Analysis: Iran looks West with eye on East

ISTANBUL, Turkey, June 27 (UPI) -- U.S. pressure notwithstanding, Iran wants to maintain energy ties to the West while keeping an eye on the growing economies of the East, an Iranian expert on energy affairs said.

"In the present circumstances, Iran is looking to the East, but at the same time it doesn't want to lose the West because of good markets and political reasons," S.M.H. Adeli, chairman and chief executive officer of the independent, Tehran-based Ravand Institute for Economic and International Studies, told United Press International on the sidelines of an energy conference in Istanbul, Turkey.

Iran, he noted, was using Chinese expertise to develop resources such as the North Pars field but still hoped that Europe could be a major buyer of its gas.

Adeli said U.S. pressure, including in the form of legislation being considered in Congress that would tighten sanctions on companies doing business with Iran, would eventually give way to European self-interest.

"When strategic interests of U.S. allies are at stake, they choose their own way," he said. "In Europe, there is dire need for diversification. This has one meaning: an alternate source to Russia.

"If there is one source of gas that's going to compete with Russia, it's going to be Iran," he said.

Iran has the world's second-largest gas reserves, after Russia. Europe is considering several options, including Central Asia, Algeria and Egypt, as ways to diversify its supply. Adeli said, however, that for any diversification to be meaningful, Iran, with 18 percent of the world's gas, must be in the picture.

"A meaningful direction for Europe would be to get gas from Iran," he said.

There are signs of such a deal, though they are the subject of fierce U.S. congressional scrutiny and threats of sanctions against Austria's OMV, which announced a $30 billion deal on natural gas with Iran in April.

Under the agreement on the sale of liquefied natural gas and a joint project, OMV will help develop parts of the South Pars gas field and build a liquefaction facility. Iranian gas could be fed to the Nabucco pipeline, which OMV is promoting heavily.

Adeli compared the situation to the 1980s when the United States unsuccessfully tried to pressure Europe against buying gas from the Soviet Union. This time, too, he said, self-interest was likely to prevail.

That was also his rationale behind why the $7 billion Iran-Pakistan-India pipeline would be completed. The 1,700-mile pipeline would run from Iran to India via Pakistan and supply some 90 million cubic meters of Iranian gas to India and 60 million cubic meters to Pakistan every day. Talks have been stalled on that issue because of two factors: the price of Iranian gas and transit fees that India must pay to Pakistan, but the three sides are reportedly close to a deal.

The United States has opposed the project, preferring instead that the two South Asian economies get their gas from Turkmenistan via a pipeline that also runs through Afghanistan.

"You cannot compare 1.5 percent of the world's gas (Turkmenistan) to 18 percent of the world's gas," Adeli said. "It cannot substitute what Iran has."

He said both nations desperately needed energy: India to fuel its economy and Pakistan to ward off social upheaval.

"In my view, both countries will be able to justify their links to Iran," he said.

But Iran faces problems. Its energy infrastructure is aging and it is unable to ramp up production because of a lack of investment. Although it has the second-largest oil and gas reserves, its capacity is comparatively low.

Investment is a major obstacle because of global politics. The United States says Iran supports terrorism and accuses Tehran of using its nuclear program to make weapons. Iran denies the charge. Still, with the global consensus against it, the likelihood of major energy investments in Iran -- with the exception of the OMV deal -- remains in doubt.

Existing sanctions on Iran are likely to continue and new U.N. sanctions could come as early as July, Vera de Ladoucette, senior vice president and senior director of Middle East research at Cambridge Energy Research Associates, said Tuesday at the energy conference.

"There's no sanction as such on Iran and there's no expectations ... but companies are thinking twice," she said.

Adeli was optimistic, however. He pointed to a recent minor thaw in U.S.-Iran relations when top officials met to discuss Iraq.

"If we take Iraq as an example, then we should infer this could also happen with other areas of concern to both sides," he said.

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