Russia, Iran, Qatar discuss OPEC-style gas cartel

NEWSWEEK

Russia, Iran, Qatar discuss OPEC-style gas cartel

Natural gas giants Russia, Iran and Qatar make moves toward forming OPEC-style cartel

Mike Eckel Adam Schreck Constant Brand

AP -- Russia, Iran and Qatar took their first serious steps toward forming an OPEC-style cartel for natural gas on Tuesday, a prospect that has unnerved energy-importing nations in Europe and the United States.

The three countries together account for 60 percent of the world's gas reserves, and Russia and Iran have both been accused of using their hold on energy supplies to bully neighboring countries. The European Union, which is heavily dependent on Russian gas, criticized the proposal, saying "energy supplies have to be sold in a free market."

Russia, which most recently came into confrontation with the West over its five-day war with Georgia in August, has been accused of using its hold on energy supplies to exert influence on neighboring nations, particularly Ukraine. Its energy grip adds to its leverage in disputes over other issues, too, such as the United States' missile defense plans.

For its part, Iran, in its standoff with world powers over its nuclear program, has threatened to choke off oil shipments through the Persian Gulf if it is attacked.

A gas cartel to determine supply and influence prices could extend both countries' reach in energy and politics, particularly if oil prices bounce back to the highs seen earlier this year — prompting politicians, businesses and consumers to look toward cleaner burning natural gas and other alternative fuels.

The gathering in Tehran, which included the chief excutive of Russia's state-controlled energy company Gazprom and the oil ministers of the other two nations, appeared to be the most significant step toward the formation of such a group since Iran's supreme leader, Ayatollah Ali Khamenei, first raised the idea in January 2007.

"Big decisions were made," said Iranian Oil Minister Gholam Hossein Nozari. The three countries will "seriously pursue the formation of an organization of gas-exporting countries," he added.

Two more meetings, in Qatar's capital and in Moscow, are needed to reach a final deal, said his Qatari counterpart, Abdulla Bin Hamad al-Attiya, according to the Iranian Oil Ministry's Web site. No timeframe was given.

"We are consolidating the largest gas reserves in the world, the general strategic interests and, what is very important, the high potential for cooperation on three-party projects," Miller said in a statement from Gazprom. What he called the "big gas troika" would meet three or four times a year.

In a separate statement on the Iranian Oil Ministry Web site, Miller was quoted as saying that the group would "review the market and supply and demand" and try to act in both the "interest of all gas-exporting countries as well as consumers."

The prospect of a gas cartel has raised concern in the United States and around the 27-nation European Union, which depends on Russia for nearly half of its natural gas imports. Moscow, which controls many of the European pipelines delivering gas from Russia and Central Asia, already has a tight hold on supplies.

The European Union's executive office, the European Commission, said Tuesday that it would oppose the creation of a cartel.

"The European Commission feels that energy supplies have to be sold in a free market," said EU spokesman Ferran Tarradellas Espuny.

Experts say a natural gas cartel that resembles the Organization of Petroleum Exporting Countries group would not have the same influence on prices as OPEC has on oil.

But it could still have benefits for gas-producing countries. Such a body would allow its members to potentially wield more influence on world prices, particularly in Europe and Asia, than they can individually.

"To try to maneuver the supply ... makes perfect sense," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com. "Just because it doesn't have the clout of oil, it's still in their best interest to deliver natural gas where it needs to go and manage supply in order to help manage the price."

Plans for a gas cartel are also anticipating a future in which global crude supplies will become even more scarce and expensive.

Liquefied natural gas — a rapidly growing segment of the market — could be traded as a commodity similar to oil at some point in the future, and the move by Russia, Iran and Qatar for closer cooperation appears to anticipate that, said Konstantin Batunin, an analyst with Moscow's Alfa Bank.

"My take is that it is just a commitment to create something in the future, it's just a first step," he said.