Monday, August 31, 2009

Luft on Iran’s Gas Industry

Building on our recent discussion of the Iran gasoline sanctions debate, I wanted to flag two recent pieces by Gal Luft of the Institute for the Analysis of Global Security. The first is from Foreign Affairs earlier in the month in which Luft makes two argumentst. 1. Sanctions on Iranian gasoline imports will not hit hard because the country has taken steps to beef up refinery capacity and is reducing its gasoline consumption by encouraging substitute fuels. Luft cites a 25% reliance on imported gas, in contrast to the 40% figure that is regularly cited in the press.
2. The better way to hurt Iran would be to thwart its plans to export gas to Pakistan (then possibly on to India) and Turkmenistan (and then possibly on to Europe).

This article parallels a longer piece Luft published in the Journal of Energy Security in June, in which he fleshes out the potential implications of Iran developing its gas markets to the east. Luft asserts that Russia is keen to get Iran’s gas exports focused eastward so it can continue to dominate Europe’s energy scene, and warns that Iranian gas pipelines to Pakistan could give Tehran energy leverage over the subcontinent similar to that which Russia exercises over Europe.

While Luft’s contrary view on Iran’s gasoline import dependence is interesting and the second piece does a good job of gaming-out geopolitical possibilities of the Iran-Pakistan pipeline (read it all here), my concern is about the underlying sanctions logic:

Across both articles, Luft implies that thwarting Iran’s Pakistan pipeline scheme will force Tehran to rethink its nuclear ambitions. Yet Iran is hardly out of options when it comes to using its gas: It could re-inject gas into its aging oilfields to boost production, explore export options to Europe, make a dash for LNG technology, or continue to orient towards domestic use. So rather than capitulate on the nuclear program — a key security and energy priority (not to mention point of national pride) — Iran is likely to pursue its gas plan B ( and C, D, and E) first.

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