Russia, Iran and Qatar announce plans for an OPEC-style trilateral gas agreement.
Western concerns over global energy prices hit new heights in October with Russia, Iran and Qatar’s hints that they plan to form an OPEC-style cartel.
“We have agreed to create a technical committee, and one of its missions will be to review projects that can be implemented in a trilateral way,” said Alexei Miller, chief executive officer of Russia’s Gazprom, following high-level meetings in Tehran.
“We are united by the world’s largest gas reserves, common strategic interests and, which is of great importance, high cooperation potential in tripartite projects,” he added.
Whilst the gathering in Iran still needs to be ratified by further meetings in Qatar and Russia, it is still the most significant step towards the formation of a cartel since the idea was first raised by Iran’s supreme leader, Ayatollah Ali Khamenei, in January 2007.
Given that the three countries combined control more than 60% of the world’s gas reserves, any deal would signal alarm bells for both consumers and governments around the world. The European Commission for one has already signaled its opposition, with spokesman Ferran Tarradellas Espuny declaring that energy supplies must be sold in a free market.
In reaction, Russia’s government dismissed such concerns, saying that closer cooperation with other gas producers is meant to ensure present and future supplies. They did, however, declare that the era of cheap hydrocarbons has come to an end.
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Any talk of a cartel is likely to once again raise the question of whether the EU should be more willing to take Iran on as a supplier to the Nabucco pipeline aimed at bypassing Russia and easing its energy hegemony. The project has been delayed many times and faces uncertainty over whether it can secure sufficient supplies from the countries of the Caspian.
Iran’s entry into the EU-led US$10.46 billion project has proven to be a major issue of contention, with the US in particular firmly against any Iranian involvement. The chief executive of OMV, the lead consortium member, Wolfgang Ruttenstorfer, has, however, spoken out against the US, saying that “to build the Nabucco pipeline and say it should not transport Iranian gas would not make sense.”
Ultimately, the likelihood any a trilateral deal being reached seems highly unlikely. Whilst as a small nation Qatar may be willing to compromise, Iran and Russia have too much at stake to make any concessions, making a deal near impossible.
Russia for one already holds unrivalled hegemony over the EU in regards to gas supply. The country has already proved its mettle to ti using gas supplies as a tool of foreign policy against its pro-european leaning neighbours. A repeat of such behavior could break a cartel in one swoop.
Its dominance cements high gas prices and allows it to dictate the majority of agreement specifics with the EU. It therefore seems unnecessary for Russia to form a cartel and be subject to negotiations and compromise, both of which it has never been a fan of in the past.
Any talk of a cartel must be seen as mere rhetoric from Iran and Russia and thus taken with a pinch of salt. Just as with Russia’s recent talk of increased cooperation with OPEC, both Iran and Russia are simply trying to leverage more power and influence out of their gas supplies.
In the process they are sending out a warning to resource-deprived and gas hungry consumer nations that they remain major-players in the hydrocarbon sector, regardless of any deals attempting to by-pass them.
