Cable reference id: #08IRANRPODUBAI11

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Reference id aka Wikileaks id #145439  ? 

SubjectThe Politics Of Iranian Natural Gas
OriginIran RPO Dubai (Iran)
Cable timeWed, 12 Mar 2008 13:05 UTC
ClassificationSECRET//NOFORN
Sourcehttp://wikileaks.org/cable/2008/03/08IRANRPODUBAI11.html
References06DUBAI6919, 08ASHGABAT7, 08ASHGABAT75, 08IRANRPODUBAI2
History
  • Time unknown: Original unredacted version, leaked to Wikileaks
  • Thu, 1 Sep 2011 23:24: Original unredacted version published, with HTML goodies

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RUEHMO/AMEMBASSY MOSCOW PRIORITY 0004
RUEHAH/AMEMBASSY ASHGABAT PRIORITY 0001
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S E C R E T SECTION 01 OF 03 IRAN RPO DUBAI 000011

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 3/11/2018
TAGS: ECON, ENGR, EPET, PREL, IR
SUBJECT: THE POLITICS OF IRANIAN NATURAL GAS

REF: A. 2006 DUBAI 6919; B. RPO DUBAI 0002; C. ASHGABAT 0007; D. ASHGABAT 0075

RPO DUBAI 00000011 001.2 OF 003

CLASSIFIED BY: Jillian Burns, Director, Iran Regional Presence
Office, Department of State.
REASON: 1.4 (d)

1.(S//NF) Summary: Iran has oversubscribed its natural gas
commitments by 20%, given current extraction and transportation
capabilities, according to a reliable Iranian energy analyst.
He added that Iran and UAE’s Dana Gas still have not agreed on a
pricing structure for Iranian natural gas (ref A). Deputy Oil
Minister Ali Kordan’s lack of experience is reportedly to blame
for the bungled renegotiation of the Iran-Turkmenistan gas
contract (ref B,C,D). The resulting gas shortages during the
winter months may have cost President Ahmadinejad some support
among his base, although the government attempted to shift blame
to internal enemies. The analyst argued that Iran is not
seriously contemplating a gas OPEC and that statements to that
effect are part of a greater public relations strategy to retain
Russian support for Iran’s nuclear program while it competes
with Gazprom for the European market. He said Iran’s February
2008 deal with the State Oil Company of Azerbaijan to receive
gas in exchange for Iranian deliveries to the Nakhichevan
exclave is simply a gas swap with little net gain for Iran.
Iran is seeing a greater advantage in providing power to
regional power grids as opposed to exporting its gas resources,
claimed the analyst. It is possible that Iran oversubscribes
its gas deals because it knows some deals will die from external
pressure (as well as internal mismanagement). The winter’s gas
shortage could cost allies of the president votes in this week’s
parliamentary elections, unless Iranians buy the conspiracy
theory spread by the government blaming other factions. End
Summary.

Iran over-commits gas resources

——————————-

2.(S//NF) A reliable energy analyst from Tehran claimed in a
conversation with IRPoffs March 9 that Iran has oversubscribed
its gas domestic and export commitments by 20%, given current
extraction and transportation capabilities. He said this was
their finding in a recent study his company did for a European
client considering investment in Iran’s natural gas industry.
The analyst claimed that former Deputy Oil Minister for
International Affairs Mohammed Hadi Nejad Hosseinian told him
recently that he believed Iran has over committed its gas
exports by 1.5 times its actual capabilities. (Bio note:
Hosseinian was also Iran’s Ambassador to the UN prior to Javad
Zarif. Endnote) Although the analyst did not blame
oversubscription for some of the protracted gas contract
negotiations Iran is involved in, he noted that Iran and UAE’s
Dana Gas still have not agreed to pricing terms (ref A).

Iran, Turkmenistan gas deal

—————————-

3.(S//NF) The analyst also claimed that the shut-off of Turkmen
gas exports to Iran since 29 December 2007 is a result of Deputy
(so called Acting) Oil Minister Ali Kordan’s lack of energy
experience and inept negotiation strategies (ref B,C,D). Kordan
reportedly got his current position because of his close ties to
the president, not his qualifications. The analyst said that
just prior to the expiration of the previous Iran-Turkmenistan
gas contract, Iran sent Kordan to Ashgabat to work out the terms
of a new deal. When Turkmenistan asked Iran to match a much
higher price offer from Russia, Kordan reportedly insisted on a
price far below market value. Turkmenistan declined the offer.
(Bio Note: Ali Kordan was appointed Deputy Oil Minister in
October 2007. His previous positions include: Deputy Labor
Minister, President of Iran’s Technical and Vocational
Organization, Deputy Head of the Islamic Republic of Iran
Broadcasting (IRIB) Provincial and Parliamentary Affairs, Deputy
Culture and Islamic Guidance Minister for Administrative and
Financial Affairs. Endnote)

4.(S//NF) The resulting gas shortages in harsh winter weather
negatively impacted President Ahmadinejad’s popularity among the
lower class, traditionally his base of support, according to the
analyst. The source said this was the most direct impact of
government mismanagement that people in remote provinces had
felt. He added that Iranian government spokesman Elham had

RPO DUBAI 00000011 002.2 OF 003

publicly blamed domestic Iranian politics for the breakdown of
negotiations. According to a Tehran reformist daily, Aftab-e
Yazd, Elham said February 6, “Some currents within the country
have formed a financial partnership with Turkmenistan and, in
order to achieve their political and personal interests, they
have tried to put the people under pressure by cutting
Turkmenistan’s gas supply in the recent period of unprecedented
cold weather. The Intelligence Ministry is currently looking
into this matter.” The analyst felt Elham’s remarks were a
veiled attempt to accuse Assembly of Experts head Rafsanjani of
secretly maneuvering to kill the deal to embarrass the

SIPDIS
president.

5.(U) Despite the fact that Turkmenistan has yet to resume gas
exports to Iran, a March 8 article from the Iranian Students
News Agency (ISNA) reported that Turkmenistan plans to expand
its oil, gas and petrochemical industries through a contract
with Iran. According to ISNA, Turkmen President Berdimuhamedov
asked his country’s oil and gas industry to sign a $29 million
contract with Iran’s Pars Energy Company, allowing Pars to
develop Turkmenistan’s oil and gas industry.

Iran, Russia gas relations

————————–

6.(S//NF) When asked how Iran is managing its relationship with
Russia, given the fact that on one hand it is looking for
Russian backing to its nuclear program and on the other, it is
trying to break Gazprom’s stronghold over the European market,
the analyst claimed that Iran puts on a show to keep Russia
happy. Specifically, he said, Iran has no interest in forming a
gas OPEC with Russia but makes statements of interest to woo the
Russians. The source said that in general, Gazprom-Iranian
relations are sensitive. Russia would like Iran to focus on
supplying the eastern market and leave Europe to Gazprom. In
light of this, it is noteworthy that in mid-February 2008,
Iranian Oil Minister Nozari announced that Gazprom and Iran
decided to jointly develop several phases of Iran’s South Pars
gas field. While final agreements have not been signed, the two
sides are reportedly in the process of concluding a deal. The
announcement came just one week after Iran had announced, what
Russian press termed an “unpleasant surprise for Moscow,” its
possible participation in the Georgia-Ukraine-EU “White Stream”
gas pipeline that will transport natural gas from the Caspian
via the Ukraine to Poland. Iran’s Foreign Minister Mottaki had
also indicated early February 2008 that Iran would potentially
join the Nabucco gas project which will transport gas from
Turkey to Austria.

Iran, Azerbaijan gas swaps

————————–

7.(S//NF) According to the analyst, Iran’s February 2008 deal
with the State Oil Company of Azerbaijan (SOCAR) to receive gas
in exchange for Iranian deliveries to the Nakhichevan exclave is
simply a gas swap with little net gain for Iran.

Iran sees advantages to synchronizing regional power grids

——————————————— ————

8.(S//NF) The analyst maintained that Iran has now concluded
that it is more advantageous to export electricity to regional
power grids than to try to export natural resources. Energy
Minister Fattah said February 19 that Iran and Russia signed a
MoU to synchronize their electric systems, adding that “the port
systems of Iran and Russia are technically very similar so that
Iran’s power grid can benefit its neighbors like Turkmenistan,
Azerbaijan and Armenia.” Additionally, Iran is becoming an
important supplier of electricity to bordering areas in Iraq.

9.(S) Comment: Perhaps because Iran knows that international
pressure (as well as internal mismanagement) will end up killing
some of its energy deals, it explores more export deals than it
could fulfill, with current capacities. Most likely the Gazprom
investment in South Pars will serve a two-fold purpose: 1)
appease Russia by allowing it to become involved in Iran’s gas
production and therefore a background player in Iran’s projected
cooperation in the Nabucco and White Stream projects; and 2)
give Iran’s gas sector a technological upgrade, thereby reducing

RPO DUBAI 00000011 003.2 OF 003

oversubscription.

10.(S) Comment continued: The results of the March 14
parliamentary elections in areas hit hardest by the gas cut-off
may indicate whether allies of Ahmadinejad suffered by
association. Elham’s clumsy attempt to blame internal
machinations for the gas cut-off seems a desperate attempt to
shift blame away from the administration. That said, Iranians
tend to put great stock in conspiracy theories.
BURNS