After the deal
Sanctions Not the Only Obstacle to Iranian Gas in Europe

Soon after it struck a framework nuclear deal with the West, Tehran turned its gaze west by northwest, eyeing Europe as a huge potential market for its oil and gas. Sanctions crippled Iran’s energy sway in Europe, but as the West prepares to lift them as part of the agreement, Iran is eager to make up for lost time. But as the FT reports, there’s still a long way to go before Iranian gas starts powering and heating European homes and businesses. Naturally, one of the biggest obstacles in Iran’s way is one of Europe’s biggest natural gas suppliers—Russia:

The cancellation of the South Stream pipeline seemed to have knocked Russian efforts to send more gas into southern Europe, but it was quickly replaced with the similar Turkish Stream pipeline. This 60 bcm per year subsea pipeline will compete directly with any effort by Iran to market its gas in Europe.

In fact, Iran has been losing market share to Russia in Turkey, the only gateway market into Europe it supplies. In 2010, Iran supplied around 20 per cent of Turkey’s gas imports, but last year it fell to 18 per cent. Over the same period, Russian gas exports to Turkey have almost doubled to 30 per cent.

Russian efforts in Turkey, inspired by Europe’s rejection of the South Stream pipeline, are going to make it more difficult to get Iranian gas to market. Iran could imitate its neighbor across the gulf—Qatar—and start liquifying more gas and sending it on ships, but there too it will be running up against stiff competition. Tiny Qatar accounts for roughly a third of global LNG trade, a veritable giant in a market that seems already well-supplied, especially with American LNG exports in the offing.

Iran’s oil exports are a different story, as they promise to upset other petrostates both within and outside of OPEC. The oil cartel’s members are already flagging under plunging prices—now trading below $50 per barrel—and will be loathe to see new supplies coming online to contribute to an already full-up market. But there’s another petrostate that may be even more worried than Venezuela or Saudi Arabia. Russia exports to Europe a grade of crude similar to that which Iran produces, and as such its market share is under the greatest threat by resurgent Iranian exports.

Iran will hope to hit the ground running with its energy exports, but its chances look a lot better with oil than with gas.

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