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Iran Seeks Role in Caspian Oil and Gas Game

Iran is moving aggressively to stake out a major role in the development of Caspian Basin oil and gas reserves.

At a September 19 forum in New York, Iranian Foreign Minister Kamal Kharrazzi courted US oil-sector executives and analysts, saying Iran was prepared to cooperate with Western firms in helping develop the Caspian Basin's energy infrastructure.

"We are prepared to join hands with our partners in the developed countries and the West to contribute and expedite the process of economic development in the [Caspian] region," Kharrazzi said at the forum, organized by the Eurasia Group.

Kharazzi added that "economic logic" mandates that Iran serve as the main transit hub that brings Caspian Basin natural resources to Western markets. "We ought to choose the best route, free from any kind of political pressure and fanfare and non-economic parameters," Kharrazzi said. "The Iranian route is the shortest route for the transfer of energy resources."

Since the collapse of the Soviet Union in 1991, Iran, Russia, Turkey and the United States have jostled for control of potentially lucrative oil and gas transit routes. At present, there are a variety of transit plans under consideration. The US government has been a staunch advocate of constructing new pipelines that would bring Caspian oil and gas to facilities in Turkey. The project, known as Baku-Ceyhan, would cost an estimated $2.4 billion to build. Other projects, competing with the Iranian option, would bring energy resources to markets via Russia and China.

Kharrazzi estimated that Central Asia and the Caucasus – especially Azerbaijan, Kazakhstan and Turkmenistan – possess up to 6 percent of the world's oil and gas reserves. The best way to develop those resources, he stressed, is through international cooperation, not competition. He implicitly criticized US policy when he said that some "external powers" are turning the region into an "arena of unnecessary rivalries." Despite Kharazzi's call for cooperation, Iranian leaders have so far rebuffed US overtures for direct talks on the normalization of relations.

The Iranian foreign minister urged the resolution of regional disputes, particularly the delineation of Caspian Sea boundaries. Caspian states so far have been unable to formulate a legal framework that would facilitate the development of natural resources contained under the sea bed. Kharrazzi held discussions on the Caspian question with his Russian counterpart, Igor Ivanov, on September 18 in New York. A working group comprising all the Caspian states – Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan -- is scheduled to meet at the end of September in Teheran for discussions on the sea's legal status.

Iran and Turkmenistan have advocated redrawing existing Caspian Sea boundaries into five equal national zones. Azerbaijan, Kazakhstan and Russia prefer to maintain the existing sea borders. In addition, Russia is pushing for joint development of natural resources in disputed territories. Kremlin officials have indicated that they do not expect a breakthrough in the Caspian talks to occur during the Teheran meeting.

In his address, Kharrazzi also called for renewed efforts to produce political settlements to regional conflicts in Afghanistan, as well as the enclaves of Abkhazia and Nagorno-Karabakh. In addition, he said the international community should increase efforts to combat drug-trafficking and terrorism that are undermining stability in Central Asia. [For additional information see Eurasia Insight archive].

Several recent developments have provided a boost to Iranian efforts to secure a major share of oil and gas transit traffic. On September 18, a US consortium involved in a project that would transport gas from Turkmenistan to Turkey announced that it was closing its office in Ashgabat. Consortium officials admitted that the project faced an uncertain future. Meanwhile, Azerbaijani oil industry officials have announced that they plan to ship more oil than previously expected through the Russian-controlled Baku-Novorossiisk pipeline.

Iran has taken steps in recent months to allay concerns of potential foreign investors. Kharazzi assured assembled executives and analysts that foreign investments in Iran would be welcome and fully protected, citing a "new and supportive climate for growth. "

The Iranian parliament recently adopted measures that would allow foreign firms to hold a 100 percent equity stake in Iranian ventures. The legislation also protects foreign investments from nationalization, and permits investments in all sectors of the Iranian economy. The bills are awaiting the ratification of the hardliner-dominated Guardians Council.

Justin Burke is editor of EurasiaNet.

Iran Seeks Role in Caspian Oil and Gas Game

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