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The rationale behind Iran’s swap of Turkmen gas to Iraq

A Turkmen boy in traditional dress waits for then President Gurbanguly Berdymukhamedov at an official launch ceremony for the East-West gas trunk pipeline in Shatlyk on May 31, 2010. (Photo by AFP)

A gas swap agreement was signed between Iran and Turkmenistan on Wednesday to supply 10 billion cubic meters a year of Turkmen gas to Iraq through Iran. The strategic agreement is a win for all three countries, diversifying Turkmenistan's export destinations, supplying gas to the north of Iran, and preventing electricity shortages in Iraq.

The contract was signed in a ceremony attended by Iran’s Ambassador to Turkmenistan Ali Mojtaba Rozbahani, and head of state concern Turkmengaz Maksat Babayev.

In the joint press statement published on the occasion, it was declared that "Turkmenistan and the Islamic Republic of Iran have been developing mutually beneficial relations in the gas industry for years based on the principles of friendship, good neighborliness, mutual respect and equal participation".

A separate gas swap arrangement is already working, delivering Turkmen gas to Azerbaijan through Iran since 2022. 

The Turkmen government has yet to provide any details on prices, timing or logistical arrangements, but has announced that it will seek to expand the new gas pipeline to Iran.

According to the Associated Press, Iranian companies are going to build a new 125-kilometer (77-mile) pipeline to Iran to increase Turkmenistan's gas transmission capacity. Turkmenistan’s foreign ministry announced that Ashgabat plans to increase its gas exports to Iran to 40 billion cubic meters annually.

The gas swap contract was signed by Iran’s Ambassador to Turkmenistan Ali Mojtaba Rozbahani (L) and state concern Turkmengaz head Maksat Babayev in Ashgabat, July 3, 2024. 

Turkmenistan relies heavily on the export of its huge natural gas reserves, and China is its main customer. Ashgabat is working on building a pipeline to supply gas to Afghanistan, Pakistan and India in order to diversity its markets.

Also, the entry into force of the new contract will provide a solution to the electricity crisis in Iraq. Iraq's power plants rely heavily on gas imported from Iran, which covers a third of the country's needs, but the supply is prone to frequent cutoffs.

In previous statements, Iraq’s Electricity Minister Ziad Ali Fazil confirmed that his country had finalized the agreement to import 20 million cubic meters of Turkmen gas per day, but the only challenge was the lack of transmission lines. 

Therefore, Iraq negotiated with the Iranian side to use its networks to transfer gas from Turkmenistan whenever a disruption in gas supplied by Iran occurred. The gas swap deal signed on Wednesday covers part of Iraq’s needs and underlines Iran’s commitment to guarantee sustainable supplies to the country.  

The agreement is also an important development in Iran’s foray into the infrastructure building business, where the construction of 125 km pipeline and three compressor stations in Turkmenistan is carried out by Iranian companies with the aim of expanding the Central Asian country's gas supply to the Islamic Republic.

This has been officially confirmed by the Ministry of Foreign Affairs of Turkmenistan. The recent talks held in Ashgabat from July 1 to 3 also provided the basis for discussions on several aspects of further cooperation in the gas industry between Iran and Turkmenistan.

The European Union and Turkey closely monitored the negotiations and underlined their international importance. The pipeline project is of vital importance for the energy security of both countries and shows their willingness to develop long-term strategic relations in the energy sector.

The initiative aims to strengthen the gas transportation infrastructure and ensure export of more natural gas to Iran. It also allows Turkmenistan to increase its natural gas exports and embolden its position in the global energy market.

As for Iran, it will optimize domestic gas consumption and consolidate the country’s exports, which is very important considering the increasing domestic demand for energy sources.

Turkmenistan plans to increase the volume of gas supplied to Iran from two main routes to 40 billion cubic meters per year.

 The first route is the main Dauletabad–Sarakhs–Khangiran gas pipeline with a current capacity of 12.5 billion cubic meters per year. The pipeline stretches from the Dauletabad gas field in Turkmenistan to Khangiran in Iran, where it is connected with the Iran Gas Trunkline system.

It is significant as it allows the diversification of Turkmenistan's gas export routes, doubling the nation's export of gas to Iran.

For Iran, the pipeline allows the country to deal with gas shortages in its northern regions, and to improve its reputation as a trade partner in the Caspian region.

The second route is the Korpeje–Kordkuy pipeline with a current capacity of 8 billion cubic meters per year. In addition, transmission continues through the Artiq-Lotfabad cross-border pipeline launched in the 1990s to supply gas to border towns in northern Iran. The pipeline has a capacity of one billion cubic meters of gas per year and plays an important role in ensuring the energy security of border regions.

The signing of the swap deal for 10 billion cubic meters of per year of Turkmen gas to Iraq shows Iran's effort to strengthen its position in the regional energy market and its role in gas transit between neighboring countries. It allows the regional countries to optimize their supply and use of natural gas, according to their geographic and economic features.

Taking geographical and economic factors into account, Iran has always sought to set up a gas swap system with its neighbors. The country’s main gas fields are located in the south, with its densely-populated north facing energy disruptions in the winter due to harsh weather conditions and remoteness from the main resource areas. As a result, Iran should look for alternative ways to supply energy to its northern regions.

Iran has already swap agreements in place with Turkmenistan and Azerbaijan. In November 2021, Iran and Azerbaijan signed a swap deal for 1.5-2 billion cubic meters of gas per year from Turkmenistan. In July 2022, they agreed to raise the volume to 3-4 billion cubic meters per year. Iran also has the ability to import 40 to 50 million cubic meters of gas a day from Turkmenistan to guarantee energy security in the country and strengthen economic relations with its neighbors.

Negotiations on the transit of gas from Turkmenistan to Turkey through Iran are also ongoing. Iran and Turkey are connected by a main gas pipeline with a capacity of 14 billion cubic meters per year, but Turkey imports only 9.6 billion cubic meters per year and there is room for additional 4.4 billion cubic meters per year to transmit through the network.

Negotiations on the potential transit of Turkmen gas through Iran to Turkey indicate a growing interest in creating new energy routes that can meet Turkey's growing demand for energy resources.

Overall, the development of gas transportation infrastructure between Turkmenistan and Iran along with having new swap deals signed shows the strategic importance of these projects for the region.

In the midst of international sanctions and geopolitical instability, these measures are carried out with the aim of ensuring energy security and sustainable development of both countries.

Considering the geopolitical importance of the region, these projects can play an important role in strengthening economic and political relations between countries. They also diversify natural gas supplies and reduce dependence on traditional routes and suppliers, which is essential to ensure long-term stability in the region.

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