Energy diplomacy in Iran during two years of “Raisi” rule (article)

After Ebrahim Raisi was elected president of Iran, he was assured that the country’s approach to energy diplomacy had changed.

Such diplomacy is crucial for Tehran, given that it is a country rich in energy resources, including oil and natural gas.

One of Iran’s strategies, after Ebrahim Raisi takes office, is to develop international relations in the field of energy.

Tehran is trying to strengthen its relations with other countries in the field of energy, including neighboring countries, the European Union and China, and this includes signing oil and gas contracts, developing energy trade and cooperation in the field of clean energy technologies.

In a related context, Tehran is trying to play a more active role in international energy organizations and unions, influencing policies related to energy production, distribution and pricing, and protecting its interests.

Energy diplomacy in Iran

Iran seeks to increase its negotiating power in international energy contracts.

This comes despite claims that the development of these relations initially gained great momentum, due to the focus on neighboring countries.

For its part, the Iranian Ministry of Oil has given priority to reviving relations with countries such as Turkmenistan, Azerbaijan, Iraq and the Arab Gulf states.

Subsequently, the ministry expanded its diplomatic presence to faraway countries, including China, Russia and Latin American countries.

The main point here is that due to the shortage of natural gas and gasoline, Tehran is forced to rely on neighboring countries for the production of natural gas and gasoline.

Despite the increase in Iranian oil sales over the past two years, the economic situation of the people has not improved.

Russia

Despite the sanctions imposed on Moscow and Tehran, energy relations between the two countries have expanded in the past two years.

It should be noted that Russia, to meet its currency needs and maintain its market share, was offering oil at deep discounts to countries such as China, India and Turkey.

Similarly, Iran has been selling oil at discount prices to China on the parallel market.

After the visit of President Ebrahim Raisi to Russia, and the signing of a $40 billion memorandum of understanding between the National Oil Company of Tehran and Russia’s Gazprom in late July 2022, relations between Tehran and Moscow in the energy sector gained more momentum.

During this visit, agreements and memorandums of understanding were signed for the development of Iranian oil and gas fields and a detailed plan for technology transfer was formulated.

The Iranian Ministry of Oil, which benefits from the created platform, has focused on developing this track.

In addition, this cooperation extended to the petrochemical sector, with the aim of exchanging technical knowledge and technology-based cooperation in this sector, and a north-south corridor was established to facilitate easier and faster access to markets.

It is important to note that the $40 billion memorandum of understanding between the NOC and Gazprom has not yet reached the stage of a formal contract.

Turkmenistan

Unblocking relations with Turkmenistan was necessary for Tehran to enjoy secure access to gas, because the possibility of imbalance and low gas pressure was a major problem during the cold winter months.

This threat persisted despite all expansion plans and annual increases in gas production, due to the continuous rise in energy consumption in Tehran.

In contrast, the interruption of gas supplies in Turkmenistan was a problem that made it difficult to supply fuel, especially during the cold winter months in the eastern parts of Iran.

As a result, Oil Minister Javad Ochi decided to visit Turkmenistan in the early days of his tenure, with him in charge of the Ministry of Oil, and to try to revive the long-term gas partnership between the two countries.

Exchanges between Turkmenistan, Iran and Azerbaijan were eventually revived, due to his future initiative on the sidelines of the 15th Economic Cooperation Organization (ECO) summit.

On January 1, 2023, the process entered into force, which made it easier to obtain gas during the cold winter days of that year, especially in the eastern regions of Iran.

Latin America

In light of an acute shortage of gasoline due to the embargo imposed on Venezuela, Iran entered the oil industry in Latin American countries by exporting gasoline.

Despite facing sanctions, Iran rushed to provide fuel to its longtime ally, and this led to the identification of investment opportunities in refining projects, which gradually led to the consolidation of Iran’s presence in the oil industry in Latin American countries.

This coincided with the abandonment of many oil industry projects by American and European companies, which created an opportunity for Iran to export technical and engineering services with the aim of developing them, which the government of Iranian President Ibrahim Raisi gave priority to.

The visit of the Iranian oil minister and the accompanying delegation to 3 countries in Latin America eventually resulted in the signing of 8 contracts and agreements in the fields of developing and producing oil and gas fields, modernizing and maintaining refineries, and benefiting from refining capacity.

These contracts and agreements aimed at training human resources, exchanging expertise in the oil, gas and petrochemical industries, technical and engineering services, transfer of technology and development of oil and gas fields. Relations between Iran and Latin American countries have improved and relations have strengthened because of this visit.

According to Malik Shariati Nayasar, spokesman for the Energy Committee of the Islamic Consultative Assembly, Iran’s energy diplomacy with Russia, Turkmenistan and Qatar has strengthened in light of the policies and performance of the 13th government.

Shariati stressed that cooperation in the energy sector is one of the most important aspects of cooperation between Tehran and Moscow, explaining that the Islamic Republic is a center for energy exchange, especially in the field of natural gas.

He highlighted the unique infrastructure of gas pipelines and the refining and petrochemical sectors in Iran, which Russia and other countries require, and good agreements have been reached between the two countries in this regard.

Referring to long-term cooperation plans and the signing of a 20-year cooperation document between Tehran and Moscow, Shariati noted that this document covers various areas, including energy investments, regional exchange agreements, customs tariffs between Iran and Russia, and the completion of the North-South corridor agreement in railway and road sectors, and product transportation.

Beneficial agreements have been reached, and although the details are still being reviewed, it is hoped that valuable contracts will be concluded in this regard.

Big obstacles

Iran faces significant obstacles with its energy diplomacy, and the election of Ebrahim Raisi to the presidency raises doubts about Iran’s ability to pursue this strategy effectively.

Security of gas supplies, managing fuel shortages, and increasing Iran’s market share are just a few of the difficulties that the country’s energy sector must deal with, and this depends a lot on efficient foreign policy and energy diplomacy.

Iran’s energy diplomacy will certainly face great difficulties if it is not refined and strengthened.

This could include challenges in ensuring energy security, maintaining stable oil and gas supplies, attracting international capital and technology, and promoting export markets for crude oil, gas condensate, and petroleum products.

Therefore, Iran must give energy diplomacy a high priority and improve it, through diplomatic channels and strategic alliances to address energy-related issues.

Iran can improve its energy security, promote sustainable growth in the energy industry, and ensure a more secure and prosperous future for the country by taking a well-planned and proactive strategy.

In addition, Iran’s energy diplomacy is essential for managing domestic energy issues, as well as influencing its foreign relations and future economic potential.

Iran can forge strategic partnerships, conclude beneficial energy deals, and attract capital to expand its energy infrastructure through effective energy diplomacy.

Significant impediments must be noted due to the current state of energy diplomacy in Iran.

Iran’s ability to effectively utilize its abundant energy resources and engage in meaningful energy diplomacy is constrained by the effects of sanctions, regional crises, and geopolitical tensions, and this has resulted in the loss of joint ventures, technology transfer, and market diversification prospects.

* Dr. Omod Shoukry, senior advisor on foreign policy and energy geopolitics, is the author of “US Energy Diplomacy in the Caspian Basin: Changing Trends Since 2001.”

*This article represents the opinion of the author, and does not necessarily reflect the opinion of the energy platform.