Why the transit of Russian gas through Iran is so important

A contract signed in June for the daily supply of 300 million cubic meters of Russian gas enables Iran to position itself as an energy hub and a regional leader in terms of energy diversity.

One of the most frequently asked questions about gas imports from Russia is why Iran, the world’s second-largest natural gas holder, should import gas at all. The simple answer is that the lack of sufficient investment in developing gas fields and the galloping increase in industrial and domestic gas consumption are affecting production.

In recent years, consumption has risen steadily during the cold and very hot seasons, forcing Iran to partially halt its gas exports, close some energy-intensive industries seasonally, and force some power plants to burn expensive diesel or low-quality fuel oil to generate electricity.

Energy diplomacy is used in today’s world to ensure and promote the national and international security of nations. Iran is well positioned to utilize its oil and gas resources and capabilities to give it an appropriate place commensurate with its true potential to play a significant role in the international community and consolidate its national and international security.

The Ukraine war was a massive and historic energy shock that disrupted global energy markets. While the US and Europeans tried to cut Russia’s revenues by imposing a price ceiling on crude oil and oil products, Moscow responded by shifting its export markets to China, India, Turkey and the United Arab Emirates.

However, Russia’s attempt to achieve the same with its gas exports encountered political and technical limits. In 2023, Gazprom increased gas supplies to China via the Power of Siberia to 22.7 billion cubic meters from 8.2 billion cubic meters in 2021. The increase in exports to the countries of the Caucasus and Central Asia was also below 5 billion cubic meters per year.

The total was a fraction of the gas Russia exported to Europe. Russia exported 244 billion cubic meters of gas per year, which fell to 142 billion cubic meters in 2023 after the war began. More than 55% of Russian exports, or about 140 billion cubic meters, went to Europe, which fell to 27 billion cubic meters in 2023.

There is currently about 95 billion cubic meters of excess export capacity in the Russian gas sector. The strong need for new export markets, combined with the pressure on state coffers caused by the war, offers Iran a unique opportunity to establish itself as a new energy hub.

Most of Iran’s neighboring countries suffer from insufficient gas supplies. According to statistics, there is a possibility of exporting 25 billion cubic meters of gas to Turkey annually, another 25 billion cubic meters to Iraq, 10 billion cubic meters to Pakistan and 10 billion cubic meters to Oman.

Some of these countries already have the necessary infrastructure in place, while others still need to develop and build pipelines and distribution systems. This means that there is a potentially strong market for gas imports from Russia on Iran’s doorstep.

However, regional energy cooperation should not be viewed only from an economic perspective, as the security benefits resulting from the development of such cooperation and the creation of mutual dependence in the energy sector are very valuable.

Given the importance of natural gas imports from Russia, it is safe to say that this is one of the most important projects of Iran’s energy and foreign policy. Its economic, foreign policy and security benefits are so great that it should be considered a national necessity and not be allowed to sink into bureaucratic administrative tricks.