Iran poll may herald Caspian oil shake-up
MOSCOW, Feb 25 (Reuters) - Russia has welcomed the election of a reformist
government in Iran , but analysts say it may mark the start of an upheaval
in the politics of Caspian oil as three key players, Russia, Iran and Turkey,
battle for supremacy.
The Caspian Sea contains huge if undetermined oil and gas reserves,
but is landlocked. Getting them out means building pipelines. And pipelines
give transit countries cash and clout.
Until the Soviet Union broke up in 1991, all Soviet Caspian oil crossed
Russia, which still sees neighbours Azerbaijan, Turkmenistan and Kazakhstan
as in its sphere of influence.
But with independence came a desire by these countries to loosen ties
with Russia. Backed by diplomatic muscle from the United States, they looked
at new export routes.
To Russia's dismay, U.S. ally and NATO member Turkey emerged as the
favourite, even though any pipeline built across it would be longer and
more expensive than any other option.
But Iran has always promoted itself as the best candidate for an export
line. It is the shortest and cheapest way for oil to reach the sea, and
its oil terminal at Kharg island allows easy access to where the oil is
actually needed - the Far East.
While nobody doubts the commercial attraction of Iran , U.S. sanctions
have ruled out the development of this option.
But a change of government there, if it leads to a review of U.S. policy
towards Iran , could alter that. And that could lead other would-be exporters
to lose out.
"The one thing at the moment that stands in the way of exports
across Iran is the attitude of the U.S. government," Julian Lee, Caspian
analyst at the Centre for Global Energy Studies in London, said.
RUSSIA NOT WORRIED
Russia has dismissed any threats to its influence. Asked on Thursday
if he saw any danger to Russian interests from Iran 's election result,
Energy Minister Viktor Kalyuzhny replied simply: "We're not worried
about that".
Russia's foreign ministry officially welcomed the election, and hoped
it would "create a basis for free and independent development in a
country with which we are friendly."
It has good grounds for optimism in the medium term. The biggest oil
project under development in the Caspian basin is Kazakhstan's Tengiz field,
from which a pipeline with an eventual capacity of over a million barrels
per day is already being built to Novorossiisk on Russia's Black Sea coast.
A second huge project, the Azerbaijan International Operating Company
(AIOC), developing an offshore Caspian field, will send oil through Russia
for years to come, largely because of Azeri government intransigence.
AIOC now sends some of its oil across Georgia to the Black Sea, and
wants to expand capacity on this route.
But Azerbaijan is reluctant to agree to this, fearing that if it did,
it would allow AIOC to stall on its pledge to build the U.S.-favoured pipeline
across Turkey to the Mediterranean.
As a result, Azeri oil will have to move north across Russia for the
foreseeable future, once a bypass avoiding the war in Chechnya has been
completed, supposedly within a few months.
TURKEY THE LOSER?
But Turkey may not be so lucky. Lee said BP Amoco, leader of AIOC and
with long historical roots in Iran , had never really been committed to
the trans-Turkish line, although a company spokesman denied this.
"BP Amoco is leading the efforts to progress the Baku-Ceyhan pipeline,"
he said, adding that strong forecast Turkish demand growth was a factor
in the Caspian energy balance.
Stephen O'Sullivan, head of research at United Financial Group in Moscow,
agreed that the possible emergence of an export route across Iran was most
likely to hurt Turkey.
"That is by far the most expensive and by far the least attractive
from the commercial perspective of the oil companies involved," he
said.
Meanwhile the Iranian option is gaining ground. Some firms are already
"swapping" crude from Turkmenistan across Iran .
This involves giving Iran Turkmen oil to be refined and used in big
population centres in the north, and receiving in exchange Iranian crude
at an export terminal in the south - in effect moving oil through a "virtual
pipeline".
Swiss-based trader Vitol said this month it was close to winning a deal
to organise finance for a new $400 million pipeline from Iran 's Caspian
coast to northern refineries.
This would allow Iran to swap out a further 370,000 barrels of crude
per day, and could be a precursor to a larger pipeline being built across
the whole country.
But that would still depend on the U.S. welcoming Iran back into the
fold. And few expect that in an election year.
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