Russia has proposed a gas producing cartel idea from Iran along the lines of the oil producing cartel so natural has exporters can come under a banner to control output to keep prices at higher levels. The idea was first mooted by Iranian President Mahmoud Ahmadinejad during his presentation at the 2006 Shnghai Cooperation Organisation (SCO) summit and at that time Moscow had discounted the idea.
In January this year, hosting the Russian Security Council Secretary Igor Ivanov, Iran proposed a gas co-operation like Organisation of Petroleum Exporting Countries (OPEC) that could be floated by them bilaterally since they controlled over 50% of known natural gas reserves. Russian President Vladimir Putin not only welcomed this idea but also volunteered to raise it with Saudi Arabia and Qatar when he visits them earlier in February.
However, in expressing support for his idea, Putin averred that the natural gas
exporting nations "are not going to set up a cartel" but will "co-ordinate"
their "activities" to ensure that there are no conditionality attached to their
export affecting reliability of supply.
Over a year ago, Russia had disagreements with Ukraine and last December had
disagreed with Belarus over transit and price agreements. The European Union has
been demanding that Moscow ratify the Energy Charter so they would get free
access to Russian natural gas and oil reserves. Naturally, Russia has refused
the demand but in return is asking for unfettered access to retail energy market
in Europe. Newer EU members from the erstwhile Soviet block, particularly
Poland, have been calling for an "energy NATO" that could stop Moscow from
dominating conversations on energy.
From a Russian point of view, a gas OPEC is financially alluring and politically convenient. It can control prices, resist political and diplomatic pressure, influence such a cartel to hit back with supply embargo, etc. From a Western or Indian point this is not such a good idea as it would definitely increase energy prices and therefore the cost of goods sold. However, unlike the West, India is not badly placed with either Russia or Iran and can therefore be able to negotiate a good deal or at least rely on uninterrupted supply. Some suggest that India can benefit from such a cartel but that is thinking ideologically and not monetarily. Russia and Iran see energy as a revenue generator more than a political tool-the latter is more of a fringe benefit. Hence, it is unlikely they will cut any sweeter deals for India than they would the West. But they may probably make the conversations lot easier.
In a sign of increasing interaction between Tehran and Moscow, Ahmadinejad had invited Russia to participate in the Iran-Pakistan-India pipeline and Putin seems interested to field state-owned monopoly Gazprom. He said that "Gazprom is willing to provide financial and technological resources" for the pipeline as the "project is financially sound and perfectly feasible." One reason for Tehran involving Russia apart from investment and technological reasons may be to deflect Washington pressure to scrap the project.
India too has been keen to involve China with a weaker argument based on a their
agreement to cooperate on energy projects. But analysts project that this is a plan to deflect Washington pressure on scrapping the deal.