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Iran Activating Energy Diplomacy

TEHRAN (NIOC) _ Ahmad Assadzadeh has been officially named deputy minister of petroleum for international affairs and trading.

Iran Activating Energy Diplomacy
(Thursday, February 17, 2022) 15:48

In an interview, he has outlined his plans as long as he remains in this post. He has also answered a wide range of questions about Turkmenistan-Iran-Azerbaijan gas swap contract for swapping Turkmen gas to Azerbaijan via Iran’s territory, Iran’s gas export contracts and planned gas exports to Europe.

Referring to imposition of US sanctions on Iran’s oil sector, he said: “Sanctions have their own complexities and we are trying to take effective measures with regard to sanctions lift throughout talks with P5+1 nations. The important issue in this regard is to verify the lifting of sanctions, for which we have conducted a comprehensive study and reported results to relevant authorities

Unlocking Gas Deal
The swap contract signed for the delivery of gas from Azerbaijan to Turkmenistan via Iran’s territory would thaw the ice in ties with neighboring countries. The contract was signed within 100 days after the administration of President Ebrahim Raeesi took office. Examining its various political and economic aspects shows that this agreement would be beneficial to Iran.

 “The significance of the gas swap contract is that it has been signed by three state bodies: Turkmengaz (Turkmenistan), SOCAR (Azerbaijan) and NIGC (Iran). The contract takes up added significance after ties turned sour and it is an effective step in unlocking ties with Turkmenistan. Prior      to this, swap was done by the private sector, which was positive, but unfortunately it was halted under the previous administration for some reasons,” he said.

Assadzadeh said throughout the signature of the new gas swap contract, Iran-Azerbaijan-Turkmenistan relations were reviewed and the ground was prepared for following up on the development of the Alborz oil field in the Caspian Sea. “This is a win-win agreement for the country,” he said

He added that the gas agreement would serve as a springboard for Iran to upgrade its ties with Turkmenistan and Azerbaijan

 “As far as winter fuel supply is concerned for northeastern Iran, the Petroleum Ministry had already undertaken some good measures without having to wait for this agreement. However, feeding this gas into northeastern areas would help sustain the network,” he said.

Noting that Iran, Turkmenistan and Azerbaijan are three important players in the region's gas industry and that these three countries together hold a quarter of the world's gas reserves in 2020, Assadzadeh said: "However, the trio constitutes 8.7% of total world gas reserves, which does not fit their capacity

He added: “Turkmenistan, Iran and Azerbaijan exported 31.6, 16 and 13.6 bcm of gas through the pipeline in 2020, respectively, totaling 61.1 bcm of gas by pipeline, accounting for 8% of the world’s 755 bcm of world gas exports by pipeline. The three countries’ share of global gas trading – pipeline and LNG – is 5% of a total 1,243 bcm

 “As Azerbaijan and Turkmenistan are land-locked while Iran has access to high seas and some gas-thirsty neighbors, using Iran's geography for transit or swap of Turkmenistan and Azerbaijan gas to other countries may enhance export capacity and subsequently, gas production from the three states and sustainable interaction between them would be guaranteed.  As a result, this tripartite contract could be the first step in long-term trilateral gas trade cooperation to increase the three nations’ share of regional and global gas markets,” he said.

He said that in addition to development of gas trade through tripartite cooperation, there is a wide capacity for exchange of knowledge and technical-engineering services from the upstream to downstream sector of the gas chain, which may increase the efficiency and reduce waste, help improve production levels as well as the refining capacity and exports. “I believe that these three countries can fare better in the medium and long term with a collaborative approach and become more influential players in the region and the world in terms of gas production and exports in the future," he said

 “The crude oil swap can be followed through with these countries. To do so, we really need to perform a swap operation, and we also have to use crude oil in the Caspian region, which produces less fuel oil in the refineries in the north of the Iran, which, if that happens, will have additional benefits for us,” he added.

Promising Events
Assadzadeh said: “After the signing of the gas swap contract, other attractive proposals have been made by some countries in the region, which we are pursuing. If these proposals lead to the signing of a contract, a good thing will happen in the field of energy diplomacy.”

He added: “Over recent months, we have also succeeded in starting trade with Armenia, reviving the previously swapped contract, further improvement of the level of ties with Turkmenistan, and the issue of the Caspian Sea and the Alborz oil field, which were previously agreed upon by senior officials of the two countries. Iran and Republic of Azerbaijan signed an agreement to mobilize and receive new proposals following this initiative to strengthen exchanges and interactions with countries in the region

 “The issue of swap was the result of a scenario that was designed and shaped. Although the dimensions of this action are economically small and some of its angles cannot be expressed, but strategically it has deep dimensions which experts know,” he said.

Realistic Pricing
Asked to comment on rumors of weakness of Iran’s position in the gas market after agreeing to swap Turkmenistan’s gas to Azerbaijan, Assadzadeh said: “These issues do not contradict each other. We may both export gas directly to this country and swap. Adopting these policies will not only weaken our position, but also make Iran an energy hub in the region".

 “It is noteworthy that any role in the gas market depends on optimization and doing things that can release gas for export. Unfortunately, the uncontrolled consumption of gas in Iran has affected export targets. If we miss the opportunity to export and swap gas now, it is not clear whether or not we will have such opportunities anymore, and other routes will be revived that we are not interested in and that threaten our interests in the region,” he said.

Assadzadeh stressed: “Regarding gas exports, another important point is that a realistic and strategic view should be formed about gas pricing for exports in the country, and of course, any corruption in contracts should be dealt with seriously at the same time

No Alternative to Iran Condensate
The issue of Iranian gas exports to Europe has been gradually raised in Iran since the early 1990s, and has always been one of the topics discussed with European countries under various administrations in Iran. Switzerland, France, Italy and Germany have always looked to buy Iranian gas, but these negotiations never led to a contract, and Iranian gas did not reach Europe.

Asked about any plan for gas exports to Europe, Assadzadeh said: “We concentrate on working with our neighbors, we have so many opportunities among our neighbors and Europe is our next priority, but if the Europeans are interested, we can negotiate to meet their needs. It requires that Europeans exercise independence and not follow the United States

 “The United States introduced an innovation by imposing sanctions on trade companies, and unfortunately the Europeans followed the suit, and that backfired on them. It seems that some of the US followers have so far failed to find any alternative to Iranian condensate and they are perplexed,” he said."

 “We have had good cooperation with European countries, which can continue, but it could be said that we will definitely give priority to our economic partners, who continued their cooperation with us during the sanctions period,” he recalled.

Constructive Cooperation in the Persian Gulf
Assadzadeh touched on ties with neighboring countries, saying: “At the Petroleum Ministry, we are fully prepared to cooperate with regional nations as well as Arab littoral states of the “Persian Gulf”. Some of these countries have recently shown a positive and constructive approach, which we welcome at the Petroleum Ministry."

 “Many of these countries need gas and we have good gas resources and reserves in the Persian Gulf. We may have constructive and progressive cooperation through a win-win formula. At the Office of Deputy Minister of Petroleum for International Affairs and Trading, we are reviewing various scenarios for cooperation with these countries and we welcome serious and sincere work,” he said.

Iraq Indebted to Iran
Iran has two gas contracts with Iraq. The first one, which was signed in 2013, is for gas export to Baghdad while the second one, which was struck two years later, carries Iran’s gas to Basra. Both contracts are effective, but the term of the contract is coming to an end.

Regarding cooperation with Iraq, Assadzadeh said: “As far as Iraq is concerned, good plans have been devised within the Petroleum Ministry, which God willing, will become operational soon. It is so important that a special envoy has been designated to follow up on cooperation with Iraq. One topic of cooperation is gas

Asked about any renewal of gas agreement with Iraq, he said that Iraq heavily depended on gas and that negotiations were under way for renewing the agreement. “Of course, our friendly and brotherly country Iraq should pay for its gas imports on time. Here, NIGC tries to do its best to export to Iraq as much gas it has agreed

Assadzadeh said: “We share border fields with Iraq, which is an opportunity for economic ties between the two countries. At our Office, good studies have been carried out in the field of integration of joint fields with Iraq, which unfortunately was not implemented under the previous two administrations. I will not intend to go into details now, but in short, doing so requires the serious will of both Iran and Iraq. We can cooperate with Iraq in the field of export of technical and engineering services, repair of oil equipment and goods, and many other things

Gas Exports to Pakistan
The contract to export Iranian gas to Pakistan was signed in June 2009, less than 20 days before the 10th presidential election (June 22, 2009), in the presence of then-Iranian President Mahmoud Ahmadinejad and his Pakistani counterpart Asif Ali Zardari. The day the contract was signed, more than two decades had passed since Iran began negotiations to export gas to India and Pakistan known as the Peace Pipeline. Four years after the signing of the contract and four months prior to the 11th Iranian presidential election on March 12, 2013, Ahmadinejad and Zardari broke the ground for the pipeline. That was while Iran had built more than 1,100 kilometers of the pipeline on its own territory.

Assadzadeh said: “Although Iran, with the construction of the 1,100-kilometer pipeline, has shown its determination to export gas to Pakistan, the Pakistani side, under pressure from the United States and some of Iran's regional rivals, withdrew from the deal on the pretext of financial strains. This pretext played well into the hands of the following administrations, as no attempt was made to implement the contract, and the Pakistani gas market was dominated by LNG. In fact, Pakistan had enough money to pay for LNG and LPG imports, but in Iran it was said that it cannot pay for the take-or-pay clause of the agreement

Asked if the 13th administration had held any talks with Pakistan for gas exports to Iran’s eastern neighbor, he said: “We are trying to reach a formula with Pakistan to revive this contract. We can conclude a contract for the export of Iranian gas to Pakistan by signing a multilateral agreement between Iran, Pakistan and third and fourth countries, and break the lock on this route to be a good platform to mobilize a number of other projects with Pakistan. Our eastern neighbor needs a lot of fuel and Iran is the most reliable partner

 “We may exchange views with Pakistan. Large quantities of fuel are now smuggled into that country and the profits go to smugglers. It seems that it is possible that by designing some projects along the border, the profit of production will reach border residents and smuggling will be controlled. The same is true for Afghanistan, although the current situation in that country is totally different,” he added.

Defeating Sanctions
Regarding the role of sanctions in the renewal of Iran’s gas contracts, Assadzadeh said: “Sanctions as a disturbing variable are not ineffective in our cooperation, but we have had many disturbances in the years after the [Islamic] Revolution, and by relying on our rich internal capacities, these threats can be turned into opportunities and the enemy may regret what he has done."

 “In the petroleum industry and in the country as a whole, as the Supreme Leader mentioned, we must pursue a strategy of neutralizing sanctions, and we have seen over recent years that wherever the country reaches a capability, these enemies themselves have come forward to cooperate with the aim of stopping,” he said.

New Oil Markets
In response to a question about oil exports to South America, Assadzadeh said: “Fortunately, with the efforts made by our friends in the sales sector, oil exports have gained serious momentum, and the markets which were not even thought of before are opening up, and the result is that the Petroleum Ministry, during the first eight months of the current calendar year to 20 March 2022, fed currency into state coffers more than committed. God willing, this process will be strengthened."

 “Unfortunately, the previous administration missed out on key opportunities for cooperation with South America. God willing, that will be compensated in this administration, and good agreements have been reached with some countries in that region, the effects of which will be revealed soon,” he said.

Regarding cooperation with Syria, he said: “We have plans for cooperation with Syria and Axis of Resistance in general. A Petroleum Ministry delegation was recently dispatched to Syria to study aspects of cooperation

Ad Hoc Groups
Assadzadeh said that ad hoc groups would be set up at the Office under his management. He enumerated them as follows: Strategic Monitoring Working Group, whose main purpose is to study the environment and analyze market developments and political and geopolitical events, and to develop an energy diplomacy program; Investment Working Group, which aims to identify new frameworks for foreign investment and trade in the oil industry’s Multilateral Cooperation Working Group, which aims to activate the presence of the Petroleum Ministry in multilateral agreements such as ECO and SCO among others  as well as comparison with some other economic agreements in the world such as Eurasia, BRICS, Mercosur (common market of South American countries.

 “The fact is that we did not make significant use of the capacity of these treaties. An example is the ECO, or, presumably, these unions and treaties that are formed with the participation of several countries. Can we not use multilateral purity with the member states of a treaty? These are just some of the goal setting shareware that you can use,” he said.

Assadzadeh also said that many Iranian specialists based abroad were willing to cooperate with Iran. He added that conditions should be facilitated for their cooperation.

 “Sometimes we have seen people or capacities brought in from abroad, but they have not been used as they should be. Dealing with this issue at our Office also depends on the innovation ecosystem in the Petroleum Ministry to reach a proper order and program so that we can support it,” he said.

Courtesy of Iran Petroleum

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