Gassing up against Uncle Sam

Iraq-Iran-Syria pipeline a potential kaleidoscope of geopolitical complexities

Amidst the fog of war in Syria, the clamor of sanctions and the threat of conflict in Iran, some transnational business deals in the region have slipped quietly. That was certainly the case in July 2011 when the Western press largely ignored the announcement by Syria, Iran and Iraq that they were to build a gas pipeline to transport Iranian natural gas from the South Pars Field in the Persian Gulf through Baghdad to Damascus.

At the time the saber rattling over the Iranian nuclear program was in full swing and protests in Syria were turning to armed conflict. Many, as a result, thought that the project would prove to be stillborn. But the announcement on Monday that Iran has already commenced building the first stage of the project — running from Kuhdasht in western Iran to Baghdad — has come as a wake up call to many, even though several of the original objectives of the scheme may never be met.

The project proposes a 110 million-cubic-meter-per-day (mcm/day) pipeline that originates in Kuhdasht and traverses some 1,500 kilometers end-to-end. The pipeline is tipped to cost some $10 billion in total, and the initial agreement sees guaranteed stock purchases of some 25 mcm/day by both Iraq and Syria. The first phase, costing $3 billion, will see a 225-kilometer pipeline come to Iraq (apparently through Baghdad) to supply its power plants. Rates and payment structures of the project have not been made public and the entire project is supposed to be completed by mid-2013.

The likelihood at this stage that the pipeline will ever reach Syria is small. Building a pipeline is a serious construction effort and the route needs to be secured — something the Assad regime will have a hard time doing in the midst of a civil war.

What is more likely is that the gas reaches Iraq and stays there. For starters, Iraq desperately needs the natural gas imports. The country’s estimated natural gas consumption is rapidly increasing and has grown almost a third this year — from 1,084 kilotons of oil equivalent (ktoe) to 1,423 ktoe — and is forecast to rise by a further 18 percent next year, according to the Economist Intelligence Unit. Of that consumption much will go to electricity generation, predominately in gas-powered electricity projects that are currently in development. Already two 1,750-megawatt power plants have been contracted out and are tipped for completion in 2013, and another tender was launched for a 1,500-megawatt project in May.

Thus, Iraq needs gas, and quickly. And as the United States continues to draw down its resources and influence in the country this pipeline project would tie Baghdad ever closer to Tehran. Depending on the type and efficiency of the plants and networks, the pipeline could cover much if not all of Iraq’s projected demand for gas, especially if the pipe never reaches Syria.

There is a litany of possible complications, however, from simply securing the pipeline route through a still volatile Iraq, to the contradicting alliances and animosities between the US, Iraq and Iran. How exactly will it play out with the Americans attempting to enlist allies — among them Iraq — to tighten the sanctions noose on Iran and squeeze its energy export revenues at the same time that Iraq is entering a billion-dollar energy deal with Tehran? Interesting times await indeed.

Baghdad is becoming well practiced at playing multi-faced international diplomacy, however, having thus far maintained both its alliance with Washington and helping to prop up the regime of President Bashar al-Assad in Damascus while Washington backs the opposition seeking Assad’s removal. But the discovery by the Financial Times last month that Iraq has agreed to export 60,000 tones of fuel oil for power generation and industry to Syria suggests Baghdad remains willing to help the Assad government stay afloat.

Whether Iraq will be able to continue playing on so many sides remains to be seen. What is clear, however, is that a pipeline project that was quickly dismissed last year as a public relations stunt could turn into one of the most sensitive and controversial geo-political issues in tomorrow’s Middle East.

First published in Executive’s online edition on November 22, 2012


Author: Sami Halabi

Sami Halabi is a policy consultant who covers a range of policy issues and analyses development programmes, particularly in the Middle East and North Africa. Sami specialises in analysing policies and programmes in order to provide evidence-based recommendations to policy-makers and international development agencies. Sami holds a Master of Public Policy with Distinction from The University of Edinburgh.

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