Saturday, August 30, 2008

Window on Eurasia: Will Iran Become the Route Out for Caspian Oil – And How Will That Transform the Geopolitics of the Region?

Paul Goble

Vienna, August 30 – The disruption of oil flows via Georgia during the recent violence has made that route significantly less attractive for Caspian oil exporting countries, with some concluding they have no choice but to go via Russia given Iran’s international isolation but at least a few thinking about using Iran to gain greater freedom of maneuver relative to Moscow.
If the governments of the region do decide to ship some or all of their oil via Iran, that would have three serious geopolitical consequences that may rival some of the already enormous geopolitical fallout from Russia’s decision to invade Georgia and to recognize Abkhazia and South Ossetia (
First, given the enormous appetite for oil in the West and Pacific rim, such a shift in Caspian exports would likely put enormous pressure on Washington to soften its approach to Tehran, especially if the United States wants to support the effective independence of the post-Soviet states and thus has no desire to see the oil flow through the Russian Federation.
Second, Iran’s willingness to serve as the route out for Caspian basin oil (or as a market for some of it) would likely set it on a collision course with Moscow, which has made it very clear that it wants to control all oil coming out of the former Soviet space and which would view any change in Iran’s approach or Western hostility to Tehran as not in Russia’s interest.
And third, such a shift would almost certainly affect Turkey and its relations not only with the post-Soviet Turkic states but also with Russia. Ankara’s ties with the former would likely become less important given that oil would be flowing via Iran, and it ties with Moscow would likely strengthen by means of some kind of condominium in the Southern Caucasus.
Beyond doubt, many countries, including both the United States and Russia, albeit for very different reasons, will do what they can to prevent such a shift, but the changes in Georgia and in the international system after Georgia mean that the use of such a route with all the consequences it would entail is no longer as unthinkable as it was a month ago.
The Georgian government and many commentators have suggested that blocking the east-west flow of oil from the Caspian via Georgia, a route that bypasses Russia, was one of the most important reasons behind Moscow’s decision to introduce troops there, an argument both Moscow and other analysts have heatedly denied.
But however that may be, Natalya Kharitonova, a regional analyst at Moscow State University, argues that it is important to focus on “the concrete facts” including both the way in which Russia’s action made Georgia less attractive as a transit corridor and Iran potentially a much more interesting one (
Among the “facts” she lists are the following: “the use of the Baku-Tbilisi-Ceyhan and Baku-Supsa oil pipeline, of the Baku-Tbilisi-Erzurum gas pipeline and of a number of other transportation units as well as the cessation of rail deliveries of oil to the Georgian port of Batumi was stopped” because of the conflict.
That in turn, she notes, forced Baku not only to reduce the amount of oil it pumped but also “to search for alternative routes for the transportation of this resource. As a result, Azerbaijani oil has been flowing through the Baku-Novorossiysk pipeline. [And] Turkey intends to purchase additional gas from Russia and Iran to compensate.”
At the same time, the Moscow scholar says, “Iran for example has decided to build the Neka-Jask pipeline as a competitor to Baku-Tbilisi-Jeyhan.” Earlier this week, Iranian sources reported that Azerbaijan had begun exporting some of its oil exports via Iran, although some in Baku denied this (§ionid=351020103).
A commentary in the Baku newspaper “Echo” today, indicates that Azerbaijan hopes to develop the east-west pipelines in Georgia but points out that analysts there and in other regional oil-exporting countries are looking at the Iranian route in the hopes of avoiding the consequences of using the Russian one (, August 30).
Ilham Shaban, the president of the Baku Center of Oil Research, told the paper that “all Western oil companies would like to work in Iran” but can’t easily because of American opposition. But now “invoking the situation in Georgia, they are beginning to advise official Washington to review its relations with Iranian so as to allow them to begin work there.”
He and other experts noted that because of the events in Georgia, “Azerbaijan began to export its oil to international markets through Iran,” even as it sent some of its oil northward via Russia – an example of Badu’s “balanced” foreign policy. But Azerbaijan was not the only regional country to use Iran during this crisis: Turkmenistan and Kazakhstan did so as well.
And another Azerbaijani expert, Gubad Ibadoglu, the head of the Center for Economic Research, pointed to three other reasons the Caspian basin states are now likely to reconsider Iran as a route: First, it is common practice for exporters to want to have multiple pipelines rather than be at the mercy from disruptions of a single one.
Second, exporting oil through Iran to the Gulf is significantly less expensive than sending it through Georgia and Turkey or through Russia. And third – and this may be especially significant in the case of Azerbaijan – oil from the Caspian going via Iran could help meet the fuel needs of the northern part of that country, a section populated by ethnic Azerbaijanis.

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