Subscribe to Print Edition | Sun., September 07, 2008 Elul 7, 5768 | | Israel Time: 01:11 (EST+7) web haaretz.com   Back to Homepage Haaretz Toolbar Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate Easy Start Travel Week's End Anglo File

Energetic intervention By Emanuele Ottolenghi Tags: Europe, Iran The story broke in late July that the German company SPG (Steiner-Prematechnik-Gastec) had signed a 100-million euro deal with Iran to build three plants for compressed natural gas (CNG) production. There are three lessons to be learned from this tale: First, European technology remains indispensable for Iran, if it is to be able to exploit its energy reserves and become a regional superpower. Second, if economic sanctions against Iran were to include exports, investments and joint ventures in the energy field, it could have severe repercussions for Tehran. Finally, tougher sanctions against Iran are the only non-military way to pressure Tehran to renounce its nuclear ambitions. Today, Iran is feeling some heat due to a squeeze on its banking sector, a politically generated credit crunch and other restrictions against key regime officials. Political uncertainty and the unhealthy business environment have further discouraged foreign investment - with some oil giants having second thoughts about their Iran ventures. But UN-backed sanctions have crucially failed to target Iran's lucrative energy sector, and with Europe keen to reduce its dependence on Russian oil and gas, big energy interests may ignore the political side effects of their involvement in Iran. Advertisement It is almost a cliche that Europe needs Iran's energy supplies. Among the top 10 countries importing Iranian oil are Italy, France and Greece. And its largely untapped natural gas reserves are a potential bonanza for European energy companies. But Iran needs Europe, too, being almost completely dependent on its technology and skills for the development of those same gas and oil riches. In the field of gas extraction, and export in particular, Iran would forever sit on an inaccessible treasure, were it not for European know-how - an expertise that Russia and China cannot currently match or replace. Hence, it is in the energy field, particularly natural gas, where European sanctions can make a difference, and squeeze Iran's regime where it hurts most. The SPG deal illustrates this very clearly. Iran possesses the second-largest known reserves of natural gas in the world (after Russia) - 26.4 trillion cubic meters, according to 2006 official estimates. Lack of suitably advanced extraction technology and the challenges posed by natural gas exports to faraway countries have so far meant that 62 percent of its reserves are not being exploited. Plans to develop three liquefaction plants are way behind schedule. Of those fields that are being exploited, 65 percent produce gas that goes mostly to domestic consumption, while 18 percent is re-injected into oil fields to maximize extraction and the remaining 17 percent is lost. Given the above, the potential for development and profit is immense. At the same time, Iran, an emerging economy whose population has nearly doubled in three decades, is still importing refined petroleum. Currently, it produces about 10.5 million gallons of gasoline a day but consumes 18.5 million - a whopping 43 percent of its consumption is imported. Iran rightly fears sanctions in this sector - and Western powers are seriously pondering the option - so to shield itself from pressure, it has adopted a three-part strategy: to expand refining capacity by building new refineries and upgrading existing ones; to guarantee imports of refined fuels from friendly countries like Venezuela and Indonesia, even by subsidizing new refineries there; and to introduce measures aimed at reducing consumption - including gasoline rationing, price controls and conversion of all of the country's cars from gasoline and diesel to CNG - the kind of fuel SPG is going to help produce. According to a study by Gal Luft, director of the Institute for the Analysis of Global Security, car conversion involves four phases: Convert existing cars to CNG within five years - 1.2 million cars per year, starting with 600,000 government vehicles; withdraw older cars (approximately 1.2 million) by 2010; produce new CNG-run cars (Iran is the leading car manufacturer in the Middle East); and make the country's 10,000 existing gas stations CNG-enabled within five years. By 2015, the plan is for most cars in Iran to run on natural gas - clean, environmentally friendly and locally produced. This would offer incredible long-term benefits. Iran's dependency on imported fuel would be a thing of the past, a top political and economic priority for the regime. Additionally, such a move would free almost half a million barrels of oil a day for export - at current prices, that would mean more than $17 billion a year of additional revenue. And it could not happen without SPG's planned plants. Iran's energy sector is like a dog biting its tail. Lack of modernization makes increase of production impossible; delays in both the construction of new refineries and the upgrading of existing ones, as well as the lack of development and exploitation of gas fields, all keep Iran dependent on imports. As long as Iran has to do it alone and lacks the technology, it will be vulnerable to external pressure - and as long as the best technology for these ventures comes from European companies like SPG, Europe is in a position to squeeze Tehran by denying it access to those lucrative deals that will ultimately make Iran achieve its goals and become the regional superpower it aspires to be. What are we waiting for? Dr. Emanuele Ottolenghi is executive director of the Transatlantic Institute, in Brussels. Bookmark to del.icio.us   But you cannot hide Court rules Michigan resident helped liquidate Polish Jews during Holocaust. Junk TV Airing of first Palestinian soap opera was cancelled because topics were 'too liberal'.

Read & React Pfeffer: Jewish Agency has signed its own death certificate Responses: 74 Nasrallah: We still seek fallen guerillas' bodies Responses: 137 Top IDF officer: Israel not prepared for next war Responses: 135 Chabad envoy to Alaska: Palin staunch friend of Jews Responses: 156 Report: UN to demand Israel pay Lebanon $1 billion in reparations Responses: 95 Abbas: Jerusalem, right of return are inalienable Palestinian rights Responses: 58 More Headlines 20:15 Abbas: Jerusalem, right of return are inalienable Palestinian rights 22:13 Cheney to Peres: Russia supplies weapons to terrorists 15:45 Israeli official denies U.S. supervisors will take part in Israel-Syria peace talks 20:06 Report: UN to demand Israel pay Lebanon $1 billion in reparations 13:19 Iran rejects French warning over possible Israeli strike 10:42 Gaddafi meets Rice during secretary of state's historic Libya trip 08:56 Court rules Michigan resident helped liquidate Polish Jews during Holocaust 13:09 Israeli hacker arrested in Canada for $2 million online fraud 19:18 Why was airing of 1st Palestinian soap opera cancelled? 18:48 65 kilos of drugs seized in 'record raid' in north 03:06 Jewish World / The language of anti-Semitism 11:26 Egypt uncovers three smuggling tunnels on border with Gaza 16:56 VIDEO / Hamas' Meshal agrees to pass Noam Shalit's letter to Gilad 23:17 Palestinians clash with IDF as Israel limits entry for Ramadan Previous Editions Select Day 05 sep 04 sep 03 sep 02 sep 01 sep 31 aug 29 aug 28 aug 27 aug 26 aug 25 aug 24 aug

Special Offers Advertisement Fattal Hotel Chain Perfectly located hotels on best resorts of Israel. JMG your online solution Jewish Singles Personal Ads Find the love of your life on JDate.com MBA in Israel in English APPLY NOW! Limited spaces available Israel's Premier Real Estate Website www. israel-property.com Hebrew Summer courses From $39.95 ISRAEL BONDS Build Israel Israel bonds - a multi-purpose way to celebrate Israel's 60th Eldan Rent a Car Israel's leading car rental company offers you a 20% discount on all online reservations Junkyard Junk a car - get free towing nationwide and a tax-deductible receipt

Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | Underground | Site rules |

Real Estate in Israel | Travel to Israel with Haaretz | Hotels Israel | Restaurants Israel | Tourist attractions Israel | Shops Israel

birthright Israel | Search engine marketing

Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.

© Copyright  Haaretz. All rights reserved