Turning the Gas Crisis into an Opportunity: Iran's Strategic Role in Eurasia

Expanding trade and diversifying gas supply sources from neighboring countries is a strategy to strengthen the country's energy security and economic stability.

According to Mehr reporter, the worsening of the gas imbalance in the country has caused Iran to face restrictions in supplying the required gas in some periods and unable to fully and sustainably fulfill all its export obligations to Turkey and Iraq. This situation, in addition to putting pressure on the commercial relations and contractual credit of the country, makes the necessity of diversifying the sources of gas supply even more obvious. The concentration of about 50% of the country's total energy on the South Pars gas field is considered one of the most important structural vulnerabilities in Iran's energy security, and any disruption in the production of this field can have extensive effects on the country's gas supply. As a result, the daily imbalance of gas in the cold days of the year leads to restrictions in the supply of feed for industries, power plants and the household sector and creates significant economic costs. In such a situation, the development of trade and diversification of the sources of gas supply from neighboring countries has turned from a commercial choice into a necessity to strengthen the country's energy security and economic stability.

Having more than 17% of the world's proven gas reserves (amounting to 32 trillion cubic meters), Iran ranks second in the world after Russia, and with an annual production of more than 250 billion cubic meters, it is the third largest producer in the world. Realizing this capacity, the legislator has set a clear goal in the seventh development plan to achieve the export volume of 40 billion cubic meters and the import of 20 billion cubic meters of gas per year. In the northeastern borders of the country, Turkmenistan is present as the fifth largest holder of gas reserves in the world, which is in dire need of diversifying its export markets and exiting the monopoly of its main gas buyer, China.

In terms of infrastructure, currently the Daulatabad-Sarkhos-Khangiran pipeline alone has a nominal annual transmission capacity of 12.5 billion cubic meters of gas. Expert investigations show that by applying the correct management to use the maximum capacity of the current pipelines connected to Turkmenistan, as well as speeding up the upgrading of pressure boosting stations, achieving the import and transmission capacity of 20 billion cubic meters of gas is fully available. The expansion of the nationwide network of pipelines inside Iran has made it possible for the gas received from the north to be transferred to the western and eastern export points in the shortest time and with the least pressure drop, which makes Iran the most economical way to connect Eurasia's energy to open waters and consumption markets.

With its unique geopolitical position, the Islamic Republic of Iran is the shortest and safest transit route to connect gas production centers in the north to energy-hungry consumers in West and South Asia. In this new architecture, importing and swapping gas from Turkmenistan and directing it to markets such as Iraq and Pakistan is not only an effective solution to curb the seasonal imbalance of gas inside the country, but by creating a political and economic interdependence, it severely weakens the infrastructure of Iran's economy.

Iran has an acceptable implementation history in the field of swap legal and commercial mechanisms; including the successful implementation of the tripartite swap plan for the annual transfer of 1.5 to 2 billion cubic meters of Turkmen gas to the Republic of Azerbaijan through the national infrastructure. Also, plans and agreements to start a gas swap from Turkmenistan to Turkey with a capacity of up to 2 billion cubic meters per year have also been discussed. Relying on these models, the energy-hungry markets in Iran's neighborhood are considered a unique opportunity to develop these contracts. In order to advance development projects and rebuild its national economy, Iraq needs stable imports of gas and electricity. In the eastern borders as well, Pakistan has been struggling with the energy shortage crisis for years, but due to high security and transit risks on the way to Afghanistan, it has not been possible to receive gas from the Tapi pipeline project.

Directing Turkmenistan's gas to the markets of Pakistan and Iraq through Iran is the point where energy diplomacy creates political deterrence. The nature of gas trade creates stable and long-term relationships (generally over 20 years) between governments, which are much more difficult to intervene and sanction than the crude oil market. When the security of energy supply and consequently the stability of industrial and domestic networks of countries like Iraq, Turkey and Pakistan are tied to Iran's gas supply network, a strategic interdependence is formed. Providing Iran's gas network as a safe alternative to the risky TAPI project not only brings foreign exchange earnings and continuous transit rights for the country, but also greatly increases the political and economic costs of Iran's isolation or sanctions for world powers and turns the country into a structural and irreplaceable player in the region.