Iran and EU partner on natural gas deal
Published: 27 Apr 2016 By Grace Kimberley
The European Union is now looking to import natural gases from Iran for the first time, with a partnership being put in place to aid in Iran’s energy security. Iranian Foreign Minister Mohammad Javad Zarif and EU High Representative Federica Mogherini met in Tehran on the 16 April to discuss the partnership, which was in regards to a number of economical subjects, energy being the vital point of discussion.
The pair agreed on investment requirements for the Iranian energy sector and also discussed the opportunities for infrastructure innovation in Iran to further assist in the EU’s energy security. They also brainstormed ideas for means of attracting investment in power generation, transmission and distribution.
This agreement could generate billions of dollars’ worth of business both for the EU and Iran, but the US won’t be reaping these benefits. This is all due to the US sanctions imposed on Iran in regards to trading and business. The repercussions of this mean that the US are unable to participate in the partnership.
According to reports, the fact that Iranian leaders plan to invest more heavily into economic growth as opposed to nuclear weapons has caused frustration in Tehran, particularly from the political hardliners. There is also a worry that partnering with foreign countries economically will open Iran up to a whirlwind of liberation and that strict laws and regulations put in place by the government will inevitably be stretched over time.
Iran has huge potential for supplying energy and this has encouraged the EU to lift the sanctions put in place on Iran. The European Commission has predicted that by 2030, 25-35 billion cubic meters of gas could be imported from Iran thanks to this agreement. It is believed that the effects of the partnership could start to flourish as soon as the next 3 years, due to the fact the decisions put in place can quickly be turned round and developed. With a good amount of investment into natural gas plants, these are not time costly developments in comparison to other energy producing projects.
There is much excitement about the prospects of this new agreement, however there are also some major concerns to be addressed. This includes the price of the natural gas exports, which remains high and has caused similar talks between India, the UAE and Turkey to fail. These prices would need to be lowered in order for Iran to undercut cheap Russian equipment and supplies. It is also thought that although the flagship Iran LNG plant is due for completion in two years’ time, Iran will not commit to the other two plants due to the huge technology investments required to develop such projects.
The meeting concluded that three energy joint working groups (in oil and gas renewables and energy efficiency) will be created to handle details of these plans and how the EU and Iran will work together moving forward. This will involve at least one yearly meeting between ministers. Iran has already begun making adjustments to their energy terms in order to prompt investments, however this is receiving backlash from a political perspective due to opportunities being offered to Western companies.