Robert Amsterdam (one of our favorite blogger analysts) recently offered interesting insight into the geopolitical importance of Iran in terms of EU energy security vis-à-vis Gazprom’s dominant position, and why Iran can be considered as a Gazprom monopoly “killer”.  As the article notes, this may have impacted Russia’s actions during the major powers’ recent meeting in Shanghai to discuss Iran’s nuclear program:

“…one of the issues of enormous concern to Moscow… is the proposal to boost the EU-Iran energy trade. Analysts argue that Moscow has an interest in making sure these bellicose tensions between Iran and the West last as long as possible to stall progress on Iranian gas (hence their moves in China today)…

…Iran is perfectly positioned to deliver natural gas directly to one of the world’s most attractive markets, and it is possible to imagine that deepening this economic cooperation could result in more stable political relations … despite the fact that this globalization-makes-peace theory has been stretched to its limits by other examples…”

As Ryan R. Miller further points out a strategy of the U.S. working with its European allies to leave the door open to greater EU-Iranian energy trade as a potential reward for Iranian good behavior could kill two birds with one stone :

“…Gazprom, Russia’s state-controlled gas monopoly, supplies roughly two-thirds of Central Europe’s natural gas. This constrains competition and fosters concerns in the region about Russian political and economic influence. Iran, sitting atop the world’s second-largest gas reserves, is Gazprom’s natural competitor. The Iranian government’s pursuit of the atom and support of nasty groups in the Middle East suppresses this competition. Still, Iran hopes to supply the European market with natural gas in the near future. And European officials have for some time desired to import Iranian gas. This coalescence of interests should be leveraged in support of the West’s negotiating position with Tehran. To be blunt, European gas markets should be offered as a carrot.

Under the right circumstances, Iranian gas could one day reach Central Europe via the Nabucco pipeline – a planned gas conduit sponsored by Brussels and Washington that avoids Russia. The Nabucco consortium is having difficulty pinning down sufficient gas supplies, and the Iranians have expressed an interest in supplying the pipeline. Liquefied natural gas (LNG) is the other option for getting Iran’s hydrocarbons to European consumers. Poland or Hungary, for instance, could access Iranian LNG via proposed terminals in the Baltic and the Adriatic….

…Long-term, of course, Iran will probably become a net-exporter of gas regardless of U.S. sanctions. Energy markets are tight, and demand for natural gas is growing, suggesting it to be only a matter of time before the country’s gas deposits make it onto international markets. In practice, unilateral sanctions seem to encourage Chinese energy companies to fill the gap. Though the “China option” is not ideal from Iran’s standpoint (Chinese firms lack the sophisticated technology of Western oil and gas majors, and Iranian gas interests have their eye on European customers), Iran will have little choice but to look eastward if cut off from Europe’s lucrative markets.

From a U.S. perspective, there’s a strong case to be made that it’s better to let Iran’s gas flow to America’s friends than to its rivals. U.S. leverage over China is limited, and it’s maybe wiser to let the Mullahs sell to those whom Washington can sweet talk when necessary. It also makes sense to help U.S. allies in Central Europe diversify their energy imports. Indeed, if Gazprom is allowed to pursue a policy of “divide-and-conquer” with individual EU customers, should not the Central Europeans be able to balance two producers (Iran and Russia) off one another? For these reasons, the United States should consider dropping its opposition to Western gas deals with Iran as part of a broader package of incentives to entice the Iranians to cooperate….”