Iran-Europe Dialogue on Central Asia and Caucasia (CA&A)

1. Iran-Europe Dialogue on Central Asia and Caucasia (CA&A) Abbas Maleki Roundtable on “Iran and European Union Cooperation in Caspian Sea, Central Asia, and Caucasus Institute for Caspian Studies March 11, 2007

2. Sources of Instability -Radical approaches to Islam -The lack of sustainable economic development -Energy and its Route -Effort to change the lifestyle of the peoples in the region -Corruption -Policies of dominated powers in the region -Ethnic violence -Drug Trafficking

3. Radical approaches to Islam • Different interpretation of Islam in the CA&C is one of instability sources. Specifically, the extreme perceptions of Islamic culture as different groups like Hizbuttahrir are proposing. • A rigid, radical and unpopular version of Islam which is very hard for the people to obey it.

4. Lack of sustainable development Total population of the CA&C is 73 millions: -68% of 8 million in Azerbaijan, under the poverty line -35% 15 Kazakhstan -51% 5 Kirgizstan -GDP/Capita: • -Tajikistan $180 • -Kirgizstan 270 • -Uzbekistan 360 • -Armenia 520 • -Azerbaijan 600 • -Georgia 630 • -Turkmenistan 750 • -Kazakhstan 1260

5. Energy export is not very high • Armenia 0.3 US billion Dollars • Georgia 0.3 • Kyrgyzstan 0.5 • Tajikistan 0.8 • Azerbaijan 1.8 • Turkmenistan 2.7 • Uzbekistan 3.0 • Kazakhstan 9.1 Compare with Saudi $135 and Iran $55 US billion

6. Orchestrated efforts by West to change the lifestyle of the peoples in CA&C • Activities of rulers to weakening traditions, customs • Neglected NGOs • Example: Kazakhstan advertisement in IHT, Nov. 12, 2003 title: "Kz is the outpost of struggle against fundamentalism". Kz is the only country in the region in which Islamic opposition does not really exist. Religion has never played an important role in Kz, while Muslim organizations have been influential in neighboring Uz and Td…..This means that the Kazakhs are catching on to Western lifestyle and values. • The question is who is living with Kazakh lifestyle and values in future?

7. Corruption There is no good governance in the region -Most of the Governments are totalitarian regimes -Most of the rulers are the former Secretary General of local Communist Parties. -Corruption Index shows -Azerbaijan is the 4th most corrupted country -Russia is the 7th -Kazakhstan is the 20th

8. Energy in CA&C • Energy is one of the resources that could support the development • But the geopolitics of pipelines is the key factor for the phenomenon of new dependency to other countries • Russia is trying to dominate all of energy infrastructure in Eurasia

9. Energy Routes at a Glance

10. Middle East Sub Region

11. Asian Identity

13. ECO (Economic Cooperation Organization)

14. Iran and CA&C • Iran has shown a rational, modest and economic oriented model in the CA&C. • Iran’s activities for -Establishing ceasefire in Nagorno Karabakh in 1994. -Success to end the Tajik civil war is among them. -Iran was eager to see more cooperation among CA&C, proposed them the membership of ECO, establishment of CASCO in 1992. -An observer in Shanghai Cooperation Organization -Road and Rail networks for landlocked countries

15. Iran:A look at the energy sector • Iran has very ambitious plans in oil, gas and petrochemicals; • Though the strategy on oil production capacity increase remains a key debate topic, major investments in this sector are inevitable; • The legal framework remains an issue, though slow changes are taking shape; • Iran’s focus in the next decade will be on gas and also gas-intensive industries; • Next important event: Restructuring of NIOC and consequent corporatization of the energy sector companies. Investments needed in Iran’s energy sector 2005-2020

16. 1.1 Omsk Samara Pavlodar 2.1 1 Atyrau 2 1.2 4 Odessa 2.2 Makhachkala Novorossiysk Actual Shymkent 3 Supsa 2.3 5 Baku Chardzhou Ceyhan Neka 3 – Aktau-Baku-Tbilisi-Ceyhan 4 – Kazakhstan-China 5 – Kazakhstan-Turkmenistan-Iran 1 – Atyrau-Samara 1.1 – BPS 1.2 – Druzhba-Adria 2 – CPC 2.1 – Odessa-Brody-Gdansk 2.2 – Constanta-Trieste 2.3 – Burgas-Alexandroupolis KTI

17. Kazakhstan-Turkmenistan-Iran Pipeline • Study in process in accordance with the Agreement on Joint Studies concluded between KazMunayGas, Total, Japan National Oil Corporation, and Inpex • A Long-Term Export Option for Delivering Kazakh Oil to Asian Markets via Persian Gulf

18. Caspian Oil Terminals and Neka

19. Neka-Ray Old and New Pipeline (370 000 b/d)

20. Iran’s Free Zones in the North

21. North-South Corridor

22. Great Central Asia Routes

23. 20% 13.6% 11%

24. Iran-Europe Energy Dialogue • The gas pipeline from CA to Iran then Europe is a key project in trilateral cooperation among three regions. • The study of the two routes from Iran to Europe via Turkey and Ukraine had been done.

25. Energy • Iran is energy giant, one of its feet on the Persian Gulf, another on the Caspian, with geostrategic advantages. • Europe is surrounded by the sea of gas, most important of them: Russia, Iran and Qatar. • For Europe, the importance of CA&C is dramatically increased, because member ship of each central or Eastern Europe countries to EU means a new demand for Energy.

26. Energy (2) • -Iran can decrease isolation of central Asia dramatically. • Iran now imports gas from Turkmenistan to consume in the Northern part of Iran, as imports oil from Kazakhstan. • Iran is end-user of the produced oil and gas in the CA&C

27. Potential New Supplies to Europe with Diversification of Supply • Caspian Sea region: Azerbaijan, Turkmenistan, Kazakhstan, Uzbekistan • Middle East region: Iran, Iraq • North Africa region: Egypt, Libya

28. Iran-Europe Energy Dialogue Restraints • Freidman Muller has discussed, in the past with political motivation, Europe preferred to follow the Soviet gas pipeline instead of the cheap and costless Iranian gas. Now again, because of US extraterritorial rules like 1995 ILSA, the oil and gas companies can not invest more than 20 million dollars in Iran's energy industries.

29. World NG Consumption

30. EU NATURAL GAS DEMAND & SUPPLY OUTLOOK 2003 - 2025 Source: EUROGAS Report 2004 6

31. Proved natural gas reserves at end 2006

32. 80% 20% Import Norway Import Russia Indigenous Production Import Algeria Imports Import Others Indigenous Production Sources of Natural Gas Supply - European Union 2030 Indigenous Imports 80% Production 20 % 2002 Indigenous Net Imports 47% Production 53 % 2003 Indigenous Net Imports 51% Production 49 % 14% 14% 18% 19% 49% 53% 12% 12% 3% 6% Source: EU-forecast, EU Energy, Issue 86, July 2nd, 2004 Source: Eurogas

33. Forecast of Gas Supply – OECD Europe Source: „Security of Gas Supply in Open Markets - LNG and power at a turning point“, Edition 2004 (OECD/IEA)

34. Nabucco New gas supply route to Europe from Turkey to Austria via Bulgaria, Romania and Hungary

35. Project Partners • OMV • OMV Gas GmbH, Austria • MOL • MOL Natural Gas Transmission Ltd., Hungary • Transgaz • S.N.T.G.N. Transgaz S.A., Romania • Bulgargaz • Bulgargaz EAD, Bulgaria • BOTAS • Botas Petroleum Pipeline Corporation, Turkey

36. OGG MOL TG BG Botas NN 1 Nabucco Nabucco International International FINCO Company 2 Nabucco Nabucco Nabucco Nabucco Nabucco Austria Hungary Romania Bulgaria Turkey Nabucco corporate structure

37. Missing link between giant gas sources (in bcm) and potential markets 4,000 47,570 1,770 33,530 4,520

38. Supply Sources for Nabucco Azerbaidschan 10-14 bcm Iran 10-20 bcm Egypt Iraq 8-10 bcm

39. Nabucco Gas Pipeline Strategic Goals of Project • Opening a new gas supply corridor for Europe from Middle East and Caspian regions • Raise transit profiles of participating project countries • Contribution to security of supply for partner countries and for Europe as a whole • Strengthening the turntable position of Austrian pipeline grid and the Hub Baumgarten within the European network

40. Feasibility Study Phase - Findings Technical Study • Routing corridor defined • Border crossings fixed • Pipeline Diameter: 56“ • Distance: 3,300 km • Investment: 4.6 bill. € Project is technically feasible

41. Project Phases Feasibility Study Develop- ment Constr. 1st step 2nd step Operating & Marketing

42. US military around Iran

43. Final thoughts... • Central Asia and Caucasus are neighbors of Europe and Iran • Europe is surrounded by sea of gas, Iran is one of them • Divergence is important in energy supply • Instability in CA&C has impacts to the both sides • Interpretation of Islam is a key factor in these areas. • Iran’s path to the free world is Europe via North, during tight situation.