NoD: Tehran proposes Russia to make 'gas OPEC'

Russia spent last year strenuously denying reports that it was participating in the creation of a cartel of gas suppliers to the EU. Now, however, the idea has received an unexpected boost from Iranian leader Ayatollah Ali Khameni at a recent meeting with Russian Security Council secretary Igor Ivanov.

Commenting on the message sent to him by President Putin and the idea of partnership between Russia and Iran, the ayatollah unexpectedly initiated a discussion of creating a "gas OPEC ." "Our two countries, in helping each other, can create an organization based on cooperation in the gas sphere, along the lines of OPEC," the Iranian state news service IRNA quoted Ayatollah Khamenei as saying. IRNA did not report Mr. Ivanov's answer, and there is a reason for that. The idea of a "gas OPEC" is explicitly Russia's, but Russia consistently denies reports that the Kremlin has plans to create a cartel uniting the countries that supply gas to the EU .

A cartel would be minimally profitable for both parties, especially for Gazprom. At the present moment Iran supplies practically no gas to the countries of the European Union and to the EU's neighbors; the only country in the region currently receiving minimal supplies from Iran's gas network is Turkey. The majority of Gazprom's supply links with key countries in the EU, including Germany, France, and Italy, are through long-term contracts in which the price of the gas is pegged to the price of oil. Controlling gas prices through a pricing cartel would be effective only if the EU follows through on its threat to limit future long-term contracts.

An energy union cum geopolitical alliance of Russia, Iran, and Algeria does appear to be in the works. The possible liberalization of the EU's gas market has the potential to be used to exert pressure on Russia, in which case Russia could hit Europe back with the threat of a gas cartel as a warning not to step too far out of line in its struggle against the westward expansion of Russia's gas empire.

Why it is important:
1. A potential for powerful restructuring re one of the most important fuels of 21st century.
2. Potential closer alliance between Russia and Iran, which is geopolitically important in the view of unfolding conflict between the US and Iran.