Iran's 'Power' Play: Selling Energy to Desperate States

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.

Armenia, which borders Iran in the north, has been an Iranian ally since their costly war with Iranian foe Azerbaijan. After two major energy crises in 1992 and 1995, Yerevan concluded there was a need for greater energy security.

According to Emanuele Ottolenghi of the Weekly Standard:

Armenia lends itself well to Iranian circumvention of sanctions.

In many cases this involves Iranian gas and oil. In 2006, Armenia and Iran opened a major pipeline that supplies Armenia with gas. In December 2011, a delegation of Iranian diplomats headed by Iranian President Mahmoud Ahmadinejad traveled to Armenia and moved forward on plans to construct an Armenian-Iranian railway and to increase Iranian oil exports to Armenia.

Afghanistan, another state bordering Iran, saw a private Iranian company win a 2010 contract (to be completed in 2013-2014) to build a damn in Herat. The project was to cost about $40 million and around one-quarter of the laborers working on the dam would come directly from Iran. Herat has been a hotbed for Iranian influence within Afghanistan, leaving many Afghans suspicious regarding the true motives of the dam’s construction.

For Iran, Lebanon is known as the home for Tehran’s closest Shia Arab ally, Hizballah. Yet Iran has started to look beyond its influence over the Shia and to look to the Lebanese state and other sectarian groups. Lebanon is another electricity starved state, with generators attached to most every building, and rolling blackouts starting at 5:00 p.m. or 6:00 p.m. every night.

In light of this, Iran offered to build yet another dam project, though this undertaking would be in the Tannourine, a Christian town located in the heart of a region dominated by Christians. In early May, Iranian Vice President Mohammad Reza Rahimi took an official trip to Lebanon where he pushed for an agreement that would transfer up to 200 megawatts (through Syria and Iran’s electricity network) from Iran’s surplus of 6,000 megawatts. Concluding a deal of this nature would be another way to link Lebanon to Iran and Syria. The agreement also coincides with another project which has Tehran seeking to build Lebanon two power plants for the bargain price of $900 million.

In the Western Hemisphere, Iran announced in 2008 that they would finance and build a $230 million dam in Nicaragua. By 2010 Bolivian President Evo Morales announced that Iran would work with Bolivia to build a nuclear power plant in his country. Iran also upped Bolivia’s credit line in order to help La Paz build more dams.

With every power line erected, dam built, and oil pipeline valve turned, Tehran’s global influence grows and sanctions against it are subverted.