When it became clear that the capability of the pipeline was not enough to implement that objective, the rumours were spread that the pipeline of small capability was being constructed due to the pressure of Russian party, which wanted to intervene the entrance of Iranian gas to European market.

It is obvious that the period of 2003-2004 was the most active from the point of view of the negotiations between Iran and the EU devoted to the energetic issues. But as a result, there was no word about Armenia or South Caucasus as a transition territory for the export of Iranian gas, at least in the part, which was presented to the community through press-conferences and press releases. The only concrete proposal on the extension or the increase of capability of the Armenia-Iran pipeline was made in 2005, when the minister of energetic of Iran stated that Tehran proposed Yerevan, Tbilisi, Moscow and Kiev to create a joint interagency commission to discuss and make preliminary decisions on the issues of gas pipeline construction from Iran to Ukraine. The commission has not been created till now and there have been no discussions on the extension or the increase of capability of the pipeline. If we take into consideration the ongoing isolation of Iran, the fact that Georgia obtains enough gas from Baku-Tbilisi-Erzurum gas pipeline to provide its energy security, then today we cannot speak about the extension of Armenia-Iran gas pipeline.

At the same time, in recent months the developments in the relations between Iran and Turkey have evidenced that probably the territory of Turkey and mainly “Nabucco” gas pipeline will be used by Iran to supply gas to the EU. It is obvious that in recent period Turkey tries to underline the role of Iran in Europe’s energy security ensuring. On January 13 during his report in European policy centre in Brussels the Turkish prime-minister R. Erdogan stated that “Nabucco” could make sense only if gas was pumped to Europe not only from Kazakhstan, Turkmenistan and Azerbaijan, but also from Iran. The talks on Turkish-Iranian energy collaboration began at the beginning of the year and this was caused by the visit of Ali Larijani, the spokesman of Iranian parliament, to Ankara. As a result, the ministers of energetic of Turkey and Iran were given a commission to stir up the negotiations on the intensification of collaboration and implementation of joint programmes in the sphere of gas. The pipeline Erzurum-Tabriz, built as back as 2001, creates rather good background for the accession of Iran to “Nabucco” project.

This pipeline supplied Turkey on average with 8 billion cubic meters of gas annually; meanwhile, the capability of that pipeline allows supplying three times as much gas.

After the developments which took place in South Caucasus in August, when it became clear that Georgia was not reliable as a transit country, the possibility that Turkmenistan and Kazakhstan will join the South Caucasian pipeline (Baku-Tbilisi-Erzurum) has sharply lowered. Today Azerbaijan, in fact, is the only Caspian country ready to take part in “Nabucco” project not only on paper but also practically. . Neither Turkmenistan, nor Kazakhstan has made any practical step to become a part of that project and they would hardly do in the near future. Under such conditions Ankara realizes that in order to implement the “Nabucco” project and to get necessary financial and political dividends they need to include Iran, which has rather vast gas resources, in that project. There is such an approach in Europe too, on the level of political and economic actors. At the summit in Budapest the necessity of developing of cooperation with Iran was also stated by the executives of the companies, which were involved in the implementation of “Nabucco” pipeline, including the author of the project and one of the main lobbyists the vice-president of Austrian “OMV Gas & Power GmbH” company G. Bogart.

Let us mention one important fact: in January 2009 on the official site of “Nabucco” project www.nabucco-pipeline.com a new map of the project was placed. It shows that one brunch of the pipeline enters the territory of Iran (look at the map).

 

1 (original)

 

The main difficulties, which may emerge owing to the accession of Iran to the “Nabucco”, are conditioned by the position of Washington as the new administration of the US, in spite of the different analysis, has not elaborated and presented its own “Iranian policy” yet. However, today there are rather good grounds for the improvement of the relations between Iran and America, especially, if we take into consideration those difficulties, which will arise after the withdrawal of their military base from “Manas” in Kirgizstan. This will bring to the shift of the power and will directly influence the relations between Iran and the US.

Besides the above mentioned developments, it is also worth mentioning that Iran has no alternative for the territory of Turkey in the issue of gas export to Europe. Being the shortest way (from the point of view of geography) for Iranian gas supply to Europe, Turkey, on its political geography, is also the most appropriate way, because it provides the gas transition to Europe through the territory of only one country, in difference from the way, which comes through South Caucasus.

However this does not mean that there is no way or need to increase the capability of Armenia-Iran pipeline. The decision of the authorities of Armenia to build a new nuclear power plant with 1000-1500 MW power shows that Armenia is on its way to become an important electric power producing centre. This policy may succeed only if the political dialogue between Armenia and Turkey causes the developments in the economic and, mainly, in energetic spheres in interstate relations. It first of all refers to the export of electric power to Turkey, which eastern districts have rather great demand of electric power.

The possibility of the increase of the export capabilities of electric power to Iran is also high, but Iranian market in the long term cannot be regarded as priority, because the rapprochement between Iran and the West will cause the investments flow to the energy sector of Iran, the development of nuclear programme, the building of new thermal power plants and sooner or later will turn energy resources rich Iran into a self-sufficient, from the point of view of electric power state.

In fact, today, the issue of the increase of the capability of Iran-Armenia is directly connected with the normalization of the relations between Armenia and Turkey.

Oil refinery and oil pipeline

As for the oil sector of Iran and Armenian-Iranian collaboration in oil sphere, then there are many problems. Most of them, which relate to Iran, are connected with the following problems:

  1. 40 of 60 working oil-wells in Iran are rather worn out, which will cause the reduction of oil production in near future,
  2. 4 big and 18 small oil refineries cannot supply the demand of refined oil products in Iran. The result is that almost 40% of oil products consumed in Iran comes from abroad and Iran with the help of subsidy assistance keep low prices on oil products and first of all on petrol.

Though the problems mentioned in the second point make difficulties just for Iran, at the same time, they are rather important factor in the context of the development of the energetic cooperation between Armenia and Iran. Here, first of all, we mean the prospects of building oil refinery in Armenia and the first statement concerning it was made at the beginning of 2007 by presidents of Armenia and Russia. For Iran the economic expediency of oil refinery building in the south of Armenia is connected with general problem of oil refining in the Islamic republic. The main oil refining capabilities were built in Iran 35-50 years ago and were to supply the refined oil demand in Iran. It is evident that for recent decades Iranian refineries have undergone obsolescence and deprecation. Under the condition when there are no direct western investments it is rather difficult to build new refineries on the territory of Iran. Iranians have no contemporary refining technologies and capacities, and the demand of refined oil in Iran is growing, which is determined not only by economic development of the country but also by the fact that the population of Iran has doubled as compared to 40 or 50 years ago. Today Iran is a state, which exports crude oil and imports refined oil and petrol. Iranian government intends to struggle with such a situation in near future. But this situation is objective and it is determined by the absence of refining capabilities and new technologies. It is almost impossible to create those capabilities themselves and there are no foreign investments in that sphere because:

  • there are no attractive economic conditions in the country for foreign investors and on the international arena there is an opposition to American political investments to Iranian oil refining and oil sector in general.
  • China (which has enough means to set the network of oil refineries in Iran) is the only country, which is out of American control and has no direct dependence on the US, and it is interested in getting crude oil from Iran, which amount may reduce if the Islamic republic develop the oil refining sector.

In this context the building of oil refinery on the territory of Armenia (and this may be joint Russia-Iranian project) seems rather profitable for Iran. Though the oil refinery will be out of Iranian territory its geographic position and the joint Russian-Iranian nature of the investments will reduce the possible economic and political losses for Iran. The building of Armenia-Iran railway will connect Iranian railway with Armenian railway, and this will prove the Islamic republic even more secure and profitable access to Black Sea ports of Georgia (if Meghri connects with one railway to a common Armenian railway network, round Nakhichevan).

At the end of 2008 the minister of transport of Russia and the co-chairman of Armenian-Russian intergovernmental commission I. Levitin made the statement that the construction of an oil refinery in Armenia is unprofitable, and this statement complicates its building. But it is still on the agenda, as the statement by Livitin only evidences that the Russian companies would hardly be involved in the construction of the refinery. Of course, one could hardly regard the construction of the oil refinery as super profitable, moreover if we take into account that Armenia is in blockade, the oil products market in Iran is under the state control and that is why it is not so attractive for business. But the situation may change and there are two important reasons for such a change:

  • The normalization of the relations between Armenia and Turkey and the re-opening of the borders may create a new market for the Iranian oil refined in Armenia.
  • Azerbaijani authorities last year took the decision to close two oil refineries in Baku; Georgian authorities also speak about the possibility of such a decision. It is not excluded that in a couple of years there will be no oil refinery in South Caucuses, which may cause a new rather attractive situation for oil products production and the building of a new refinery.

The building of the oil refinery is important for Armenia not only because it will strengthen the energetic security of Armenia but also because Iran-Armenia oil pipeline and railway will be constructed. The statement made by the minister of energetic and natural resources of Armenia A.Movsisyan on December 22, 2008 that there was an agreement about the construction of pipeline for the import of refined oil products from Iran to Armenia might create a good bases for the oil refinery building3.

At the same time, the discussions of oil refinery building, in our opinion, have already had their most important result: the issue of Armenia-Iran railway has become a concrete discussion theme and this is, perhaps, even more important than the programmes implemented in the energetic sector.

Transport sector

Today Iran is one of the world leading countries in the issue of the railway construction. For several recent years due to the implemented big construction projects Iran has created a big railway mainline system, which connects in one railway network the railways of Turkey, Iran and Turkmenistan. The map of the railway mainline system of Iran is presented below4.

 

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But today Iran is directly involved in the implementation of several regional projects, which may even increase the role of Iran as a transition and transport area. Those projects are:

  1. On March 25, 2008 in Dushanbe the ministers of foreign affairs of Iran, Tajikistan and Afghanistan signed a memorandum about the construction of railway, which supposedly would start from Iranian Mashad and would still finish in Tajikistan capital Dushanbe. According to the minister of foreign affairs of Tajikistan Kh. Jarikh, in the future the railway will continue towards Kyrgyzstan and China. At the same time a modern trunk road will be built from China to Iran, mainly to the city of Bander-Abbas on the Gulf coast.
  2. In November 2009 the mejlis of Kazakhstan initiated the hearings on the search of the sources of finance for the construction of the railway from Kazakh city of Uren to Iran5 (the city of Gorgan, which is situated not far from Caspian Sea) through the territory of Turkmenistan. The new railway will be 600km shorter than the one operating today, which goes through the territories of Uzbekistan and Turkmenistan and connects to Iranian city of Saraskh. This will boost the growth of cargo transportation. This project is, at some extent, a competitor of Dazvin-Resht-Astara railway and can transport the cargo from north to the south of Central Asia. And the flow traffic is growing. According to the president of “Russian railways” company V. Yakunin, in 2015 the railway flow traffic from the north to the south will grow on 53% as compared to 2007, even when there is no railway in the direction Russia-Azerbaijan-Iran. However, it is not clear what growth can be shown if Kazakhstan, Turkmenistan and Iran will build a new, shorter and profitable railway. The discussions on the construction of a railway played a central role during the official visit of the president of Turkmenistan G. Berdimuhamedov to Iran (February 13-15). It is remarkable that a day before the visit of Turkmen president to Iran V. Yakunin had also been there and the main aim of his visit was to start the negotiations on the construction of Dazvin-Resht-Astara railway, which would connect Russia, Azerbaijan and Iran.
  3. Since 2004 the issue of the construction of Dazvin-Resht-Astara has been discussed. The Russian-Azerbaijani-Iranian consortium, founded in March 2008, had to begin the construction works, but Iranian and Azerbaijani parties have done almost nothing in this line.

The first two points should be regarded as very important for Armenia. If those projects are implemented, then Armenia may have a short railway to Central Asia and China. For that end it is important that Armenia-Iran railway is built and this, in its turn, will create a direct railway connection between China and Black Sea ports. It is not excluded that in the issue of finding the sources of finance for the construction of Armenia-Iran railway this factor will play a key role. First of all we mean China. During the visit of the chairman of the National Assembly of the RA Hovik Abrahamyan in December 2008 to China the issue of the railway construction was also discussed, and it, according to the official information, interested Chinese party.

Of course, the global economic crisis will influence all the aforementioned projects, but it cannot stop them, as there are very important preconditions for their implementation. All these projects give Armenia the opportunity to take some steps to overcome the blockade and integrate into the regional and global economy.

1Iran possesses 16% of world gas resources and the possible export volume, according to different sources, may be 80-120 billion cubic meters.

2This stance of Iran determined the present low level of the cooperation between Turkey and Iran, as Turkey tries to become not only a transition country, but also a reseller of Iranian gas.

3The diameter of the pipeline will be 250mm, the length - 300km. The project will cost $200-240 million.

4Map copyright belongs to “Noravank” foundation.

5Kazakhstan and China, in their turn, reconstruct the railway, which connects those two countries. In order to increase the flow traffic on Dostik (China)-Alashankou (Kazakhstan) section, the interstate managing and developing council was created. In fact if new Kazakhstan-Iran railway is built it will also connect China and Iran, create a possibility to import and export goods from China (and to China), using for this purpose Iranian port Bander-Abbas on the Gulf coast.


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