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US confrontation with Iran

 
  

Project: US confrontation with Iran

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1993

       India and Iran sign a memorandum of understanding for a 2,670 kilometer pipeline that would transport natural gas from Iran's South Pars fields through 707 kilometers of Pakistani territory to India. The $3-5 billion pipeline would provide India with gas at half the cost of what it now pays. Though Pakistan would stand to earn $600-700 million a year from transit fees and would be permitted to purchase some of the gas for its own use, it is highly unlikely that the proposed pipeline will be constructed any time soon due to the poor relations between India and Pakistan. Furthermore, the pipeline would have to travel through Pakistan's Balochistan region over which Islamabad has only limited control. [Asia Times, 10/15/2004; Indo-Asian News Service, n.d.; Alexander's Oil and Gas Journal, 7/7/2000]
          

July 9, 2002

       Iran's Deputy Foreign Minister for Economic Affairs Hussein Adeli says during a press conference that Iran has begun feasibility studies on exporting Iranian gas to India (see 1993) and is considering the possibility of transporting gas to Europe via a pipeline. He says that the Iranian government is also looking into the possibility of exporting gas to members of the Persian Gulf Cooperation Council (PGCC) and is also considering selling gas to Armenia, the south Caucasus, and the Republic of Azerbaijan. [Tehran Times, 7/9/2002]
          

2004

       Iran, despite being OPEC's second largest oil exporter, is forced to import a billion dollars worth of gasoline due to demand outstripping the country's limited refining capacity. “We use 50 million liters of fuel each day, 10 percent more than just a year ago,” Seyyed Reza Kasaizadeh, planning director for the national refining and distribution company NIORDC, tells the Persian daily Khorasan. Roughly a quarter of that amount is purchased by the government on the open market, and then sold to the public at the same subsidized price as domestically refined fuel—roughly 35 cents per gallon. [Iran Daily, 12/12/2004] In addition to the subsidy program's actual costs, the program also represents “a huge opportunity cost, because they could be selling that at world prices,” Ben Faulks, an analyst for the London-based Economist Intelligence Unit, tells the Washington Post in mid-2005. Iran hopes that its nuclear energy program will solve this problem by reducing the country's industrial oil consumption needs. The country would then be able to sell more of its oil at market prices and substantially increase its revenue. [Washington Post, 7/4/2005]
          

October 29, 2004

       China and Iran negotiate a $70-$100 billion deal that gives China's state oil company a 51 percent stake in Iran's Yadavaran oil field, located near the Iraq border. The Yadavaran oil field, once thought to be two separate oil fields (Koushk and Hosseinieh), contains more than 3 billion barrels of recoverable oil and a total reserve of 17 billion barrels. [Washington Post, 11/17/2004; Chinese Daily, 11/8/2004] China agrees to purchase ten million tons of liquefied natural gas (LNG) annually for a 25-year period once Iran has constructed plants to liquefy the natural gas, a feat that could take more than five years. The amount could increase to as much as $200 billion if an oil deal, currently under negotiation, is also agreed upon by the two nations. [Persian Journal, 10/31/2004] As part of the deal, Sinopec, China's state oil company, will have the right to exploit Iran's Yadavaran oil field, located near the Iraq border, on a buy-back basis in cooperation with another major international oil company. The Yadavaran oil field contains more than 3 billion barrels of exploitable reserves and comprises the Koushk and Hosseinieh oil fields, “which were recently found to be connected at various layers, forming an oil field with a cumulative in-place reserve of 17 billion barrels,” the Chinese Daily reports. [Chinese Daily, 11/8/2004] Iran is estimated to have a 26.6-trillion-cubic-meter gas reservoir, the second-largest in the world. About half of its reserves are located offshore. Some observers suggest that the Iran-China agreement could establish a precedent that opens the way for other nations to do business with Iran. The US Iran-Libya Sanctions Act of 1996 (ILSA), which penalizes foreign companies for investing more than $20 million in Iran's oil and gas industry, has so far discouraged many companies from doing a large amount of business with the Islamic state. [Asia Times, 11/6/2005] Additionally, the Iran-China deal dramatically reduces the Bush administration's leverage over Iran, as its threat to bring Iran to the UN Security Council over its nuclear program is greatly weakened by the fact that China, as a permanent member, holds a veto at the council. [Washington Post, 11/17/2005]
          

January 7, 2005

       India announces that it has agreed to a $40 billion deal with Iran. Under the terms of the agreement, the National Iranian Oil Co (NIOC) will sell 5 million tons of liquefied natural gas (LNG) annually to India over a 25-year period with the possibility of increasing the quantity to 7.5 million tons. India's price will be computed at 0.065 of Brent crude average plus $1.2 with an upper ceiling of $31 per barrel. As part of the deal, India's ONGC Videsh Ltd (OVL) will participate in the development of Yadavaran, Iran's largest oil field. India's share in the oil field will be 20 percent, which translates into roughly 60,000 barrels per day of oil. Iran has retained a 30 percent stake while the Chinese state oil company Sinopec secured a 50 percent share in an agreement signed at the end of October (see October 29, 2004). India's deal with Iran will also provide India with 100 percent of the rights in the 300,000-barrel-per-day Jufeir oilfield. [Asia Times, 1/11/2005; World Peace Herald, 1/17/2005] The agreement could give new impetus to the long proposed Iran-Pakistan-India gas pipeline project (see 1993). The Tehran Times, which is known to represent the views of the Iranian government, comments, “The Iran-India agreement on LNG exports will pave the way for the implementation of the project to pipe Iranian gas to India via Pakistan and the dream of the peace pipeline could become a reality in the near future.” [Asia Times, 1/11/2005]
          

Late February 2005

       US ambassador to New Delhi David Mulford informs India's Oil Minister Mani Shankar Aiyar in a meeting that the Bush administration has reservations about Indian attempts to strike a deal with Iran on the long proposed $3-4 billion Iran-Pakistan-India gas-pipeline project (see 1993). According to the Indian Express, the meeting marks the first time the US has formally conveyed its concerns about the pipeline proposal. [Dawn, 3/11/2005; Agence France-Presse, 3/10/2005; Voice of America, 3/17/2005]
          

March 16, 2005

       Iranian Oil Minister Bijan Namdar Zanganeh signs a memorandum of understanding with his Indonesian counterpart Purnomo Yusgiantoro that Iran will build a $3 billion refinery in Indonesia. As part of the deal, Indonesia will receive 300,000 barrels per day of heavy crude and Tehran will get a 30 percent stake in PT Pertamina, Indonesia's state oil company. National Iranian Oil Company and Pertamina will lead the four-year project, which Iran hopes will provide security for Iran's market supply. [Bloomberg News, 3/18/2005; Iranian News Agency, 3/16/2005]
          

May 25, 2005

       The $4 billion US-backed Baku-Tbilisi-Ceyhan (BTC) pipeline officially opens. The pipeline begins in Baku, Azerbaijan and travels 1,762 km (1,000 miles) through Georgia to the Mediterranean port city of Ceyhan in Turkey. The pipeline has been under construction for ten years and was built by a consortium of oil companies including Amerada Hess, ConocoPhillips, Eni, Inpex, Itochu, Statoil, Total, SOCAR, TPAO, Unocal, and BP. The pipeline is expected to bring one million barrels of oil per day to the West. [Brookings Institution, 3/4/2003; BBC, 5/25/2005; BBC, 5/5/2005]
          

June 5-7, 2005

       A delegation from India visits Pakistan to discuss cooperation in the oil and gas sectors. The 11-person delegation is headed by Indian Minister for Petroleum and Natural Gas Mani Shankar Aiyar. The two countries agree to establish a working group to review the legal, technical, commercial, and financial parameters of the proposed Iran-India-Pakistan gas pipeline (see 1993 and January 27, 2003) that would transport natural gas 2,775 km from Iran to India via Pakistan. They plan to start the project by December 31, 2005. [Islamic Republic News Agency, 6/5/2005; The Tribune India, 6/5/2005] At a press conference on June 6, Aiyar is asked about US concerns expressed by Secretary of State Condoleezza Rice in March (see March 19, 2005) that the pipeline would strengthen Iran. Aiyar responds that construction of the pipeline is contigent only upon an agreement being made between India and Pakistan. [The Tribune India, 6/5/2005] India and Pakistan also discuss the Turkmenistan-Afghanistan-Pakistan (TAP) pipeline (see January 18, 2005), which they agree should extend to India. [The Tribune India, 6/5/2005; Associated Press, 6/5/2005] The delegation also explores the possibility of exporting Indian diesel to Pakistan. [Islamic Republic News Agency, 6/5/2005]
          

June 9, 2005

       Iran downplays the significance of the opening of the US-backed $4 billion dollar Baku-Tbilisi-Ceyhan (BTC) pipeline (see May 25, 2005) that will carry oil from the Caspian Sea to the Mediterranean port city of Ceyhan, Turkey. The project was supported by the US government, which believes the pipeline will weaken Iran's leverage over the distribution of oil. Mahmood Khagani, director for Caspian Sea Oil and Gas Affairs in Iran's petroleum ministry, says the project makes little economic sense. “Iran's route is the shortest, cheapest, and potentially the most lucrative,” he says. [Agence France-Press, 6/9/2005]
          

(June 12, 2005)

       India's petroleum Minister Mani Shankar says that Iran has agreed to research the possibility of extending the proposed 2,670 km Iran-Pakistan-India pipeline (see 1993) to China. [PakTribune, 6/13/2005]
          

September 6, 2005

       Deputy Secretary of State Robert Zoellick tells reporters that if China continues to pursue energy contracts with Iran it will find itself increasingly in conflict with the United States. He adds that it isn't clear whether the force behind China's dealmaking comes from new Chinese oil companies or some government “strategic plan.” He also asserts that China will not be able to guarantee its energy security through contracts with countries such as Iran “because you can't lock up energy resources” in the global marketplace. [Reuters, 9/6/2005]
People and organizations involved: Robert B. Zoellick
          

September 10, 2005

       During a news conference in Washington, US Secretary of State Condoleezza Rice urges China, Russia, and India to support US threats of imposing sanctions against Iran for its nuclear programs. Iran needs to get a “unified message,” she says. “I think that after the IAEA (International Atomic Energy Agency) report a couple of days ago, it is clear that Iran is not living up to its obligations, and so UN Security Council referral seems to be a reasonable option.” [US Department of State, 9/9/2005; BBC, 9/10/2005]
People and organizations involved: Condoleezza Rice
          

September 24, 2005

       The International Atomic Energy Agency's Board of Governors passes a resolution declaring Iran in non-compliance with its safeguard obligations under the Nuclear Non-Proliferation Treaty (NPT). The resolution calls on Iran to suspend all enrichment-related activity, cease construction on a heavy water research reactor, and provide agency inspectors access to research and development locations and documentation. The resolution also calls on Iran to “[p]romptly ... ratify and implement in full the Additional Protocol,” which would require Iran to allow short-notice inspections of Iran's nuclear facilities. [IAEA, 9/24/2005] Iran has signed but not ratified it. [Washington Post, 9/26/2005] If Iran fails to comply with this resolution, the board could decide at its next meeting in November to refer the matter to the UN Security Council. A referral to the Security Council would set the stage for the possible imposition of sanctions on Iran. Iran has repeatedly stated that it will not relinquish its right under the NPT to enrich uranium for peaceful purposes. The resolution, sponsored by Britain, France, and Germany, passes with 22 votes. Twelve countries abstain, including Russia, China, Pakistan, South Africa and Brazil, and only one—Venezuela—opposes the resolution. India, under strong pressure from the US (see September 10, 2005), backs the resolution, despite its close ties to Iran. The resolution marks the third time in two decades that an IAEA resolution has not been approved unanimously. [BBC, 9/25/2005; Associated Press, 9/25/2005; India Economic Times, 9/26/2005; Washington Post, 9/25/2005] Foreign Minister Manouchehr Mottaki calls the resolution “politically motivated, illegal, and illogical,” asserting that the “three European countries implemented a planned scenario already determined by the United States.” [India Economic Times, 9/26/2005]
          

September 28, 2005

       Iran's Supreme National Security Council spokesman, Ali Aghamohammadi, says that Iran has no intention of withdrawing from a multi-billion dollar deal to sell natural gas to India. There have been rumors that Iran, upset over India's support of an International Atomic Energy Agency (IAEA) resolution declaring Iran in breach of its Safeguard Agreements (see September 24, 2005), had informed India the deal was in jeopardy. “We have had good, deep relations with India in many fields and regional affairs and their behavior at the IAEA was strange and we didn't expect them to vote against Iran,” he says. Nonetheless, “We don't want to review our current relations with India and their vote against Iran doesn't affect the gas project.” [BBC, 9/28/2005]
          


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