Beware the Russian-Iranian Natural Gas Cartel

By: By Ariel Cohen, Ph.D, Journal of Energy Security (from icecap.us)
By: By Ariel Cohen, Ph.D, Journal of Energy Security (from icecap.us)


Steadily and stealthily, a natural gas cartel has emerged over the last seven years. On October 21 in Tehran, the Gas Exporting Countries Forum (GECF) agreed to form a cartel. Russia, Iran, and Qatar announced that they intend to form a yet-unnamed group to “coordinate gas policy.” The Group of Three (the “troika") will meet quarterly to coordinate and exercise control over close to two-thirds of the world�s gas reserves and a quarter of all gas production. To compare, the Organization of Petroleum Exporting Countries (OPEC) controls more than three-quarters of the world�s oil reserves but only 40% of global production.

The United States should create a global coalition of energy consumers to oppose oil and gas cartels and to bring market principles to the natural gas industry. The US Congress should also liberalize regulations to allow energy exploration in the Arctic, in the Rocky Mountains, and along the Pacific and Atlantic continental shelves, where natural gas is abundant, and expand cooperative gas ties with Canada.

In the tight global energy market, Russia clearly appreciates the economic and political bargaining power that its vast energy resources provide, as it is attempting to control energy exports from the New Independent States, such as Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan. Russia also has strengthened its ties to Iran, Venezuela, Libya, and other major energy exporters. Recently, Moscow also launched a charm offensive to OPEC.

Thus, Russia is playing a complex and sophisticated game, one that is likely to maximize its advantage as the leading gas producer with the largest reserves on the planet as well as the largest oil exporter.

The United States should open its vast natural gas resources on-and-offshore to further exploration and production and encourage its neighbors in Canada, Mexico, and the Caribbean to do the same.

Finally, the next administration must develop a clear global policy to limit cartelization of gas markets. Specifically, the US should work with the European Union member states, Japan, China, India, and other countries to prevent the cartelization of the gas sector. This can be accomplished through cooperation through the International Energy Agency, which China and India should be invited to join, and by applying anti-trust legislation worldwide against state-owned companies that are actively involved in cartel-like behavior in energy markets.

The US should also work closely with those within GECF who oppose Russian-Iranian domination. These include Norway as an observer. The National Security Council and the National Economic Council should take the lead in developing this policy. Unless buyer solidarity is translated into action, energy consumers and economic growth will suffer worldwide.


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