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Iranian Politicians Support Establishment Of Natural-Gas Cartel

By Vahid Sepehri

February 6, 2007 (RFE/RL) -- Iranian politicians are welcoming proposals to form an international natural-gas producers' organization -- similar to oil's OPEC -- allowing members to exercise greater control over natural-gas prices. Several politicians believe such an organization would improve and stabilize the price of gas as well as enhance Iran's political power through greater finances and closer ties with Russia, a gas producer seen as a strategic ally against unfriendly Western countries.

One of the proponents of creating a gas cartel is Iranian Supreme Leader Ayatollah Ali Khamenei, who discussed the idea with Russian Security Council Secretary Igor Ivanov in Tehran on January 28.

Natural Gas's Big Two

Russian officials are reportedly interested, though perhaps not in an OPEC-style cartel. Iran and Russia are believed to hold half of the world's natural-gas reserves.

Hamid Reza Haji-Babai said the cartel would "prevent the authoritarianism" of Western countries and would be a "center of power to resist Western powers' -- and especially America's -- economic and political pressures.

"Mohammad Reza Bahonar, Iran's deputy speaker of parliament, said in Tehran on February 2 that a "gas OPEC" would have many benefits for Iran and other producers, pointing out that exporting gas is more costly than exporting oil, as gas must be liquefied for transport or piped, ISNA reported.

Iranian Oil Minister Kazem Vaziri-Hamaneh said in Tehran on February 2 that liquefaction requires technology that some producer countries lack, while natural gas can only be piped to customers in relatively nearby countries, Dow Jones reported.

Several members of Iran's parliamentary Energy Committee concurred on February 2 that international gas prices have yet to reflect its "real" value.

Shirvan representative Hossein Afarideh, a member of the parliamentary Energy Committee, told ISNA that "the future of energy is in gas" and producers "can definitely not control many prices" without a cartel.

An OPEC For Gas

Another committee member, Hossein Nejabat, pointed out the political importance of the cartel. He said in Tehran on February 2 that with oil slowly running out and "the energy issue" a key instrument of the "management and control" of international affairs, Iran must work to form this cartel. The future of energy, he said, is in "petrochemical products and especially in gas," the daily "Aftab-i Yazd" reported.

The political view was stated clearly on February 3 by Heshmatollah Falahatpisheh, a member of the parliamentary National Security and Foreign Policy Committee. He told ISNA that "when the world is becoming daily more dependent on energy," the formation of a "gas OPEC" can give producers and exporters a "strategic position."

He urged officials to start studying the mechanics of forming such a cartel, so the issue is no longer a "general discussion." Another committee member, Hamid Reza Haji-Babai, said the cartel would "prevent the authoritarianism" of Western countries and would be a "center of power to resist Western powers' and especially America's economic and political pressures," "Aftab-i Yazd" reported the next day.

Akbar Torkan, the managing director of the South Pars Oil and Gas Company, told the Mehr news agency on February 3 that gas exporters must not "harm each other any more with unsuitable competition." He said producers could maximize benefits through "constructive cooperation" and that this is the best time for Iran and Russia to cooperate on gas exports, Mehr reported.

Domestic Consumption Problematic

One of the problems Iran faces in this regard is its considerable domestic consumption. As with oil, cheap subsidized gas boosts demand; and gas is subject to wasteful consumption.

Tehran-based academic Ali Khorram asked on February 3 if Iran could play a decisive role in a gas cartel "considering its [large] domestic consumption and the fact that a major part of Iran's gas is injected into oil wells to allow the oil to be exported," reported. A recent cold spell led to fuel shortages around the country.

Another problem is Russia's seeming reluctance to form an OPEC-style cartel and preference for cooperation, the daily "Etemad" reported on February 5. It stated that Russian President Vladimir Putin reacted mildly to a previous proposal for a cartel made months ago by Iranian President Mahmud Ahmadinejad, apparently at the June 2006 meeting of the Shanghai Cooperation Organization, which Ahmadinejad attended as an observer.

On February 2, Oil Minister Kazem Vaziri-Hamaneh said that all gas producers and especially Russia will have to support the formation of a gas cartel for the idea to materialize, and Russia is giving out "conflicting signals," Dow Jones reported. The agency reported that Iran has for some years sought to bring gas producers together, organizing the Gas Exporting Countries Forum in Tehran in 2001, which reportedly discussed pricing and marketing issues.

Copyright (c) 2007 RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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