SYRIA - A Syrian Role In Regional Petroleum/Petrochemicals Trade & Gas Pipelines.

A dialogue limited to Iraq between the US and Iran, announced on March 16, may lead to what Tehran seems to hope will eventually give it a leading role in regional energy integration. Now this is merely a hope and the chances of the hope becoming a reality will depend on Iran delivering on what the US wants of Tehran: first a national unity government in Iraq, second concrete steps to help stabilise Iraq, and third Iran providing the UN Security Council (UNSC) with verifiable guarantees that its nuclear development plan is totally for peaceful purposes.

Realisation of this hope depends on the credibility of a fatwa (religious decree) issued by Iran's Supreme Leader Ayatollah Ali Khamenei against the acquisition, development and use of nuclear weapons by Iran. If and when this satisfies the US and its Western allies, the following could become a reality.

The regional and inter-continental energy integration card may become a carrot from Iran - not only for the US and its European allies, but mainly for Israel. Power, oil and gas supply lines linking Iran to Syria and Lebanon, through Iraq, will boost the chances of peace between the Arabs and the Jewish state. If the proposed US-Iran dialogue over Iraq results in a stable national unity government in Baghdad, Washington might be receptive to such ideas from Tehran.

A stable and secure theocracy in Tehran would eventually encourage this regime to democratise in real terms, as highly-educated pragmatists within its conservative camp - such as the Larijani brothers - are more comfortable in a truly democratic Iran (see ood3-IraqUnity-Mar20-06 in this week's Diplomat Package). These pragmatists include former foreign minister and presidential candidate Dr Ali Akbar Velayati, who is the top foreign affairs adviser to Ayatollah Khamenei, and ex-President Ali Akbar Hashemi Rafsanjani who heads the Expediency Council (EC) - a potentially powerful institution with authority to check on the Presidency, the Majlis (parliament), the Council of Constitutional Guardians, the judiciary, etc.

The US sorely needed Iran's help in getting Iraq's factions to form a government of national unity and avoid sectarian warfare. They noted that the US had run into serious resistance at the UNSC from Russia to a draft presidential statement calling on Iran to renew its suspension of uranium enrichment activities. Talks are to continue this week.

The March 16 announcement that Iran was ready for talks on Iraq came from Ali Larijani, Iran's top nuclear negotiator and secretary of the Supreme National Security Council (SNSC). He said he was responding to a March 15 call for "dialogue" between Tehran and Washington from Abdul-Aziz al-Hakim, head of the Shi'ite Supreme Council for Islamic Revolution in Iraq (SCIRI) and a long-term ally of Iran.

The timing of Larijani's remarks fuelled speculation in Tehran that the Shi'ite theocracy had opted to try to avoid confrontation. The Financial Times on March 17 quoted a senior Iranian official as saying: "The important thing is how to get out of the crisis with the Security Council, especially with the recent radicalisation of the US position towards talking of 'regime change'".

The Bush administration has been careful in limiting the scope of the talks to Iraq's short-term prospects - a national unity government and end to the violence between Iraq's Shi'ite and Sunni communities. The talks, to be held in Baghdad between the US Ambassador Zalmay Khalilzad and his counterpart from Iran, may cover other matters - including the nuclear issue - if and when the first two US objectives have been achieved.

On taking office in August, Larijani had set up a team to study talks with the US. This is led by his brother Mohammad-Javad Larijani, a former deputy foreign minister who has advocated normalisation of relations with the US.

The Larijani brothers are the sons of the late Grand Ayatollah Amoli, who was among the leaders of the theocracy's conservative, pro-bazaar right-wing camp calling for the private sector to play a much bigger role in Iran's economy and the petroleum sector. Before Imam Khomeini died in 1989, he sent Amoli to Russia to advise then President Gorbachev that Communism was coming to an end and that Moscow should a adopt a more pragmatic approach towards the Muslim world, with emphasis on Iran.

The Larijani brothers - not very keen on hardline President Mahmoud Ahmadi-Nejad - are said to be behind proposals for entente with the US to be part of wide-ranging energy integration between Iran, Iraq, Syria and Lebanon, as well as energy and industrial links between Iran and the Asian powers. There are proposals to link the four Middle Eastern states by electric power lines and oil and gas pipelines, enabling Iran to export energy and petrochemicals to Europe through the Mediterranean.

Of course, the US will never back any such projects if they are opposed by Israel and its European allies. Iran's pragmatists mentioned above are all aware of this and of America's "regime change" agenda where Ba'thist Syria is concerned. The Ba'thist regime of Syria has been implicated with the murder of Lebanon's former Prime Minister Rafiq Hariri, and Tehran is fully aware of what this means.

At the closing session of a conference on Iran-China energy co-operation on Iran's island of Kish on Feb. 19, Dr. Velayati pointed to that fatwa of Khamenei. Apparently this ban on atomic weapons and other WMD applies to Iran and any other country in the Greater Middle East (GME). During the Q&A part of that session, Dr. Velayati told APS Energy Group President Pierre Shammas and about 200 other participants that Iran's aim was exactly like that of Egypt and other Arab states, for the GME to be free of WMD. This implied that Israel and other GME countries should get rid of their WMD.

Iran wants its energy supplies to link Asia's big powers to Europe of the future - mainly China, India and Pakistan - to Europe through Syria and Turkey. It wants electric power lines, as well as crude oil and natural gas pipelines, to run from Iran to Iraq, Syria, Turkey and Europe, with spur lines for power and natural gas to Lebanon from Syria already built. To the east, it wants similar lines to China to run through Pakistan and India.

In its proposals to link up with Syria, Turkey and Lebanon, Iran wants to tie a part of its future gas exports with the Arab Pipeline system which supplies Jordan with Egyptian gas and is being extended to Syria, Turkey and Europe. The link of the Arab Pipeline to Turkey through Syria is under construction and should be completed in 2007.

Iran is proposing to have petrochemicals export ventures built in Lebanon and Syria in partnership with local and international oil companies (IOCs). Lebanon and Syria, most likely under a changed regime, will eventually have a special status as associates to the European Union. As such, petrochemical exports to the EU could receive preferential treatment - on the assumption that the two states would have free trade agreements (FTAs) with the EU.

For its part, Tehran wants to become a member of the World Trade Organisation (WTO) as well as FTAs with Japan, the US and other markets. These would be among the rewards Tehran expects in return for a comprehensive deal with Washington.

That all the above is mere wishful thinking will depend on the outcome of Iranian-US talks in Baghdad. It is to be noted, however, that Tehran is fully aware of American plans for Lebanon and Syria. Iran wants to maintain its geo-political and economic influences in Lebanon and Syria as well as in Iraq (see ood3-IraqUnity-Mar20-06). For this to become possible Iran will have to play a key role in a US-sponsored peace process between Israel and each of Lebanon and Syria; and for this to become feasible, the Syrian regime must either change its behaviour or be replaced by a real democracy.

These are toll orders, indeed, but should not be impossible if both the US and Iran want them. It is interesting to note that, while Mohammad-Javad Larijani is heading the team for relations with the US, another like-minded technocrat from the conservative camp is said to have just become a fellow at Harvard for a year. The latter is a nephew of a Grand Ayatollah in Qom who is close to Grand Ayatollah Ali al-Sistani of Najaf (Iraq).

So out of Tehran there are two different messages to Washington, and both have major implications for the energy and industrial sectors of Syria and Lebanon as well as for other parts of the world: One from President Ahmadi-Nejad, deemed "the new Hitler" for calling the Holocaust a "myth" and pledging to "wipe Israel off the map" (see omt12SyriaExportsMar20-06); and the other from Mohammad-Javad Larijani like-minded pragmatists.

Ahmadi-Nejad belongs to the Islamic Revolutionary Guards Corps (IRGC), which through his administration has been trying to stage a coup to affect the entire theocracy. But since taking office last August and until now at least, Ahmadi-Nejad has not been able to do much other than just talk - a talk big, against the US, the other powers and Israel.

Damascus recently announced that it had signed a memorandum of understanding (MoU) with Tehran aimed at closer co-operation in oil, natural gas and petrochemicals. Under the MoU, an oil pipeline, which Damascus said was being planned to be built in co-operation with the Iraqi government, would run from Iran, through Iraq and on to Syria's Mediterranean coast.

The Syrian regime's fully owned daily newspaper al-Thawra on March 7 reported that "a Syrian-Iranian Joint Committee was also discussing plans to build a gas pipeline to run from Iran, across Iraq and on to Syria, "which could be linked to the Arab gas pipeline under construction" (for background on the Arab gas pipeline see gmt3EgyptExptJan16-06).

The following are extracts from al-Thawra's March 7 report: "The Syrian-Iranian Joint Committee was held with the attendance of representatives from the Syrian Petroleum [& Mineral Resoruces] Ministry to discuss agreements on improving work to build an oil pipeline in co-operation with the Iraqi government as Syria, Iran and Iraq would benefit from this project. The Committee discussed the possibility of building a strategic gas line across Iraq and Syria to link it to the Arab Gas Line which is under construction to transport the Egyptian gas through Syria and Jordan. The Committee also discussed...co-operation in the field of using the natural gas as fuels for vehicles in the future, and to establish [compressed natural] gas...stations (CNG), in addition to the training of cadres working in gas and oil fields and encouraging investments in the field of exploration".

Cairo and Ankara have proposed linking the flow of Egyptian gas in Turkey to the Nabucco project. This is a pipeline project proposed to carry natural gas from the Caspian region and from Iran to Austria and other parts of Central Europe. The French daily La Tribune on March 16 quoted the CEO of Gaz de France (GdF), Jean-Francois Cirelli, as saying the company was planning to invest US$1.8 bn (1.5 bn) in two gas pipeline projects linking Europe to Algeria by 2007 and to Iran by 2015. The latter is the Nabucco project.

Cirelli told La Tribune GdF will finance 12% of Medgaz - linking Spain and Algeria from 2007 - at a cost of 640m. GdF wants to make Algeria "its second supplier, equal to Russia" by 2010. Cirelli said: "We have obtained the agreement from Algerian authorities and we'll sign the contract in the coming days" (see gmt7AlgerGasExprtFeb14-05).

Cirelli said GdF would also invest in Nabucco in a "more ambitious" project to finance 30% of the 3,300 km pipeline at a cost of 4.6 bn. "We are candidates [for the project] and are ready to put money into it", Cirelli said. The Nabucco gas pipeline should allow delivery of up to 30 BCM/year (1.05 TCF/y) of gas to Europe.