DAR AL ISLAM - IRAN: THE CURRENT WEAPON OF CHOICE FOR IRAN = OIL

Walker's World: Iran's oil weapon
By MARTIN WALKER
UPI Editor Emeritus

WASHINGTON, June 13 (UPI) -- Now that U.S. President George W. Bush at the G8 summit has mended at least some of his fences with the Europeans over global warming and with Russia over installing anti-missile systems in Europe, it is time to return to the thorny problem of Iran and its nuclear ambitions. That means returning to the matter of sanctions.

The plain fact is that sanctions against Iran are not working well. This week Iran reached agreement with five Asian countries to build refineries with a total capacity of more than 1.1 million barrels a day, along with separate oil storage facilities.

Seyed Kazem Vaziri Hamaneh, Iran's petroleum minister, announced at the two-day Asia oil and gas conference in Kuala Lumpur, Malaysia, that the refineries would be built in China, Singapore, Indonesia, Malaysia and Syria. He added that a further deal had been agreed with India's Essar Group to build a new refinery in Iran itself, for what Indian sources said would be worth $2 billion for a refinery producing 300,000 barrels of gasoline a day. Iran is currently spending close to $5 billion a year importing gasoline, because it lacks the refining capacity to turn oil into petrol.

"Those are some of the cooperation opportunities which I hope will be supported by Asian countries," the minister told more than 1,200 delegates to the conference. "China and India are expected to be two major potential consumers in the coming 20 years."

"We are supposed to be partners in the refineries and also try to provide the crude oil for those refineries. The aim is to bring Asian countries together and to provide crude oil for mutual benefit," Hamaneh added.

Further discussions were under way with China, he went on, on filling China's new strategic oil reserve bunkers. These are designed to give China a cushion against interruption of its tanker supply route through the Indian Ocean and the Malacca straits, where China is nervous of political complications that could allow the Indian or U.S. navies to constrict its energy supplies.
China has already built a 33 million barrel storage tank at Zhenhai and is about to start filling another bunker system at Aoshan, to bring it closer to its target of having 100 million barrels in reserve by the end of next year. China currently consumes about 6.5 million barrels a day, so the 100 million barrel reserve would last little more than two weeks at the usual consumption rate. But with rationing in a state of emergency, it could keep essential services and the military supplied for a much longer period.

There is no doubting the strengthening energy ties between Iran and China, whose imports of Iranian crude have risen by 14 percent in the first four months of this year from last year's figures, at a time when China is deliberately trying to curb its appetite for imported oil. The growing cooperation in oil follows the dramatic $70 billion deal that China's giant Sinopec Group made with Iran to buy 250 million tons of liquefied natural gas over 30 years from Iran and develop the giant Yadavaran field.

In this context, it is not easy to see China approving severe sanctions against Iran at the U.N. Security Council. And given India's equal hunger for imported oil and gas, and the current discussions between Indian and Iranian officials over a gas pipeline from Iran through Pakistan, it is not easy to see India throwing its weight behind sanctions, despite the close strategic ties that have been forged between New Delhi and Washington.

...

The main problem, the energy executives broadly agreed, was international politics. Nine out of 10 of those surveyed said they expected the global geopolitical situation to remain tense in the next five years, with instability in the Middle East, Russia and Iran seen as the greatest risks to energy supplies and prices. More than two-thirds saw no prospect of a resolution of the nuclear crisis with Iran being reached in the next five years.

This is the world that oil built, an imperfect place where the morality of human rights and concerns about states like Iran getting nuclear weapons carry only modest weight against the hard reality of energy needs. Faced with such an unpromising political environment for diplomacy to talk Iran out of going nuclear, the worry is that a frustrated Bush administration might conclude that in a world of ruthless realpolitik over Iran's oil, maybe some ruthless power politics with air power is the only way to proceed. And who knows what the oil price would reach then.



Pertinent Links:

1) Walker's World: Iran's oil weapon