Weapons of Mass Disruption: Fossil fuels and the Iranian nuclear crisis

Article 7 Apr 2006 admin

Matthew Taylor and Paul Ingram, British American Security Information Council (BASIC) – This feature report was first published in Platform’s carbon web newsletter, issue 4.

As the crisis between the international community and Iran escalates, the media continue to focus exclusively on Iran’s nuclear ambitions.  The nuclear issue is one part of the story. The international non-proliferation regime, weakened by its failures to progress disarmament, is in danger of unravelling. Israel, India and Pakistan have nuclear arsenals and are outside the regime, North Korea appears to have joined them. But it is against Iran that the United States and Europe have now chosen to take a stand, after they led a war against Iraq for similar, though discredited reasons.

The relationship between the Islamic Republic and the United States has been poor since the Iranian revolution of 1979, partly for historic reasons (especially memories of the hostage crisis that followed the revolution), partly for ideological reasons, and partly for strategic reasons (Iran openly challenges US and Israeli dominance within the Middle East).

In January 2002 President Bush labelled Iran part of the axis of evil; for some time Iran has been the principal target of neo-conservatives in Washington. There are many reasons behind the US and Israeli antipathy towards Iran: sufficient in themselves to explain the slow deterioration of diplomatic relations and calls for the use of military action.  But achieving consensus within the international community is proving difficult, especially as Iran has put greater emphasis on engagement with foreign players.

Iran’s first contract with a foreign oil company since the revolution was with Total in 1995, to develop the Sirri field. Further investments were slow to begin with, but have expanded rapidly since 1999. Even since the latest IAEA Board resolutions in January and March, with threats of sanctions coming from Europe, the Iranians have been offering Total, Shell and Repsol upstream development contracts in the huge South Pars gasfield. Europe is currently Iran’s primary economic partner, accounting for 35% of its trade. These relationships heavily influence European gambits. France and Germany in particular feel their economic ties give them leverage.

But that leverage works in both directions: European countries are all too aware of their growing dependence on Gulf oil. Iran’s wealth of oil and gas may not provide the explanation for the current crisis, but it certainly explains much of the global interest, and many of the dynamics that will determine future events. Iranian oil and gas reserves are particularly attractive because of their size, because they are relatively underdeveloped, and because they could supply both India and China via pipelines.

Regular Carbon Web readers will know of the astronomic growth in energy imports to south and east Asia. China overtook Japan as the world’s second largest consumer of petroleum products in 2004, with a total demand of 6.5 million barrels per day. In four years’ time, imports will account for half China’s oil consumption. In 2003, Iran provided 14% of Chinese oil imports, a figure set to rise significantly. Deals over Iranian natural gas are equally important. In October 2004, Iran signed a $70-100 billion, 25-year contract with the Chinese company Sinopec, which includes the supply of 250 million tons of Liquified Natural Gas (LNG) and constitutes one of China’s biggest overseas investments.

India is in a similar position of import dependency. According to Brajesh Mishra, National Security Advisor, ‘We see a synergy between the energy resources in Iran and the energy markets in India.’ Both India and China are rumoured to have concluded significant arms deals with Iran. India already has a 50% share in the world’s largest gas field at South Pars.

Many in Washington are intent on building up pressure upon Iran. But they find many Europeans reluctant, not just because of their previous Iraqi experience and a belief in soft power, but because they are not willing to make economic sacrifices again. For similar but more powerful reasons, they may find outright opposition from China.  If the West is to strengthen the non-proliferation regime and prevent weaponisation of Iran’s nuclear programme it has no choice but to positively engage. The bigger conflict may yet centre around access to that most strategic of energy sources – oil.

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