Energy Scholar:

Global economy to benefit from Iran, Russia, Azerbaijan integration

News ID: 4146823 -
TEHRAN, Nov. 20 (MNA) – Energy scholar at the Middle East Institute, Rauf Mammadov believe Global economy will benefit from economic integration of Iran, Russia and Azerbaijan in the important region located on crossroads of China’s One Road, One Belt Policy.

Tripartite meeting of the Iran, Russia and the Republic of Azerbaijan’s leaders was held in Tehran on Nov 2. Iranian President Rouhani hosting his Russian and Azerbaijani counterparts described extensive interaction with the world, especially neighboring countries, as strategic policy of Tehran. He said, “Such arrangements should be taken advantage of by a win-win approach".

He added, "From the point of view of the Islamic Republic of Iran, tripartite interactions of Iran, Russia and Azerbaijan, beyond bilateral relations and in the form of a tripartite format, can not only develop and strengthen existing capacities between the three countries in various political, security, cultural and economic fields, but it can also create new opportunities in the face of challenges in the region by creating convergence".

As Azerbaijan, Iran and Russia have common borders together, it is in the interest of the three countries to exchange on several political, security, economic and energy issues.

These three countries are major oil producers and in fact they are competitors because they want to sell their own oil and want to attract their own investors, but it does not mean that they cannot cooperate. These three countries at the same time can cooperate with each other.

Boosting cooperation between these countries can create economic interdependency between them and this is not only economically to their benefits but also will boost the stability and the security of the region.

To shed more light on the issue, Payman Yazdani from Mehr News agency reached out to the resident scholar on energy policy at the Middle East Institute, Rauf Mammadov.

Referring to the significance of the economic cooperation between the countries, Mammadov said, “Consistent and successful economic cooperation within the region will subsequently contribute to the creation of integrated economic zone located on the crossroads of East-West and North South trade routes and in close proximity to one of the biggest energy importer markets of the world—Europe. Global economy will only benefit from economic integration of such important region with unique potential.”

Touching upon the factors which add to the importance of the three counties cooperation and the reasons that make their convergence essential, he added, “All three countries are tied with historic, cultural and socio-political connections and, of course, with common geography. There are almost 230 million people living in this geography, which stretches from Arctic to Indian Ocean. All three countries are rich with natural resources and they are geographically located in close proximity to one of the biggest energy markets in the world—Europe. They are also located on crossroads of ancient Silk Road, which is currently being reinvigorated by China’s One Road, One Belt Policy.”

 Mammadov went on to say, “Another commonality is dependence of economies of these countries on oil and gas revenues. Current price environment has left a formidable impact on budget revenues of these neighboring states coupled with sanctions applied by United States and Europe to Russia and Iran. Therefore, it is only natural to see recent convergence of interests. All three countries are also strongly interested in diversifying their energy export outlets. Russia is still the biggest supplier of gas to Europe, although Europe is, slowly but consistently, diversifying its energy imports. Russia wants to avoid the situation where it will be dependent on China and Europe as its main gas importers. Hence, an access to Persian Gulf via Azerbaijan and Iran can theoretically increase Russia’s ability to leverage its energy export diversification. Azerbaijan is currently in the process of building its first gas pipeline to supply gas to the EU. Throughput capacity of the future pipeline-Southern Gas Corridor could be easily increased, which equips Azerbaijan and its partners with technical capability to transit Central Asian, Iranian or any other exporters’ gas volumes to Europe. Of course, it is only technical capability and there are geopolitical and commercial elements to be factored in before such decisions are made. Nevertheless, there is a strong potential for cooperation in this field.  Besides being a major gas producer, Iran is also one of the major gas consumers in the world. Russia, which is interested in finding new markets for its gas, might also evaluate Iran as a potential buyer of its gas and Azerbaijan could play an important link in this potential infrastructure value chain.”

Answering a question on the effect of the three countries cooperation on the stability of the oil market, Mammadov said, “As far as question of “stability in oil market” concerns, one must factor in geopolitical and macro-economic situation, simple supply-demand balance and other factors to elaborate on presumed stability of the oil prices (I am assuming this is what you are referring to when you say “stability in oil market”) in short, medium or long term trajectory. Although, cooperation in energy sector has been one of the main areas of discussions during the visits of presidents, it is too early to calculate the impact of recent intensification of the relations on global oil market. Nevertheless, writ large, all three countries have repeatedly declared their commitment to OPEC deal on volume cuts, which is deemed as the main factor to keep oil prices from plummeting. Russia, in fact, is the lead protagonist of the initiative, whereas Iran’s decision to adhere to the deal has played crucial role in achieving the agreement itself.  To this point, even partial compliance to OPEC deal amid with other contributing factors, has led to the price increase unseen for last two years. Continuation of the current geopolitical and macro-economic situation, as well as, to what extent shale oil will be resilient to the price increase will eventually impact the price stability.”

Commenting on the possible US and some western countries’ pressures on Azerbaijan, Iran and Russia to avoid regional cooperation and the reasons behind the West’s worries, Mammadov concluded, “All three countries have been cooperating in energy field for decades. Azerbaijan has long-standing oil and gas ties with both Russia and Iran. Both Russian and Iranian companies are involved in major energy production projects in Azerbaijan (Azeri-Chirag-Guneshli, Shah-deniz), Baku-Supsa oil pipeline connects Azerbaijan with Russia. Moreover, Azerbaijan has been swapping gas volumes with Iran for many years to supply its citizens in Nakhchivan, which has been under blockade for two decades due to occupation of Azerbaijani territories by Armenia. There has not been any precedent of interference or pressure by western countries to energy cooperation among these countries. Western community is interested in cultivation of economic relations among nations, which eventually contribute to globalization of world economy. All three countries are located on crossroads of East-West and North-South transit corridor and therefore, it must be in best interest of world community to see economic and trade relations among these countries to flourish.”

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