Amidst the shifting dynamics of global energy markets and evolving geopolitical challenges, the new gas supply route through Azerbaijan to Iran has sparked considerable interest.
- Why was the route through Azerbaijan chosen for transporting gas to Iran? What factors influenced this decision—economic, political, or infrastructural?
- Infrastructural factors played the leading role in this case. Northern Iran has a significant demand for natural gas, especially during the winter heating season. Tehran is globally known for its smog issues, exacerbated by the burning of coal and even firewood for heating purposes. Air quality in the city remains poor throughout the year, but it becomes particularly hazardous during the winter months, endangering the health and lives of citizens, especially those with respiratory conditions.
The existing infrastructure—two pipelines built during the Soviet era (from Russia to Azerbaijan and from Azerbaijan to Iran)—offers a quick and relatively economical solution for delivering Russian gas to consumers in Iran's capital region. However, these pipelines have limited capacity, which is why the officially stated figure of up to 2 billion cubic meters of gas annually is relatively modest. Consequently, Russia and Iran view this as a test project, laying the groundwork for a more comprehensive solution in the future.
-What are Russia's goals in supplying gas to Iran? Is this a diversification of export routes, an effort to strengthen ties with Iran, or a response to sanctions?
- All three factors mentioned play a role, albeit to varying degrees. I would identify the primary motivation as the need for Russia to counteract the sanctions imposed by the United States and European countries more actively.
Following the closure of the Yamal-Europe pipeline through Poland, the sabotage of the Nord Stream pipelines, and the cessation of gas supplies through Ukraine on January 1 this year, Moscow has found itself with a substantial gas surplus. Since the domestic market cannot absorb these volumes, the Russian government and Gazprom, as the largest gas producer, have been seeking new markets.
For liquefied natural gas (LNG), finding new markets has been relatively straightforward, with Russia implementing large-scale projects in the Arctic and on Sakhalin, significantly increasing LNG exports globally, including to Europe, which faces high prices and irregular supplies of American LNG.
However, options for pipeline gas exports are far more limited. Last year, Russia began substantial gas supplies to Central Asia (Kazakhstan and Uzbekistan), utilizing existing Soviet-era pipelines. A similar model is now being applied to Azerbaijan and Iran.
For Russia, a long-term solution would involve building new LNG plants and completing negotiations on its participation in the "Turkish hub" project and the Power of Siberia-2 pipeline, which could deliver over 50 billion cubic meters of gas to China.
Although these negotiations are in advanced stages, final agreements remain elusive, primarily due to pricing disputes. Russia's partners, particularly Turkiye and China, aim to exploit the current crisis and secure gas at domestic Russian prices—a position Moscow is not prepared to accept, leading to stalled talks.
- Where will Russian gas go after reaching Iran? Does Iran plan to use it for domestic consumption, export, or further processing?
- Iran, which holds the world's second-largest natural gas reserves, can theoretically meet its domestic needs independently in the long term. However, this cannot be achieved immediately. Many of Iran’s older fields are significantly depleted and cannot boost production, while developing new fields requires investments and technologies that Iran struggles to access.
While Tehran will undoubtedly address these challenges over time, it will not happen overnight. Therefore, Russia expects significant volumes of its gas to be consumed in Iran over the next several years, not just in the northern regions.
In the longer term, attention will shift to potential gas exports to Pakistan and India. Both nations are experiencing rapid industrial growth and population increases, leading to a surge in energy demand, including for natural gas. However, current political tensions between Islamabad and New Delhi make this scenario unfeasible for now.
Resolving these issues will require concerted efforts from politicians, diplomats, and business leaders to find mutually acceptable solutions. If successful, Russia could supply over 50 billion cubic meters of gas to these markets—a possibility already discussed at the official level in Moscow.
At present, Russia is not interested in establishing LNG production facilities in foreign countries using its gas, including Iran. Although Iran has considered this option in a purely theoretical sense, should circumstances change, Russia possesses the technology and financial resources to develop an LNG plant on the Persian Gulf or Arabian Sea coasts.
