Iran plans gas pipeline to Central Asia and China

By bne IntelliNews April 13, 2012

Clare Nuttall in Almaty -

Iran is planning to build a new pipeline to export natural gas to Central Asia and China, as it faces sanctions from former buyers in the European Union. The new pipeline is currently being considered in Teheran, and would run through Afghanistan, Tajikistan and Kyrgyzstan to China.

Iran has stopped selling oil to several EU countries after the bloc announced sanctions against Tehran over its nuclear programme, and froze Iranian Central Bank assets in Europe. Germany was added to the list of EU countries barred from receiving Iranian oil exports on April 11, to join France, Greece, Spain and the UK.

Talks on Iran's nuclear programme are due to start in Turkey on April 14, with Iranian officials to meet with diplomats from the five permanent members of the UN security council. There is speculation that discussions may continue for several months.

Teheran is already looking at new options for oil and gas exports. India became the top buyer of Iranian oil in the first quarter of 2012, Reuters reports. According to the Teheran Times, Iraq is close to reaching an agreement to import 25m cubic metres of Iranian natural gas a day in 2013.

Iran has also expressed an interest in exporting gas to Central Asia, but the infrastructure is not yet in place. The presidents of Iran, Afghanistan and Tajikistan are understood to have discussed building a gas pipeline at a summit in Dushanbe on March 25.

Iran's Ambassador to Tajikistan, Ali Asghar Sherdoust told Trend news agency that, "according to the agreement reached ... in Dushanbe, a pipeline will be built running from Iran to Tajikistan through Afghanistan and further to Kyrgyzstan and China."

In addition to providing Iran with an alternative market for its gas, the pipeline would help solve Kyrgyzstan and Tajikistan's pressing gas supply problems. While both countries have hydropower infrastructure, this is mainly only useable during the summer months.

In winter, the two Central Asian republics are dependent on imports of natural gas. Uzbekistan is their main supplier, but its exports are unreliable. This is partly because, with many non-paying customers, the cash-strapped national gas distribution companies in Kyrgyzstan and Tajikistan are sometimes unable to pay their bills to exporter UzTransGas.

Meanwhile, Tashkent has a history of using its position as a gas exporter as a political tool to put pressure on its neighbours. The most recent example was a decision to turn off gas supplies to Tajikistan on April 1 as part of a bid to persuade it to halt the construction of a dam that threatens Uzbekistan's cotton industry, which is a major cash crop for the country.

Iran does not currently able to export gas to Tajikistan there are no pipelines linking the two countries. And given that a new pipeline across Afghanistan - with all its security issues - is only now being discussed, that's not likely to change for several years.

At the same time, links between Central Asia and Iran are accelerating rapidly. There are also plans for Kyrgyzstan and Tajikistan to export electricity to Iran, with the CASA-1000 project planned to build new transmission lines south to Afghanistan and Pakistan, whilst a plan to build a rail line from Kyrgyzstan to Iran's Persian Gulf ports is also doing the rounds.

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