Hamidreza Azizi

Prospect of Energy Cooperation in the Caspian Region after the JCPOA

Date of publication : March 7, 2016 18:39 pm
Prospect of Energy Cooperation in the Caspian Region after the JCPOA

According to an estimate by the International Energy Agency (IEA), energy reserves of the Caspian region amount to about 48 billion barrels of crude oil and 292 trillion cubic feet of natural gas. During early years of the post-Soviet era, efforts made by external powers to take advantage of not only the resources in the region, but the newly independent states' desire for independence of Moscow in energy transit led to multiple energy transit routes from the Caspian region.

Technically speaking, Iran's unique geopolitical and geographical features are seen as an economically feasible transit route of the Caspian energy to the West. Therefore, a number of fossil fuels' transit routes’ projects revolving around Iran were discussed. However, foreign pressure against Iran, especially the United States opposition to any projects turned into a serious hindrance of Iran's joint energy production/transmission projects with the rest of Caspian region. However, following the comprehensive nuclear agreement, known as JCPOA, the prospect of Iran's foreign economic relations’ developments, including relations with the Caspian region on the energy sector, has come up as an important topic for discussion. This new trend can show itself in all economic sectors related to the field of energy.

In the oil sector, cooperation between Iran and other littoral countries of the Caspian Sea has so far remained limited to signing “swap” contracts. In this kind of relations, Iran meets the demand of its northern regions for oil by importing crude oil from neighboring countries (including Turkmenistan, Kazakhstan and the Republic of Azerbaijan) and delivers to their customers an equivalent amount of crude oil in the Persian Gulf, in return. However, under new political settings, Persian Gulf could be used as a transit route of the Caspian region’s oil reserves to global markets. Perhaps this is the reason behind renewed debates about creating an international corridor through Uzbekistan, Turkmenistan, Iran and Oman, which can potentially expedite and facilitate implementation of the project.

As for the gas pipeline, Iranian previous transit routes to Europe are to be reoperated by the Rouhani government and they will accordingly reinvigorate the longstanding idea of economically feasible southern transit route of the Caspian energy. Undoubtedly, it requires enough time and patience but depends, to a large extent, on real participation of foreign entities in the Iranian energy sectors. The first step Iran should take towards new opportunities of post-JCPOA era in the Caspian region is to hold a series of high-level negotiations with the stakeholders and simultaneously, to conduct preliminary studies on the feasibility of the southern transit route project.

Hamidreza Azizi, a lecturer at Shahid Beheshti University, is the fellow at The IRAS Institute.

 This article first appeared in Iran Review.
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Author : Hamidreza Azizi