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Iran’s ‘Power’ Play: Selling Energy to Desperate States

The regime dodges sanctions by striking deals with the electricity-starved.

by
Phillip Smyth

Bio

June 4, 2012 - 12:00 am
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Reuters reported the following in February:

New financial sanctions imposed by the United States and European Union are making it difficult for Iran to pay for staple food and other imports, causing hardship for its 74 million people with just weeks to go before an election.

General James Jones (ret.), former national security adviser to President Obama, told CBS news later that month that sanctions were making Iran “squirm,” and that “[due to] skyrocketing inflation, their access to capital is diminished.”

Nevertheless, Iran is not now disintegrating or begging for mercy. How are the mullahs propping up their rule while still exerting influence abroad? Showing real pragmatism and demonstrating the so-called Persian “Bazaar Culture,” Iran has looked regionally and globally for states with exploitable energy problems. This tactic is backed by Iran’s extensive oil and gas reserves, as well as its standing as the third largest builder of dams on Earth.

From 2008 to 2010, Pakistan was shutting down power for three to six hours a day. In Faisalabad alone, 300,000 jobs were lost due to electricity problems. According to journalist Naseem Sheikh: “The same is happening to other big industrial cities like Gujranwala, Multan, Lahore, and Rawalpindi.” The Washington Post even printed the headline “Pakistan’s power crisis may eclipse terrorist threat.” Suffering from a rapidly expanding population and lacking domestic supplies of gas and oil (over 60 percent of Pakistan’s electricity output relies on gas or oil), Pakistan desperately needs energy.

Seeing an exploitable angle, Tehran first opened negotiations with Pakistan in 1993 to develop and construct a pipeline. As Pakistan’s energy security situation grew more dire, its interest in the pipeline increased.

On a number of occasions, Washington has attempted to dissuade Pakistan from accepting the Iranian deal. However, Iran correctly assessed Islamabad’s predicament and eventually the Pakistanis signed onto the pipeline. Pakistani President Asif Zardari noted in January 2012:

The economies of the West are in trouble and not in a position to help us. … Our priority is the needs of our population of nearly 200 million people.

As talk of sanctions and increased international awareness of Iran’s nuclear program made headlines, Iran decided to pitch India (in 2007), China (in 2008), and Bangladesh (in 2010) to join with Pakistan in creating a larger pipeline that could satisfy their energy needs.

All of these countries are energy-starved, have rather friendly relations with Iran (Bangladesh and China have both been supportive of Iran’s nuclear ambitions), have rapidly expanding economies, and have growing populations.

By 2006, India’s energy demands had tripled. While New Delhi has been generally accepting of UN sanctions against Iran, it did not accept U.S. sanctions targeting Iranian energy. Coupled with its astounding economic growth, Bangladesh’s energy situation was so poor that in 2010 the tropical country had to shut down a number of natural gas stations and order citizens to keep air conditioners off for five hours every day.

Due to heavy American pressure, India reduced Iranian gas imports. Bangladesh and Pakistan also signed onto a gas pipeline project from Turkmenistan providing significantly cheaper gas than Iran could. Nevertheless, Iran has continued lobbying in the subcontinent.

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