Putin's Tehran-Moscow gas transit plan stirs controversy in Iran

As Moscow and Tehran seem determined to push ahead with plans for a gas pipeline linking their countries, critics within Iran argue against the project, warning that it could undercut Iran’s own gas exports.

Last week, Russian President Vladimir Putin announced that his country aims to export up to 55 billion cubic meters (bcm) of gas to Iran per year in the future.

Initial deliveries, expected to flow through an existing pipeline, are set to commence with volumes of up to 2 billion cubic meters per year.

The proposed pipeline by the two countries, is intended to deliver higher-volumes of Russian gas cross Azerbaijan to northwest Iran, with the potential of also using Turkmenistan as an alternative route to supply gas to northeast Iran.

Putin's announcement referred to a memorandum of understanding signed in June 2024 between Russia’s Gazprom and the National Iranian Gas Company (NIGC), outlining plans for energy cooperation between the two heavily sanctioned nations.

Following Russia's invasion of Ukraine in 2022, the United States and the European Union imposed extensive sanctions on Russia's natural gas sector, with critics arguing that any potential gas exports could involve Iran helping Russia circumvent these sanctions.

However, some vocal proponents of the deal inside Iran say that it could position the country as a regional energy transit hub, which would enhance its geopolitical leverage and influence in global energy markets.

The economic newspaper Jahan-e Sanat published an opposing viewpoint on the project in an article titled "The Bizarre Matter of Exporting Russian Gas," in which experts criticized the deal as one of the worst Tehran has made.

Several experts have also publicly questioned why a country with the world’s second-largest natural gas reserves would facilitate the export of a rival’s gas instead of maximizing its own production and export capacity, the newspaper said.

“Have Iran's political authorities conceded that Iran's gas will never be extracted from the seas and deserts … to decide to sell another country’s gas to India, or perhaps other countries? Does this deal and Iran's agreement … to sell the rival’s gas for a small profit make sense?,” the piece read.

The news outlet also accused Russia and its state-controlled energy giant, Gazprom, of repeatedly failing to fulfill investment commitments in Iran’s gas industry, using some projects instead as a means to permanently distance Iran from global gas export markets.

While Iran does possess significant natural gas reserves, years of Western sanctions, self-imposed isolation, and mismanagement have severely hindered its production capacity.

The lack of access to modern technology and foreign investments has led to a decline in output, which is falling by approximately 5% annually, leaving production insufficient to meet even domestic demand.

Yet, supporters of the gas pipeline have noted the project’s potential to generate a steady income for Iran, which they argue could bolster Tehran’s economy amidst sanctions.

Economic publication Tejarat News, however, highlighted Iran’s current dependence on Russian gas imports to address domestic winter shortages. The outlet described it as ironic that Iran, once viewed as a potential alternative gas supplier to Europe, is now forced to import gas from Russia to meet its own needs.

Challenges to implementation

The gas transit project faces several challenges including the need to build new pipelines or upgrade existing ones in Azerbaijan or Turkmenistan.

“There is currently a pipeline through the Republic of Azerbaijan which can very quickly carry the Russian gas to Iran, but the pipeline can transit just 2 bcm of gas per year. New pressure boosting stations and compressors are required to increase the pipeline's capacity. This can take a year or so. Even doing that can increase the transit capacity only to around 8 to 10 bcm per year,” Iran energy expert Dalga Khatinoglu told Iran International.

Other challenges the ambitious project may encounter include the need to build or upgrade north-south pipelines in Iran to transport Russian gas to India and other potential buyers in the south, as well as competition from other producers, such as Qatar, in South and Southeast Asian markets.

Western sanctions on both Iran and Russia present significant challenges to the implementation of their plan, as these restrictions limit access to international financing, advanced technology, and crucial partnerships for large-scale infrastructure projects.