DEFENSE & FOREIGN AFFAIRS ANALYSIS

Tuesday, April 3, 2007


New Iran-Armenia Gas Pipeline Raises Strategic Concerns

Analysis. By GIS Staff.

The Iranian clerical Government has attempted to maneuver around anticipated international sanctions by the opening, by Presidents Mahmud Ahmadi-Nejad of Iran and Robert Kocharian of Armenia, on March 19, 2007, of a new gas pipeline to Western markets via Armenia.

The 101km pipeline runs from Tabriz to the Armenian border and for another 41km in Armenia from the border town of Meghri to Kajaran. The next planned section, to be built by 2008-2009, should run for another 100km toward central Armenia, where it would link up with the existing distribution network, controlled by Russia’s Gazprom.

Iranian sources have said that they believed that the new pipeline was “sanction-proof” because the US Administration and Congress were heavily influenced by the California-based Armenian political lobby, which has been pumping funds into the election campaigns of both the Republican Party and the Democratic Party (and particularly supporting the interests of the new House of Representatives Speaker, Nancy Pelosi, of California).

The Iranian sources indicated that they felt the US political system would do nothing to antagonize the powerful American-Armenian voting bloc by forcing Armenia to comply with international sanctions against Iran because of the Iranian nuclear weapons programs.

Apart from the potential impact on Russian gas market domination, the pipeline also changes the regional balance by giving Iran a strengthened alliance with Armenia which could pressure Azerbaijan at a time when Azerbaijan has been courted by the US to accept major assets on its soil to counter possible Iranian ballistic missile and nuclear weapons capabilities.

In essence, the Iran-Armenia gas pipeline is an attempt to break both the economic and strategic mold in the region, and it is a move which does not enhance either Russia’s domination of the energy marketplace nor its influence over Armenia and Iran.

This may, then, be the first sign of a potential break in Russian support for Armenia and Iran, while at the same time, over the past year and despite earlier differences, Russia, Ukraine, and Azerbaijan are beginning to develop a common vision of the strategic shape of the region.

Although the Iran-Armenia gas pipeline is relatively small in terms of volume and market potential, it is seen in Moscow as, in some senses, a betrayal of the special support which Moscow has given to both Yerevan and Tehran (even though the Russia-Iran relationship certainly transcends this problem).

Significantly, on the other hand, it has come to accept the inevitability of the supply of Caspian region gas through the Black Sea, involving particularly Ukraine and Azerbaijan. But the new thrust — the “new Northern Passage” linking the Caspian with Europe via Ukraine — also gives renewed impetus to Russia to dominate its Caucasus holdings and the Russian-allied zones of northern Georgia, Abkhazia and South Ossetia, but particularly Abkhazia, with its long coastline on the Black Sea.

Moreover, the headlong commitment by Iran and Turkey toward supporting the independence of the Serbian region of Kosovo and Metohija in the face of Russian support for Serbia, quite apart from fairly overt Turkish (and now covert Iranian) support through Georgian territory for the anti-Russian terrorist movements in Chechnya and Dagestan does little to warm Moscow-Tehran relations.

And while Moscow and Washington may differ on support for Kosovo independence, they now, possibly for the first time, share concerns (for different reasons) over Iran. But Moscow is also aware that to some extent the US political machinery of both parties is held hostage to funding and lobbying by American Armenians.

Russia’s main instrument in the gas trade, Gazprom, had imposed on the Armenian Government — much to Tehran’s disappointment — a reduction in the Iran-Armenia pipeline’s diameter from the originally designed 1,420mm (the size of major gas export pipelines) to 700mm.

This measure precludes any transit of Iranian gas to third countries through this pipeline, initially confining Iran’s gas exports to the Armenian market. And Pres. Kocharian agreed in 2006 with Russian Pres. Vladimir Putin to hand the new pipeline’s section on Armenian territory over to Gazprom via the ArmRosGaz company, in which Gazprom and its subsidiary, Itera, own a combined 68 percent interest.

Significantly, much of the gas may not come from Iranian fields, but from Turkmenistan, from which Iran already imports gas to supply markets in northern Iran.

Armenia presently uses some 1.5-billion cubic meters of gas annually. Iran is to supply some 400 million cubic meters annually in the first stage of the project and up to 2.3-billion cubic meters in the second stage. It is likely that Iran is working to take up a position to ultimately push gas into the European market via the proposed 3,300km Nabucco pipeline is expected to begin in 2008 and is planned to be finished in 2011.

Nabucco Pipeline would be connected near Erzurum with the Tabriz-Erzurum pipeline, and with the South Caucasus Pipeline, connecting Nabucco Pipeline with the planned Trans-Caspian Gas Pipeline.

Once completed, it would allow transportation of natural gas from producers in the Middle East and Caspian region such as Iran, Azerbaijan, and Turkmenistan to Western Europe and to the countries along its path. The western end of the pipeline is proposed to be Baumgarten an der March, a major natural gas hub in Austria.

Azerbaijan had been the intended, and logical, conduit for gas moving to Europe from Turkmenistan, and Azerbaijan was also intending to take up a major supply position into the Nabucco pipeline. However, under US pressure, Azerbaijan opted for a separate US-controlled pipeline project — much to the concern of the European Union (and particularly German Chancellor Angela Merkel) — opening up the Nabucco capacity to Iran.

As a result, Azerbaijan and the US are now left in the position of perhaps retrieving the Azerbaijan option on Nabucco, or allowing Iran and Russia to take up the capacity, thus circumventing the long-term potential to isolate the Iranian clerical Government.

Russia on March 27, 2007, had warned the United States that putting to much pressure on Iran could turn the conflict over the country’s nuclear plans into “a clash of civilizations”. The Russian warning came three days after the UN Security Council unanimously adopted new sanctions.

The sanctions were less drastic than the US had sought. A statement signed by Pres. Vladimir Putin noted: “The international community should not risk escalating the situation around Iran and should wait for the US to make a good-faith effort to normalize relations with Tehran.”

Azerbaijan Air Force Confirmed as Recipient of MiG-29s as Economy, Defense Spending Grow

From GIS Stations, Baku and Kiev.

It has now been confirmed that the Air Force and Air Defense Force of Azerbaijan has acquired possibly two squadrons of MiG-29 fighter aircraft from the Ukraine Air Force. It is believed that the purchased comprised 24 MiG-29 (or MiG-29S) fighters, mostly single-seat variants with some MiG-29UB two-seat trainer/combat variants.

The Viyskovo–povitryani syly (Air Force of Ukraine) had some 190 MiG-29s of various models in its inventory, including the later-delivered “S” variant.

The move confirmed a statement made In March 2007 by Lt.-Gen. Rayil Rzayev, Commander-in-Chief of the Air Forces and the Aircraft Defense Forces, that new fighters had been acquired, and that airfield upgrades were also to begin soon.

At that time, GIS/Defense & Foreign Affairs reported: “Lt.-Gen. Rayil Rzayev, the Commander-in-Chief of the Azerbaijan Air Force and Aircraft Defense Force, reported in March 2006 that Azerbaijan had acquired a range of new combat aircraft to supplement the legacy force which the country retained after independence from the USSR.

Lt.-Gen. Rzayev also said that the Azerbaijan Air Force was also developing new air base structures “to be opened soon”. The new Azerbaijani combat aircraft were obtained from Russia, Ukraine, and Belarus, although specifics of the deal were not yet known.

It was, however, known that Azerbaijan had sought to acquire some MiG-29 combat aircraft to match the 18 recently sold to the Armenian Air Force (with other, Russian Air Force, MiG-29s available inside Armenia to assist in Armenian national objectives in the event of a regional conflict).”

So it is probable that several other aircraft, in addition to those from Ukraine, were acquired as well from Belarus and Russia. The Azerbaijan Air Force MiG-29 acquisition placed the country in a more balanced situation vis-à-vis Armenia, which had recently acquired 18 MiG-29s.

It is believed that the Ukraine deal was cemented during the meeting in late December 2006 betweem Pres. Ilham Aliyev of Azerbaijan and Prime Minister Victor Yanukovich of Ukraine during the latter’s visit to Baku to discuss a new oil pipeline project.

It is unlikely, moreover, that the export of the MiG-29s from Ukraine could have been undertaken without the specific approval of the Russian Government, which, despite its earlier sale of MiG-290s to Armenia, is reluctant to see the strategic balance in the Caucasus disturbed, particularly in light of Iranian moves to strengthen ties with Armenia as a means of sidestepping a possible international embargo against Iran because of Iranian nuclear weapons production.

But the Ukraine-Azerbaijan deal emphasizes the “new strategic matrix” in the region in which new networks of oil and gas pipelines are urgently being considered to sidestep bottlenecks which had, in the past, caused concerns not only to Ukraine and Georgia, but also to such regional players as Greece and Azerbaijan, as well as Russia.

Azerbaijan is in a strong position to afford to bolster its defenses — which could be said to be still insufficient — in the face of implicit Armenian and Iranian pressures. The World Bank had confirmed by early 2007 that the Azerbaijan GDP, in 2005, had reached $12.6-billion, and had a growth rate of 26.2 percent.

This was, by world standards, a staggering growth rate, firmly transforming the strategic reality of the region. The national defense budget for 2006 reflected the surging prosperity of the country, and was set at $650-million, and topped $1-billion for 2007.

And then, in late March 2007, Azerbaijan Energy Minister Natiq Aliyev said that Azerbaijan planned to double its oil output by 2010. Azerbaijan’s crude production, which stood at 32.3-million tons in 2006, would reach 65-million tons in 2010.

Minister Aliyev said that most of the oil would be produced at the Azeri-Chiraq-Guneshli offshore fields.

Another offshore field, the Shah Deniz gas project, would account for the bulk of the nation's natural gas output, which was expected to reach 30-billion cubic meters in 2010. Crude exports began in 2006 via the $4-billion Baku-Tbilisi-Ceyhan pipeline that allows the West to tap oil from the Caspian Sea fields.

The US Government strongly supported the 1,750km pipeline as part of a strategy to access sources of crude outside from the Caucausus and Central Asia. Gas supplies from Shah Deniz were also soon expected to start flowing through a newly constructed parallel gas pipeline from Baku via Georgia to Erzerum in eastern Turkey. Minister Aliyev said Azerbaijan would eventually control marketing and sales of gas from the Shah Deniz.

It seems likely, then, that the Azerbaijan economy will continue to grow at a record pace, given the fact that the economy grew at 26.2 percent in 2005, before the start of deliveries of oil through the Baku-Tbilisi-Ceyhan pipeline, and before the ramping up of new oil and gas production.