The story: The Iranian government has signed a 20B USD accord with four local companies to forge ahead with a key project at the world’s largest gas field. The aim is to enhance the pumping pressure to enable greater extraction from the offshore South Pars field, which is shared with Qatar.

The accord has raised eyebrows since enhancing pressure in the gas field is a key component of a 2022 memorandum of understanding (MOU) signed with Russia’s Gazprom.

The coverage: The Pars Oil and Gas Company (POGC), a subsidiary of the National Iranian Oil Company (NIOC), signed the agreement with local firms on Mar. 10.

The leading Mapna Group is among the Iranian contractors. So is the Khatam Al-Anbiya Construction Headquarters, an influential conglomerate run by the Islamic Revolutionary Guard Corps (IRGC).

The project involves the installation of 28 offshore platforms in the Gulf, half of which will be used to increase pressure in South Pars. Of note, the platforms will reportedly be domestically built.

Speaking at the contract-signing ceremony, Petroleum Minister Javad Owji described the effort to enhance pressure in South Pars as “the country’s most important project.”

Once complete, the initiative will enable Iran to extract additional gas and 2B barrels of gas condensate—generating 900B USD in revenue, Owji charged.

“A drop in pressure means less production,” the minister underscored, adding that unless pressure is boosted amid high extraction, “It will show its effect in four to five years.”

Pro-government media have praised “one of the biggest contracts in the history” of the Islamic Republic. But the accord has also ruffled feathers because increasing pressure in the South Pars field is part of a multi-billion dollar MOU signed with Russia’s Gazprom in 2022.

Pro-reform journalist Maryam Shokrani on Mar. 11 noted that while Iran is missing out on foreign investment, neighboring Qatar is signing lucrative deals with energy giants to develop its portion of the shared gas field.

The Reformist newspaper Shargh lamented that developing South Pars is highly dependent on Russia coming through and delivering on the Gazprom MOU.

Shargh also chided the conservative Ebrahim Raisi administration for blaming the previous government of moderate Hassan Rouhani (2013-21) for the slow development of the gas field.

The context/analysis: Iran has the second-largest proven gas reserves in the world. However, it regularly faces deficits during winter given runaway consumption and subpar investment in infrastructure. The national grid remains underdeveloped due to western sanctions and mismanagement.

Supplying 75% of national demand, pressure in South Pars needs to be boosted to sustain rising extraction. Owji on Mar. 10 asserted that daily production from the shared field had reached a record high of 707M cubic meters,

While Qatar has signed major deals with leading firms including Eni, Exxon and Total to develop its section of the world’s largest gas field, Iran mainly relies on local contractors such as Khatam Al-Anbiya Construction Headquarters.

In what has been characterized as a shift, Gazprom and NIOC signed a major 40B MOU in July 2022. Iranian state media quickly hailed the move, particularly as it came amid rising western pressure on Russia over its Feb. 2022 invasion of Ukraine.

The MOU tasked Gazprom with developing the Kish and North Pars gas fields as well as six oil fields.

The MOU also envisaged a reported 15B USD project to increase pressure in the South Pars gas field.

Conservatives in Iran who oppose relations with the west routinely extol the benefits of enhancing relations with Russia.

Tehran-Moscow ties, especially in the defense realm, have significantly strengthened following the Russian invasion of Ukraine.

However, citing past historical instances of enmity and alleged treachery, many in Iran remain skeptical of Russia and its intentions.

Despite the growing military ties, which have attracted additional western pressure on Iran, Tehran has yet to reap the purported rewards.

Iran has supplied Russia with drones that have been used in Ukraine. There are also speculations that Tehran may have begun supplying Moscow with ballistic missiles, though both Iranian and Ukrainian officials have denied such reports.

Observers charge that Iran likely hopes to rejuvenate its aging air force with Russian Sukhoi (Su-35) fighter jets in return for its arms deliveries, though none have arrived.

However, there are indications of a possible arrival of Russian warplanes. In Sept. 2023, Iran reportedly received a batch of Russian-made trainer jets commonly used to accustom pilots to Su-35s.

The future: Long ideologically in favor of improved ties with non-western powers such as China and Russia, the conservative camp in Iran now dominates all branches of power. As there are no prospects for a reversal in the ongoing decline in relations with the west, Tehran is looking to transform its relationship with Moscow.

Despite the leap in bilateral ties since 2022, it is unclear whether Gazprom has the means to turn the 40B USD MOU into an actionable accord. Yet, the Islamic Republic is not likely to re-evaluate its relations with Russia in the event of a failure in the energy field.

Apart from the ideological inclinations of the ruling political establishment in Tehran, the absence of alliance options means that Iran is not in a position to risk alienating Russia.

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