Country / Geopolitics
Iran and its global potential

Iran’s Surprisingly Strong Geopolitical Hand ... While the short-term outlook still looks uncertain for Iran, the larger fundamentals hugely favor it.

Burgess COMMENTARY

Peter Burgess

Iran’s Surprisingly Strong Geopolitical Hand While the short-term outlook still looks uncertain for Iran, the larger fundamentals hugely favor it. Credit: Robert Hale Shutterstock.com

Takeaways
The Saudi battle with Iran is unequal because Iran brings assets to the table that Saudi Arabia lacks.
It matters to China that Iran has the world’s second-largest natural gas reserves and fourth-largest oil reserves.
Saudi Arabia might make a few friends in Beijing for now, but Iran still holds far more of the good cards.

Saudi Arabia’s King Salman hopes to exploit a window of opportunity while in Beijing to loosen China’s affiliations with Iran. But he faces long odds.

The Saudi battle with Iran is fundamentally unequal because Iran brings assets to the table that Saudi Arabia lacks.

Those assets, no matter how degraded, include a large population, an industrial base, resources, a battle-hardened military, a deep-rooted culture, a history of empire and a geography that makes it a crossroads.

1. Walking a Tightrope: China Maneuvers Between Saudi Arabia and Iran

2. Why Iran has the Longterm Regional Upper Hand over the Saudis

Saudi Arabia’s traditional assets – including custodianship of the Muslim holy cities, Mecca and Medina, and money — will in the middle and long term not be able to compete.

Iran as an OBOR pivot point

Iran’s strategic advantage is nowhere more evident than in global competition to shape the future architecture of Eurasia’s energy landscape.

Energy scholar Micha’el Tanchum argues that Iran is pivotal to the success of China’s trans-continental, infrastructure-focused One Belt, One Road (OBOR) initiative in ways that Saudi Arabia is not.

In a study published in 2015, Mr. Tanchum suggested that it would be gas supplies from Iran and Turkmenistan, two Caspian Sea states, rather than Saudi oil that would determine which way the future Eurasian energy architecture tilts: Will it be in the direction of China, the world’s third-largest LNG importer, or in that of Europe?

Iran will choose its buyers

In that context, it matters greatly to China that Iran has the ability to capitalize on the fact that it boasts the world’s second-largest natural gas reserves and its fourth-largest oil reserves was significantly enhanced with the lifting in 2015 of international sanctions.


Enlarge Source: International Gas Union

According to Mr. Tanchum:

... “Iran, within five years, will likely have 24.6 billion cubic meters of natural gas available for annual piped gas exports beyond its current supply commitments.”

... “Not enough to supply all major markets, Tehran will face a crucial geopolitical choice for the destination of its piped exports.”

Further, he says Iran will be able to export piped gas to two of the following three markets:
1. European Union (EU)/ Turkey via the Southern Gas Corridor centering on the Trans-Anatolian Natural Gas Pipeline (TANAP)
2. India via an Iran-Oman-India pipeline, or
3. China via either Turkmenistan or Pakistan.

“The degree to which the system of energy relationships in Eurasia will be more oriented toward the European Union or China will depend on the extent to which each secures Caspian piped gas exports through pipeline infrastructure directed to its respective markets.”

In other words, Mr. Tanchum argued that to determine the balance of power in Eurasian energy and establish One Belt, One Road as the key determinant of Eurasia’s energy architecture, China would need to position itself as the main recipient of Iranian and Turkmen gas.

China as a natural partner

That, in turn, would enhance China’s growing economic influence in Central Asia, and further extend it to the Caucasus and the eastern Mediterranean.

China has already many of the building blocks needed to make that a reality:
... close and long-standing relations with Iran
... significant investment in Turkmen gas production and pipeline infrastructure
... the construction of Pakistan’s section of the Iran-Pakistan pipeline.

Hooking the pipeline to One Belt, One Road would allow China to receive Iranian gas not only by sea on its eastern seaboard, but also in its land-locked, troubled north-western province Xinjiang.

However, Iran’s geo-political strengths are however not wholly dependent on aligning the Islamic republic with China.

Other friends keep the competition lively

With the development of Iran’s Indian-built Chabahar port and the undersea Iran-Oman-India pipeline that would potentially create an alternative Asia-to-Europe energy corridor, Iran is, according to Mr. Tanchum, well-positioned to play both ends against the middle.

In addition, it can adopt a key role in the trans-Atlantic community’s effort to strengthen relations with India as an antidote to the rise of China.

Iran’s surprisingly strong gas leverage

Iran’s geopolitical significance is further enhanced by the fact that competition for Iranian gas is very real and offers leverage.

Contrary to some assumptions, Iranian cooperation with Russia in Syria and elsewhere is opportunistic and unlikely to prove sustainable, rather than a sure thing Russia can count on for preferential economic treatment:

– Iranian-Russian competition is already visible in the Caucasus and Central Asia, which ironically mitigates in Europe’s rather than China’s favor.

– Iran is likely to deepen energy cooperation with Turkey. The intent here is two-fold: First, it is a bid to enhance its influence in that country

Second, it would help curtail Russian inroads in the Islamic republic’s northern neighbors – Azerbaijan; Turkmenistan, which is China’s principle gas supplier as well as Armenia (where Russia’s state-owned Gazprom has invested in an Iran-Armenia gas pipeline).

All of this positions Iran to be a very choosy supplier and negotiator.

In Beijing and beyond, Saudi Arabia might make a few friends for now, but in the longer run, Iran still holds far more of the good cards.

Anyone already aligned with Iran or considering such an alliance will think twice before walking away from the Islamic republic to back the kingdom.

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About James M. Dorsey James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies and an award-winning journalist.