Turkish-Iranian Energy Cooperation and Conflict: The Regional Politics

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Middle east Policy, Vol. XXiii, No. 2, suMMer 2016
© 2016, The Author Middle East Policy © 2016, Middle East Policy Council
Turkish-iranian EnErgy CoopEraTion and
ConfliCT: ThE rEgional poliTiCs
H. Akin Unver
Dr. Unver is an assistant professor of International Relations at Kadir Has
University in Istanbul.
The outcome of the March-April
2015 nuclear negotiations be-
tween Iran and the P5+1 (China,
United Kingdom, France, Russia,
United States, plus Germany) increased
economic and trade optimism towards
easing of sanctions on Iran. This optimism
had a strong energy dimension in Europe,
as the EU has long been scrambling to nd
alternatives to its dependence on Russian
gas.1 While individual EU members have
been looking after their national energy
interests, a common EU energy policy has
not been forthcoming.2 For its part, Tur-
key has long been supportive of pipeline
projects that would strengthen its bid to
emerge as the region’s energy-transit hub
and prioritized this as a main foreign-
policy goal.3
In exporting Iran’s gas to Europe,
LNG transit is the most immediate option.
However, given the increasingly violent
Saudi-Iranian rivalry in Yemen, LNG tran-
sit through Aden will likely be problematic
in the short term.4 Also, in order to render
the Iran deal politically meaningful, with
the prospect of opening up Iran to world
markets more sustainably, construction
of an Iran-Europe pipeline seems more
strategically sound. Among possible Iran-
origin pipelines was the proposed “Persian
Pipeline,” which would connect Iran’s
South Pars gas eld with European mar-
kets through Turkey. In Iran’s westbound
pipeline options, Turkey is difcult to
overlook, with an already existing natural-
gas pipeline infrastructure and another ma-
jor project — the Trans-Anatolian Pipeline
(TANAP) — already underway as a future
connector.5
Both Turkey and Iran see themselves
as critical energy hubs — Iran exporting
oil and gas to the eastern markets of Paki-
stan, India and China, and Turkey sending
Middle Eastern and Central Asian gas to
Europe. Iran has an important advantage:
as a producer and potential large-volume
exporter, it is less vulnerable to politi-
cal pressures from large-volume import-
ers; Turkey has to balance the political
pressures of buyers. Nonetheless, Iran’s
eastern export options fall short in terms of
infrastructure nancing options, long-term
pipeline security and pricing transpar-
ency. Thus Tehran has been looking with
more favor towards European options.6
This means that Turkey will grow increas-
ingly relevant in the post-sanctions period
in planning for the export of Iran’s gas.
However, there are signicant political and
strategic disagreements between Ankara
and Tehran that need to be smoothed out
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before any agreement can be reached on
exporting and transporting gas from Iran’s
South Pars eld.
ECONOMIC DYNAMICS
Turkish-Iranian rivalry and coop-
eration have been fundamental structural
dynamics of the Middle East since Shah
Ismail I proclaimed the Safavid Dynasty
in 1501 and united all Persia as a Shi-
ite empire in 1509. Since then, the main
ideological poles in the Middle East have
been the Shiite Safavid Empire and the
Sunni Ottoman Empire, ghting direct
and proxy wars to expand their respective
Islamic ideologies. Despite these conicts,
however, Ottomans and Safavids contin-
ued to trade, mainly through Armenian and
Arab merchants who oscillated between
the Hamadan-Antioch and the Baghdad-
Tyre-Aleppo routes along the western end
of the Silk Route.7 Both empires learned
to ght and trade simultaneously, without
war necessarily restricting the ow of
merchandise.
It was only after the Treaties of Er-
zurum in 1823 and 1847 that the Ottomans
and Persians (the Qajar dynasty after 1789)
nally agreed to recognize each other as
autonomous parts of the world ummah and
enter a period of relative stability. Despite
this, religious-ideological differences
prevented both empires from rising above
mutual mistrust.8 Not until the 1930s were
the two able to expand and deepen their
cooperation, largely due to the similar sec-
ular-modernization ideologies of Turkey’s
Mustafa Kemal Ataturk and Iran’s Shah
Reza Pahlavi. Momentum built through the
marginalization of sectarian and historical
differences, and through secularism, led to
the unprecedented Treaty of Friendship in
1926, a denitive border treaty in 1932 and
a nonaggression pact in 1937.
Perhaps the sharpest negative shift in
Turkish-Iranian relations was the 1979
Islamic Revolution, which was comparable
to Shah Ismail’s consolidation of Persia
as a Shiite empire. This time it was not
Islamic doctrine per se, but the ideological
difference in state-religion and state-soci-
ety relations that drove the two neighbors
apart. An Islamic Republic ruled by sharia
law was the direct ideological opposite
of a secular republic ruled by a European
legal system.9 Turkey maintained strong
economic ties to both Iran and Iraq even
during 1980-88 war, but ideological dif-
ferences produced conict in the 1990s
as Iran supported the outlawed Kurdistan
Workers’ Party (PKK) in order to destabi-
lize Turkey.10
The rise of the Justice and Develop-
ment Party (AKP) in Turkey (2002),
followed by the election of Mahmoud
Ahmedinejad as president of Iran (2003),
took place during the wars in Afghanistan
and Iraq. Iran, seeing U.S. interventions
on both sides of the country — plus being
named part of an “axis of evil” — shifted
its strategic thinking into a defensive
mode, expecting an imminent U.S. inva-
sion.11 Tehran sought to activate its prox-
ies in neighboring countries and stabilize
its existing problems. In this context, the
Kurdish question — more specically, the
PKK and its Iranian offshoot, PJAK —
brought Turkey and Iran together dur-
ing 2007-11.12 Following joint military
cooperation against PKK-PJAK, the two
countries engaged in economic coop-
eration, sidelining political and sectarian
differences.13
The primary rationale for Turkey’s
decision to expand its economic ties to Iran
has been multi-tiered, beginning with its
dependence on Russian natural gas. Since
2002, the Turkish economy witnessed
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Middle east Policy, Vol. XXiii, No. 2, suMMer 2016
impressive yet inconsistent growth, which
increased the demand for energy at a sub-
stantial but unforeseeable rate. In order to
reduce a politically restrictive dependence
on natural gas from Gazprom, Turkey
turned to Iran. In late 2008, Turkey and
Iran signed an agreement that would allow
Turkey to invest $5.5 billion in Iran’s South
Pars gas eld in exchange for the operat-
ing rights to three off-shore elds there.
Momentum
increased
further during
President
Recep Tayyip
Erdoğan’s
visit to Tehran
during the fol-
lowing year,
ultimately
ending in a failure to reach consensus over
the technical specics of marketing South
Pars gas. This high-level failure to invest
in South Pars, along with the failure to
reduce the price of gas imported from Iran,
became a low point in Turkish-Iranian rela-
tions. Coupled with the fact that Iran’s gas
is the most expensive in Turkey’s import
le and that there have been occasional
disruptions in ow due to Iran’s inef-
cient transit infrastructure, Turkish-Iranian
gas relations have gone downhill since
2009. Following the international sanc-
tions against Iran, they declined further.
Upon Washington’s insistence, Turkey also
decreased its oil imports from Iran in late-
2012 and initiated “gas-for-gold”:
14
The Turks exported some $13 billion
in gold to Tehran directly, or through
the UAE, between March 2012
and July 2013. In return, the Turks
received Iranian natural gas and oil.
But because sanctions prevented Iran
from getting paid in dollars or euros,
the Turks allowed Tehran to buy gold
with their Turkish lira — and that
gold found its way back to Iranian
coffers.15
No incident has been as poisonous for
Turkish-Iranian relations, however, as the
Syrian civil war. It has been the second-
most-damaging factor in relations since the
1979 revolution. Through roughly a half
millennium
of history,
whenever
there has been
a substantial
change to
the sectarian
balance of
power along
the divide
between Sunni and Shiite territories, Turks
and Persians have fought, either directly or
through local proxies.
When the Arab Spring occurred,
Turkey and Iran approached its various
manifestations quite differently. For Iran,
these movements were reminiscent of the
1979 revolution: people were rising up
to topple their leaders.16 For Turkey, the
movements were about an anger caused
by decades of repression and widespread
corruption.17 Both countries saw them as
opportunities for involvement. Iran saw a
disruption of the established Sunni Arab
strategic entrenchment that would allow
Tehran to pursue its strategic goals. Turkey
saw a call for the elusive “Turkish model,”
demanding Turkey’s guidance toward a
more democratic future. The most visible
of such state-rebuilding roles was Turkey’s
involvement in Egypt. Turkish intelligence
chief Hakan Fidan went to Cairo in August
2013 to counsel President Mohammad
Miscalculating Iranian and Russian
stakes in Syria, Turkey gambled on a
quick victory against Bashar al-Assad and
became frustrated as Damascus refused
to give in to Washington’s and Ankara’s
demands.
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Morsi on a number of important political
issues, such as government inclusivity,
prevention of isolation and even garbage
collection.18 Iran pursued similar inuence
options in Afghanistan, Bahrain and Iraq,
with various levels of success.
The Syrian civil war also brought an
opportunity for proxy wars. Miscalculat-
ing Iranian and Russian stakes in Syria,
Turkey gambled on a quick victory against
Bashar al-Assad and became frustrated as
Damascus refused to give in to Washing-
ton’s and Ankara’s demands.19 Iran and
Russia, by contrast, believed that Assad’s
removal would create long-term regional
conict involving multiple radical groups,
destabilizing all the neighboring coun-
tries.20 Turkey would be spared, as Ankara
had already planned for an interim proto-
government that would be established by
pro-Turkey Syrian opposition gures.21
The spillover from Syria had a negative ef-
fect on Turkish-Iranian political relations,
but not on business or trade. As mentioned
earlier, Turkey and Iran have learned to co-
operate and ght simultaneously. Even in
2014, when Ankara-Tehran disagreements
over Syria had intensied, the Turkish-
Iranian trade volume was $13.7 billion.
Following President Erdoğan’s Tehran
visit on April 7, 2015, the two countries
agreed to disagree on Syria,22 while simul-
taneously expanding their trade volume
to $30 billion by the end of 2015.23 With
sanctions lifted, Turkey’s main agenda was
to reduce the price of imported natural gas
from Iran. President Erdoğan stated this
would signicantly increase the volume of
gas Turkey purchased.24 Despite this direct
request, Turkey simultaneously brought
the issue of high gas prices to international
arbitration in an attempt to force a 25 per-
cent reduction in price from Tehran. The
verdict was decided in May 2015 in Tur-
key’s favor; Iran was forced to pay $760
million to Turkey’s BOTAŞ Petroleum
Pipeline Corporation and to promise fewer
disruptions in ow during winter.25 It was
expected that Turkey would now purchase
more natural gas from Iran, contributing to
the $30 billion trade-volume goal.
However, the source of this gas, the
South Pars eld, does currently yield
enough output to allow Turkey to success-
fully diversify away from Russia or send it
to European markets via pipeline. Accord-
ing to one estimate, Iran will likely have
24.6 billion cubic meters (bcm) of natural
gas for export within ve years.26 The eld
requires substantial development in order
to produce politically meaningful levels of
gas — at least to the extent of rendering
Iran a political alternative to Gazprom.27
Turkey had agreed to invest in South Pars
in 2008, allocating $5.5 billion to bring
the eld up to a level at which it could
produce 20 to 35 bcm per year.28 Turkey
would, in turn, gain operational rights to
three South Pars gas elds. The deal was
cancelled due to sanctions; now Turkey is
particularly eager to revive the South Pars
talks. Whether Iran is politically willing
to enter into such talks, and to what extent
the Syrian conict has generated resistance
from Tehran to Ankara’s gas demands, are
as yet unknown.
REGIONAL POLITICS
A Turkish-Iranian natural-gas partner-
ship would have been much more feasible
politically before the Arab Spring. As
transnational Arab discontent rattled old
regimes in the Middle East, it also shook
the foundations of Turkish-Iranian rela-
tions, which need a relatively stable sectar-
ian balance in the region in order to our-
ish. Both governments have to be secular
in order to mitigate sectarian identity as a
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state ideology. As political developments
in Tunisia, Libya, Egypt, Syria, Yemen and
Bahrain created power vacuums, Turkey
and Iran have both used their respective
ideologies to ll them.
With the Syrian civil war, this situation
took an even more negative turn, as ve
nodes of conicting interests emerged be-
tween Ankara and Tehran regarding energy
cooperation:
1) The emergence of the Islamic State in
Iraq and Syria (ISIS, ISIL, IS or Daesh)
2) The Kurdish backlash following the
civil war
3) Saudi-Qatari regional counterbalancing
against Iran
4) The inuence of the Iranian Revolu-
tionary Guard Corps (IRGC) over the
energy sector
5) The controversial Babak Zanjani-Reza
Zarrab episode, which manifested as a
corruption scandal in Turkey
Gambling on a quick victory in Syria,
Turkey had planned for the swift removal
of Bashar al-Assad, followed by the instal-
lation of a pro-Sunni interim administra-
tion and free and fair elections.29 Un-
foreseen was the extent to which Assad’s
rule was reinforcing Iran’s and Russia’s
regional geostrategy. For Iran, Syria was a
substantial span of territory that connected
the northern reaches of the Shia Crescent,
a hypothetical area dening the Iranian
zone of inuence in the Middle East.30 The
replacement of Assad with a Sunni admin-
istration would impede Tehran’s reach into
Lebanon and its ability to deter Israel. For
Russia, the removal of Assad would lead
to uncertainty over its naval base at Tartus
and its air base at Latakia,31 its only direct
access to the Mediterranean. These bases
are important to Russia’s larger interests
in the Middle East. As Syria descended
into chaos, the Turkish-American axis has
supported groups diametrically opposed
to those supported by Russia and Iran,
effectively rendering Ankara and Tehran
proxy combatants. Meanwhile, ISIS has
consolidated itself as a protostate. Origi-
nally spawned as al-Qaeda in Iraq, the
group represented Sunni resistance to the
pro-Shiite Nouri al-Maliki administration
in Baghdad, later spilling over into Syria
as Assad’s operations radicalized Syrian
Sunnis as well. Effectively erasing the
Syrian-Iraqi border, ISIS has become a
defense against Iranian dominance in Iraq
and inuence in Syria. Ankara is seen by
Tehran as part of a Sunni front.32
The second issue is the rise of a Kurd-
ish awakening, a reex against the expan-
sion of ISIS. In late 2012, Turkish decision
makers believed it was only a matter of
time before the chronic “Kurdish question”
would nally be resolved, and on peaceful
terms.33 The government had good rela-
tions with the Kurdistan Regional Govern-
ment (KRG) in Iraq and was undertak-
ing “positive negotiations” towards the
disarmament of the outlawed PKK. With
the expansion and unexpected strengthen-
ing of ISIS, along with its push towards the
Turkish-Syrian border and KRG territory,
the PKK did not disarm but reorganized
itself to ght with ISIS, mainly in Syria.34
Newly emerging Kurdish groups in Syria
such as the Democratic Union Party (PYD)
and People’s Protection Units (YPG),
with varying degrees of connection to the
PKK,35 were thus the main outlets of this
newly emerging Kurdish awakening in
Syria. Despite their target’s being ISIS,
Turkey was mostly concerned about the
fact that these groups were extensions of
the PKK and thus excuses for not disarm-
ing, as the group had promised in its peace
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negotiations with Turkey. There have also
been several Syrian opposition statements
that warned Turkey that the PYD was
under “Iranian inuence,” along with the
YPG.36 This alienated Turkey further. With
the eventual collapse of Turkey’s Kurdish
peace process in mid-2015, Turkey dened
the PKK, PYD and YPG “as dangerous
and as terrorist as ISIS”37 though it only
targeted the
PKK. The
connections
of the PYD
and YPG to
the PKK, as
well as their
alleged ties
to Tehran,
forced Ankara
to view this transnational Kurdish awak-
ening with alarm. It runs from PKK cells
in Kars across Turkey’s Iranian, Iraqi and
Syrian borders, creating an uninterrupted
“Kurdish belt” that almost reaches the
Mediterranean coast. Denying it access
to the Mediterranean is a primary policy
goal for Turkey. Iran would seem to benet
from Turkey’s being cut off from the
Sunni-Arab world by a Kurdish belt.38
The Turkish-Persian conict is mir-
rored by the Saudi-Qatari rivalry in the
Gulf region. The prospect of Bashar’s
removal and the collapse of the Assad
dynasty in Syria was seen as a welcome
development by Saudi Arabia, intent on
denying Iran the strategic advantage it
gained from the Iraq War of 2003.39 To that
end, Saudi Arabia became a major source
of funds and arms for the Syrian rebels:
according to The New York Times, not
only Yugoslav-made M79 Osa guns, but
also Croatian anti-tank weapons, shipped
through Jordan.40 Along with Turkey and
Qatar, Saudi Arabia has backed the Syr-
ian Jaish al-Fatah, which also included the
al-Qaeda branch in Syria, the Al-Nusra
Front.41 The latter group turned into a more
problematic investment for all three coun-
tries after the United States declared it a
terrorist organization. Riyadh at the highest
levels took part in efforts to topple Bashar
al-Assad, but both Riyadh and Washington
miscalculated Iran’s and Russia’s stakes
in the Assad
regime.42 As
Saudi Arabia
pushed harder
on Turkey
and Qatar to
escalate in
Syria, Tehran
increased
its efforts
to counter such inuence. Complement-
ing Tehran’s commitment to the Assad
regime in the form of Quds Force deploy-
ments and military supplies, Iran also
lobbied Moscow directly to get Russia’s
active military support in Syria.43 When
Assad’s forces lost the strategically key
Idlib province in mid-2015, threatening his
own survival as well as the Russian bases
in Latakia and Tartus, Moscow ofcially
joined the ght in October 2015.
The entry of Russian military forces
into the Syrian theater effectively shifted
the balance of power eastward, leading to
the intensication of airstrikes against the
Free Syrian Army and the so-called “mod-
erate” rebel groups concentrated around
Idlib and operating within Aleppo.44
Russia’s frequent airstrikes so close to the
Turkish border from early October led to
an escalation of tensions over airspace
violations, culminating in Turkey’s down-
ing of a Russian SU-24 multi-role ghter
on November 24, 2015.45 The decision was
momentous; this was the rst time a NATO
The prospect of Bashar’s removal and
the collapse of the Assad dynasty in Syria
was seen as a welcome development by
Saudi Arabia, intent on denying Iran the
strategic advantage it gained from the
Iraq War of 2003.
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Middle east Policy, Vol. XXiii, No. 2, suMMer 2016
country had shot down a Russian plane
since 1952. November 24 marked a new
phase of escalation in Syria and served as
a warning to the countries running proxy
wars that they, too, could end up in direct
interstate conict. More important for Tur-
key, the prospect that its escalation with
Russia could affect its 57 percent depen-
dence on Gazprom46 renders gas-supply
security a critical national issue. This, in
turn, creates greater momentum for Turkey
to diversify as much as it can from Russia.
Iranian gas imports become more relevant.
ENTER THE IRGC
There are two views in Tehran on the
political plausibility of Turkey as a gas
partner. On December 12, 2015, Javad
Amin-Mansour, director for trade and en-
ergy negotiations at Iran’s Ministry of For-
eign Affairs, stated that Turkey is indeed
a reliable partner in exporting Iranian gas
to Europe in the post-sanctions period. Re-
sponding to a question on whether politi-
cal disagreements may limit the extent of
cooperation, Amin-Mansour followed up:
“I don’t see any problem basically, because
Iran has the second-largest gas reserves
in the world. So potentially it has enough
reserves for that purpose, but by that time,
it will depend on contracts between the
two countries.”47
This seems to be a favorable scenario
for the European market, which has long
been dreaming of diversifying away from
Gazprom through Iran, sanctions being the
main impediment. The sanctions had pre-
vented both the ow of direct investment
and the technology transfer to establish a
large-volume natural-gas export infrastruc-
ture, forcing Tehran to resort to domestic
nancing to increase export capacity.
Javad Amin-Mansour’s statement
contrasts with that of Iranian Oil Minister
Bijan Namdar Zanganeh, who also as-
serted on November 21, 2015, that Turkey
isn’t the only export route to Europe, that
its transit pricing conditions are too high,
and that Iran could just as well send its gas
to Europe via LNG tanker shipments.48 In
early December, Iran had halved its gas
exports to Turkey amid rising Ankara-
Moscow tensions. This was understood in
Turkey as a warning that Iran and Russia
were enacting a joint natural-gas policy
towards Turkey, and that alienating Russia
would prevent Turkey from diversifying
through Iran. Although the dispatching
director of the National Iranian Gas Com-
pany, Manouchehr Taheri, said the boost
came after a technical problem with the
supply facilities was xed,49 it did not allay
Turkish media fears that the gas cut was,
in fact, a threat: Iran was using natural-gas
supply as an “energy weapon.”
A signicant factor in Iranian opinion
regarding exports to Turkey is the Iranian
Revolutionary Guard Corps (IRGC). In au-
thoritarian systems, the armed forces tend
to develop great inuence over the econo-
my of the country. In Egypt, for example,
the Egyptian armed forces exert substantial
control over several economic sectors, and
they increased it following the 2013 ouster
of President Mohammad Morsi. In Shana
Marshall’s words:
The Egyptian Armed Forces’ con-
temporary inuence must be situated
within the broader context of mid-
twentieth-century Pan-Arab national-
ism and the prevailing development
model, which identied the military
as a key protagonist in indigenous
industrialization and economic mod-
ernization. Under the theory of state-
led development, the public sector
was central to economic growth, and
Egypt’s military became the engine
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of industry and the supplier of public
services.50
Ayesha Siddiqa explored a similar
trend in Pakistan, where she came up with
the concept of “Milbus”: “military capital
that is used for the personal benet of the
military fraternity but is neither recorded
nor part of the defense budget.”51 Just as
in Egypt, the Pakistani armed forces have
also carved out substantial business inter-
ests in the economic sector, nearing about
$10 billion of investments by 2007.52 In
Turkey as well, the military retained sub-
stantial inuence over the economy until
the early 2000s, developing a hybrid model
of state-led development while adapting to
the liberalized market system in the post-
Cold War world.53
Natural resources — especially fos-
sil fuels — are critical within the context
of military involvement in the economy;
armed forces tend to monopolize these
strategic commodities, citing independence
and autonomy. The relationship between
the IRGC and the energy sector has grown
increasingly interlinked since the 1979 rev-
olution, rendering the corps a signicant
decision maker.54 The IRGC’s involvement
is also part of the historical narrative of
anti-Western inuence. It has been fueled
by the domination of Iran’s oil sector by
the Anglo-Iranian Oil Company from 1908
to 1953. That year, the CIA’s Operation
Ajax toppled Prime Minister Muhammad
Mossadegh, who planned to nationalize the
oil sector.55 In a way, these two events set
the tone for Iranian resource nationalism
and dene the way the IRGC thinks about
exporting gas to Europe or allowing West-
ern international oil companies (IOCs) to
operate in Iran.
The IRGC’s involvement in the
economic sector started in 1989, when
it created Khatam ul-Anbia (Seal of the
Prophets) as an engineering contractor
to provide employment for IRGC veter-
ans and use their acquired skills to build
infrastructure. Today, Khatam has around
40,000 employees, making it one of the
largest enterprises in Iran.56 During the
1990s, when Total and Royal Dutch Shell
signed deals in Iran, Khatam had a small
presence in the sector. This changed after
2005 as Ahmedinejad used government
tools to subsidize Khatam’s expansion into
the gas sector as a way of nationalizing it.57
As post-2010 sanctions forced IOCs out of
the Iranian market, Khatam lled the gap
and tightened IRGC control over the sec-
tor. Khatam’s involvement in both the gas
sector and the nuclear program rendered
it even more powerful. The company was
able to use its dominance to leverage terms
with international energy companies in-
tending to enter the Iranian market. Thus,
even though sanctions have been perma-
nently lifted, Khatam’s dual role within the
Iranian energy sector may prohibit IOCs
from developing infrastructure to export
Iran’s gas.
It must be underlined that the very
reason Khatam expanded its interests in
the natural-gas sector was the sanctions
regime. As international sanctions created
a vacuum in the Iranian economy, it was
lled by the IRGC, and to a certain extent
by China and Russia.58 During the Ahme-
dinejad period, the IRGC was awarded
no-bid contracts, along with substantial
funds channeled through state loans, that
specically enabled Khatam to monopolize
natural-gas infrastructure and achieve an
inuential role in any future involvement
of IOCs in the energy sector.59
Sanctions, through weakening the
state’s ability to nancially communicate
with the world, are thought of as a way to
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coerce more cooperative behavior. How-
ever, Takeyh and Malone argue that the
U.S.-led international sanctions had mixed
success, and after 2006 had direct adverse
effects on Iran’s reformists.60 In attempting
to weaken Iranian hawks and facilitate a
broader regional transformation, President
Bush sought to cordon off Iran from the
Middle East’s broader regional transfor-
mation. This alienated Iranian moderates
and strengthened the hardliners, enabling
the IRGC to dominate the energy sector.
In turn, Takeyh and Malone argue, the
Iranian regime has skillfully managed to
foster Iran’s indigenous capabilities and
control over key resources. European
companies had to exit the Iranian market
and make way for the Russian Instrument
Design Bureau (KBP), Rosoboronexport
(ROE) and the Russian Aircraft Corpora-
tion (RAC), and the Chinese BST Technol-
ogy and Trade Company and the Tianjin
Flourish Chemical Company.61 During
that period, Khatam and Petropars were
awarded 18 stages of the South Pars gas
eld, effectively dominating a substantial
portion of its development.62
However, Khatam is not an uncon-
tested power in Iran’s energy sector.
The company’s weight is determined by
Iranian power politics, namely the struggle
between the IRGC and the reformists.
Ayatollah Khomeini strictly forbade the
IRGC to get involved in politics; it was to
remain a regime-protection unit.63 How-
ever, in 2005, hostile U.S. rhetoric, along
with the ongoing Iraq War, led Tehran to
go into “survival mode.” Supreme Leader
Ali Khamenei and the IRGC supported
Mahmoud Ahmedinejad in the face of
voter fraud and ballot-box stufng.64 In
return, Ahmedinejad granted larger con-
tracts and loans to the IRGC, expanding
its stake in the economy and politics. This,
conservatives argued, was necessary, given
the imminent threat of U.S. invasion and
growing hostility in Europe.65
It was against this backdrop that Mir
Hossein Mousavi was denied victory in
the 2009 presidential elections; the IRGC
made sure that Ahmedinejad won re-elec-
tion. The reformists and Green Movement
then asserted that this amounted to a coup
on the part of the IRGC. Therefore, when
he ascended to the presidency in 2013,
Hassan Rouhani had to tread a ne line
between ending Iran’s economic isolation
and retaining the IRGC as a safety valve
in case negotiations with the West went
awry. The signing of the sanctions deal has
strengthened Rouhani’s bid to minimize
the IRGC’s involvement in the economic
sector and use natural-gas exports as a
political tool to gain more domestic lever-
age. This political rivalry is central to any
discussion of Iran’s gas exports, especially
through Turkey. In 2004, the IRGC had
prevented the Turkish consortium Tepe-
Akfen-Vie from building Tehran’s Imam
Khomeini International Airport, citing se-
curity concerns.66 In 2009 as well, Turkey’s
cell-phone provider Turkcell was forced
out of Iran by the IRGC shortly before the
latter took over the Telecommunications
Company of Iran.67
The most signicant event related to
the IRGC’s energy dealings with Turkey
was the Babak Zanjani/Reza Zarrab epi-
sode. Babak Zanjani, a key facilitator of
Iranian oil and natural-gas deals through
his involvement with the Naftiran Inter-
trade Company and the National Iranian
Oil Company, was arrested in December
2013.68 Targeted by both the United States
and the EU due to his involvement in the
export nancing of Iranian oil and natural
gas, Zanjani was effectively acting as the
IRGC’s main actor in bypassing energy
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sanctions. Zanjani’s point man in Turkey,
Reza Zarrab, was exposed, also in Decem-
ber 2013, as a part of the so-called “17-25
December process,” during which a num-
ber of audio leaks shook Turkey’s Justice
and Development Party.69 These leaks in-
cluded senior AKP ofcials’ and ministers’
conversations with Reza Zarrab, which
became the basis of his detention, along
with the sons of the ministers of the inte-
rior and foreign trade. Since 2011, Reza
Zarrab had been in charge of Sar Gold
Trading Limited, through which he ran the
“gold-for-oil” deal with Iran, in which Tur-
key bought oil and paid in gold, bypassing
international sanctions.70 In 2012, Zarrab’s
Sar Trading company covered 46 percent
of the $12 million in gold exports.
The arrests of Babak Zanjani and Reza
Zarrab came months after the June 2013
election of Hassan Rouhani, who allied
himself with Iranian Intelligence Ministry
ofcials and the IRGC’s old guard to purge
Ahmedinejad-era ofcials and IRGC mem-
bers.71 More signicant, the newly appoint-
ed oil minister, Bijan Zangeneh, strongly
criticized the IRGC’s role in the energy
sector, accusing it of bribery and other
misconduct. The Guards hit back, claim-
ing that, without them, there would be no
way for Iran to steer through international
sanctions and signaling that they would
retain their interests in the energy sector.72
Just as Iran’s decision to export its gas
through Turkey is negatively inuenced by
the two countries’ ongoing rivalry in Syria,
it is also inuenced by the extent to which
President Rouhani will be able to keep the
IRGC out of that decision-making process.
Will Iran decide to export natural gas
through Turkey or not? The IRGC might
argue that Iran must not open up its gas
market to international business before the
IRGC creates an internal and regional mo-
nopoly over it and the ongoing dispute in
Syria is settled. This partly originates from
Iran’s troubled history with exploitation by
Western countries over its oil sector, but it
is also a function of Iran’s domestic power
politics. The IRGC will seek to mimic
Gazprom’s weight in Russian foreign
policy, through dominating foreign-policy
and intelligence decision making, but also
through using natural-gas deals to lay the
foundations of political inuence over the
region’s capitals. In doing so, the IRGC,
encouraged by the fact that Iran’s proven
reserves merit such a regional role, will
seek to exert the same systemic depen-
dency network in its environment that
Gazprom enjoys. IOCs seeking energy
investments in Iran, or Turkish negotiators
aiming to connect Iran to Western markets,
will therefore become part of the power
struggle between the reformists and con-
servatives and their historical memories of
the AIOC and Operation Ajax.
CONCLUSION
In a comprehensive recent study, Mi-
chael Tanchum posits that both Iran’s west-
bound and eastbound gas-export options
are almost equally feasible.73 What will
determine the eventual direction from a
political standpoint, according to Tanchum,
is the extent to which Caspian exports are
secured by the EU or China. If Iran’s gas
exports end up going westward, through
a pipeline, then connecting it to Turkey’s
existing Trans-Anatolian Pipeline Project
(TANAP) would be most logical. How-
ever, Iran’s decision to connect to Europe
through Turkey is a more difcult one than
the macro-decision of exporting to the EU
or China. The direction of Iranian exports
will also determine Iran’s long-term rela-
tions with its neighbors. While Turkey
offers comparatively better infrastructure
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Middle east Policy, Vol. XXiii, No. 2, suMMer 2016
and a relatively more open and amenable
energy sector, there are also high-prole
disagreements in play that affect both
countries’ national-security considerations.
As ISIS, the Syrian civil war, Iraq’s
territorial integrity and Russia’s entry into
the Middle Eastern theater dominate this
agenda, the most important but less verbal-
ized issue is how the IRGC views Turkey
and to what extent that view is going to
inuence Tehran’s energy relations with
Ankara. As the IRGC, through its business
extension Khatam, inuences Iran’s econ-
omy and natural resources, it will certainly
seek to retain the gains it made during the
Ahmedinejad period. However, it will have
to battle the Rouhani government, which
has gained immense international pres-
tige and domestic popularity by negotiat-
ing the nuclear deal. As Supreme Leader
Khamenei is currently taking a step back
to assess the struggle between reformists
and conservatives, Iran’s decision to export
natural gas to Europe through Turkey in
the post-sanctions period becomes an issue
of regime security, rather than a mere eco-
nomic decision. In that regard, the politi-
cal future of the Iranian energy industry
is largely dependent on whether Bijan
Zanganeh can survive against the IRGC,
even though he is supported by Rouhani
and tacitly endorsed by the supreme leader,
who is willing to retract IRGC gains in
the sector. However, Zanganeh’s ability to
survive politically will hinge on keeping
the IRGC’s core interests in consideration
without forcing them to make too many
concessions.
However, in whichever direction
(China-bound one-belt, one-road; or
Europe-bound Southern Gas Corridor) Iran
eventually chooses to export its gas, it will
not be able to afford to overlook Russian
interests. Whichever political system Iran
will fuel through its gas exports will be
less dependent on Russian gas. It is thus a
decision for Moscow, too, whether it can
afford its gas monopoly to be challenged
by Iran in Europe or China. Given that two
of Russia’s current military engagements,
Ukraine and Syria, involve substantial
NATO and EU aspects, it is unlikely Rus-
sia will allow its gas leverage to be chal-
lenged by Iranian exports. This, however,
is what Turkey and the EU specically
want.
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6 Simone Tagliapietra and Georg Zachmann, “Iran: A New Natural Gas Supplier for Europe?” Financial
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10 H. Akin Unver, “How Turkey’s Islamists Fell Out of Love with Iran,” Middle East Policy 19, no. 4 (Winter
2012).
11 Michael Connell, “Iran’s Military Doctrine,” United States Institute of Peace, http://iranprimer.usip.org/
resource/irans-military-doctrine.
12 “Turkey, Iran Step Up Fight against PKK, PJAK,” Gatestone Institute, July 28, 2011, http://www.gatestone-
institute.org/2297/turkey-iran-step-up-ght-against-pkk-pjak.
13 H. Akin Unver, “Post-PKK Operations: Will Turkey Change Its Attitude toward Iran and Syria?” Hurriyet
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de-toward-iran-and-syria-2008-02-04.
14 Linette Lopez, “The Turkish Corruption Scandal Involves an Explosive Gas for Gold Deal with Iran,”
Business Insider, December 27, 2013, http://www.businessinsider.com/turkey-gas-for-gold-deal-with-i-
ran-2013-12.
15 Jonathan Schanzer and Mark Dubowitz, “Iran’s Turkish Gold Rush,” Foreign Policy, December 26, 2013,
http://foreignpolicy.com/2013/12/26/irans-turkish-gold-rush/.
16 Naysan Rafati, “Iran and the Arab Spring,” London School of Economics, IDEAS, 2012, http://www2.lse.
ac.uk/IDEAS/publications/reports/pdf/SR011/FINAL_LSE_IDEAS__IranAndArabSpring_Rafati.pdf.
17 Yaşar Yakış, “Turkey after the Arab Spring: Policy Dilemmas,” Middle East Policy 21, no. 1, (Spring
2014).
18 “Darbe Geliyor, Tedbir Alın [Coup Is Approaching, Take Precaution],” Star Gazette, August 23, 2013,
http://haber.star.com.tr/politika/darbe-geliyor-tedbir-alin/haber-783203.
19 “Assad’s Staying Power Leaves Turkey Frustrated and Exposed,” Reuters, May 27, 2014, http://www.
reuters.com/article/us-syria-crisis-turkey-idUSKBN0E710G20140527.
20 “Syria Allies: Why Russia, Iran and China Are Standing by the Regime,” CNN, August 30, 2013, http://
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21 “ÖSO Komutanları Gaziantep’te Toplandi [Free Syrian Army Commanders Convene in Gaziantep],” July
26, 2013, http://www.cnnturk.com/2013/dunya/07/26/oso.komutanlari.gaziantepte.toplandi/717129.0/.
22 Mehmet Çetingüleç, ‘How Will Turkey Benet from Lifting of Iran Sanctions?” Al-Monitor, April 10,
2015, http://www.al-monitor.com/pulse/originals/2015/04/turkey-iran-how-will-benet-from-lifting.html.
23 “Erdogan Woos Iranian Business While Resisting Tehran’s Ambitions,” Financial Times, April 8, 2015,
http://www.ft.com/intl/cms/s/0/8cfac9d0-dd33-11e4-975c-00144feab7de.html.
24 “Turkish President Seeks Closer Economic Ties on State Visit to Iran,” Wall Street Journal, April
7, 2015, http://www.wsj.com/articles/turkish-president-on-state-visit-to-iran-seeking-closer-econo-
mic-ties-1428411176.
25 “Turkey Prevails in Iran Arbitration,” Hurriyet Daily News, June 1, 2015, http://www.hurriyet.com.tr/
english/domestic/11094366.asp?scr=1.
26 Micha’el Tanchum, “A Post-Sanctions Iran and the Eurasian Energy Architecture,” Atlantic Council, Sep-
tember 2015, http://www.atlanticcouncil.org/images/publications/Iran_Energy_Architecture_web_0925.pdf
27 “Iran’s Gas Export to the EU: When, How and How Much?,” Natural Gas Europe, September 22, 2015,
http://www.naturalgaseurope.com/iran-gas-export-to-eu-wood-mackenzie-analysts-25479.
28 “Turkey Pulls Out of Deal to Buy Iranian Gas under Pressure from U.S.,” Guardian, August 15, 2008,
http://www.theguardian.com/world/2008/aug/15/turkey.iran.
29 “Şamil Tayyar: 3 Saate Şam’a Varırız [AKP Deputy Şamil Tayyar: ‘We’ll Be in Damascus within 3
Hours],” Radikal, October 10, 2012, http://www.radikal.com.tr/politika/samil-tayyar-3-saatte-sama-vari-
riz-1103525/.
30 Will Fulton, Joseph Holliday, and Sam Wyer, “Iranian Strategy in Syria,” Institute for the Study of War,
2013, http://www.understandingwar.org/sites/default/les/IranianStrategyinSyria-1MAY.pdf.
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31 Dmitri Trenin, “Russia’s Interests in Syria,” Carnegie Moscow Center, June 9, 2014, http://carnegie.ru/
publications/?fa=55831.
32 F. Stephen Larrabee and Alireza Nader, “Turkish-Iranian Relations in a Changing Middle East,” Rand Cor-
poration, 2013, http://www.rand.org/content/dam/rand/pubs/research_reports/RR200/RR258/RAND_RR258.
pdf.
33 H. Akin Unver, Turkey’s Kurdish Question: Discourse and Politics since 1990 (Routledge Studies in
Middle Eastern Politics, 2015), 1.
34 Gönül Tol, “Turkey’s Tough Choice. Take on ISIS or the PKK?” CNN International Edition, October 9,
2014, http://edition.cnn.com/2014/10/07/opinion/turkey-isis-pkk/.
35 ‘PYD ve YPG, PKK’nın yan dallarıdır Kürtlerin yüzde 10’unu temsil eder [PYD and YPG Are Sub
Branches of PKK; Represent 10 Percent of Kurds],” HaberTurk, October 21, 2015, http://www.haberturk.
com/dunya/haber/1142726-pyd-ve-ypg-pkknin-yan-dallaridir-kurtlerin-yuzde-10unu-temsil-eder.
36 Bayram Sinkaya, “Suriye krizi çerçevesinde İran-PYD ilişkileri [Iran-PYD Relations within the Context of
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37 “Erdoğan: YPG ve PYD, bunların hepsi terör örgütü, ABD’nin açıklaması yanlış [Erdoğan: YPG and PYD
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38 ‘Rusya Kürt Koridoru Için Harekete Geçti [Russia Has Moved in Favor of the Kurdish Corridor],”
Star Gazette, December 5, 2015, http://haber.star.com.tr/dunya/rusya-kurt-koridoru-icin-harekete-gecti/
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39 Josh Rogin, “Iran and Saudi Arabia Clash inside Syria Talks,” Bloomberg View, November 4, 2015, http://
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40 Eliot Higgins, “Weapons from the Former Yugoslavia Spread through Syria’s War,” New York Times,
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through-syrias-war/.
41 Aaron Stein, “What Idlib Takeover Means for Turkey,” Al Jazeera Opinion, April 5, 2015, http://www.
aljazeera.com/indepth/opinion/2015/04/idlib-takeover-means-turkey-150405073027241.html.
42 Ian Black, “End of an Era as Prince Bandar Departs Saudi Intelligence Post,” Guardian, April 16, 2014,
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43 Matthew McInnis, “How Many Iranian Forces Are Fighting and Dying in Syria?” Newsweek, October 28,
2015, http://europe.newsweek.com/how-many-iranian-forces-are-ghting-and-dying-syria-335599?rm=eu.
44 “Russian Airstrikes in Syria: Pentagon Says Strategy ‘Doomed to Failure,’” Guardian, September 30, 2015,
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45 Akin Unver, “Turkey – Russia Tensions: It Is Different This Time,” Wikistrat Reports, October 12, 2015,
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46 U.S. Energy Information Administration, Turkey Country Report, https://www.eia.gov/beta/international/
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12, 2015, http://aaenergyterminal.com/news.php?newsid=7034892.
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cember 9, 2015, http://www.iraniangas.ir/Portal/Home/ShowPage.aspx?Object=NEWS&CategoryID=-
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c20a8e73-bda8-417e-b26b-9b37bd421858.
50 Sana Marshall, “The Egyptian Armed Forces and the Remaking of an Economic Empire,” Carnegie Middle
East Center, April 15, 2015, http://carnegie-mec.org/2015/04/15/egyptian-armed-forces-and-remaking-of-
economic-empire.
51 Ayesha Siddiqa, Military Inc.: Inside Pakistan’s Military Economy (Pluto Press, 2007), reviewed at http://
www.ipcs.org/books-review/pakistan/military-inc-inside-pakistans-military-economy-235.html.
52 Declan Walsh, “Book Shines Light on Pakistan Military’s ‘£10bn Empire,’” Guardian, May 31, 2007,
http://www.theguardian.com/world/2007/may/31/books.pakistan.
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53 Fırat Demir, “A Political Economy Analysis of the Turkish Military’s Split Personality,” in Understanding
the Process of Economic Change in Turkey: An Institutional Approach, eds. Tamer Çetin and Feridun Yılmaz
(Nova Science Publishers, 2013), http://faculty-staff.ou.edu/D/Firat.Demir-1/Demir_Turkish_Military_Patri-
archal_Master_or_Crony_Capitalist.pdf.
54 Suzanne Maloney, “Major Beneciaries of the Iran Deal: The IRGC and Hezbollah,” Testimony at the Hou-
se Committee on Foreign Affairs Subcommittee on the Middle East and North Africa, September 17, 2015,
http://www.brookings.edu/research/testimony/2015/09/17-beneciaries-of-iran-deal-maloney.
55 Josh Gelernter, “Iran: The Truth about the CIA and the Stat,” National Review, July 24, 2015, http://www.
nationalreview.com/article/421595/what-really-happened-shahs-iran.
56 “Oil Companies Returning to Iran Face Challenge in Form of Revolutionary Guards,” Wall Street Journal,
May 23, 2014, http://www.wsj.com/articles/oil-companies-returning-to-iran-face-obstacle-in-form-of-revolu-
tionary-guards-1400852529.
57 Julian Borger and Robert Tait, “The Financial Power of the Revolutionary Guards,” Guardian, February 15,
2010, http://www.theguardian.com/world/2010/feb/15/nancial-power-revolutionary-guard.
58 Erica Downs and Suzanne Maloney, “Getting China to Sanction Iran,” Foreign Affairs, March/April 2011,
https://www.foreignaffairs.com/articles/china/2011-02-20/getting-china-sanction-iran.
59 Bayram Sinkaya, The Revolutionary Guards in Iranian Politics: Elites and Shifting Relations (Routledge,
2016), 187.
60 Ray Takeyh and Suzanne Maloney, “The Self-Limiting Success of Iran Sanctions,” International Affairs,
November 2011, 87, no. 6.
61 “New Sanctions: U.S. Targets Scores of Russian, Chinese, Syrian Firms over Iran,” Russia Today, Septem-
ber 2, 2015, https://www.rt.com/news/314085-us-hits-russia-sanctions/.
62 “Iran Gas: South Pars Progress Remains a Problem,” Economist, August 22, 2013, http://www.eiu.com/
industry/error?aspxerrorpath=/industry/article/100881394/iran-gas-south-pars-progress-remains-a-prob-
lem/2013-08-23.
63 Ali Alfoneh, “The Revolutionary Guards’ Role in Iranian Politics,” Middle East Quarterly, Fall 2008, 3-14,
http://www.meforum.org/1979/the-revolutionary-guards-role-in-iranian-politics.
64 Alireza Nader, “The Revolutionary Guards,” in The Iran Primer: Power, Politics and U.S. Policy, ed. Robin
Wright (U.S. Institute of Peace Press, 2010), 61.
65 Ibid.
66 “İran, Havalimanı Işletmesini Geri Aldı [Iran Took Back the Management of the Airport],” Milliyet, May 9,
2004, http://www.milliyet.com.tr/2004/05/09/ekonomi/axeko02.html.
67 See Wikileaks page on the exchange between U.S. Embassy in Ankara and several U.S. government agen-
cies on the matter: https://wikileaks.org/plusd/cables/06ANKARA6687_a.html.
68 “Iranian Corporate Mogul Attends 1st Court Hearing Session,” Press TV, October 3, 2015, http://www.
presstv.ir/Detail/2015/10/03/431782/Iran-billionaire-Babak-Zanjani-court-hearing-Sorinet-group-.
69 Barın Kayaoğlu, “Turkish Media Digs Deeper into Gold Mogul Corruption Scandal,” Al-Monitor, July 31,
2015, http://www.al-monitor.com/pulse/originals/2015/07/turkey-iran-reza-zarrab-saga-get-more-interesting.
html#ixzz3uXBJAYoh.
70 “Turkey Crisis Puts Jailed Millionaire at Heart of Gold Trail,” Bloomberg Business, January 29, 2014,
http://www.bloomberg.com/news/articles/2014-01-29/turkey-scandal-places-jailed-millionaire-at-cen-
ter-of-gold-trail.
71 Najmeh Bozorgmehr, “Iran: Rogue Trader,” Financial Times, June 5, 2014, http://www.ft.com/intl/cms/s/0/
8df9c092-ca2f-11e3-bb92-00144feabdc0.html#axzz3uXBuA3yL.
72 Arash Karami, “Iran Revolutionary Guard Defends Involvement in Oil Industry,” Al-Monitor, April 2,
2014, http://www.al-monitor.com/pulse/originals/2014/04/iran-revolutionary-guard-enters-oil-industry.htm-
l#ixzz3uXCO8A65.
73 Micha’el Tanchum, “A Post-Sanctions Iran and the Eurasian Energy Architecture,” Atlantic Council, Sep-
tember 2015, http://www.atlanticcouncil.org/images/publications/Iran_Energy_Architecture_web_0925.pdf.
Unver.indd 145 5/19/2016 11:42:11 AM

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