Iranian Natural Gas: Opportunities and Risks - Exploration of U.S. Strategic Political Scenarios of Cooperation, Confrontation, and Hybrid Approach, Impact of JCPOA Withdrawal by Trump Administration

This report has been professionally converted for accurate flowing-text e-book format reproduction. This thesis investigates the Islamic Republic of Iran's current natural gas sector and explores the opportunities to monetize its proved natural gas reserves. According to BP statistics, Iran owns the world's second-largest proved natural gas reserves, totaling 33.2 trillion cubic meters, or 17.2% of the world's total proved reserves. Iran's ability to expand its role in the natural gas market depends heavily on its ability to increase production, its capability to reach markets, and improved international relations with the West. The Joint Comprehensive Plan of Action (JCPOA) afforded sanctions relief for Iran to develop and resurrect its battered energy infrastructure with foreign investments. Though the United States withdrew from the JCPOA in May 2018, Iran is expected to increase its natural gas production to at least satisfy growing domestic demands. After analyzing Iran's natural gas capacity, susceptible markets, and infrastructure, this research explores three strategic political scenarios that explore how the United States could approach Iran's natural gas sector: cooperation, confrontation, and a hybrid approach. Iran desires to become a regional energy hub for exports, and U.S. policymakers must pursue a strategy that preserves U.S. interests while also promoting energy security for its allies and partners.

The Middle East is one of the wealthiest regions of the world in terms of natural resources, and the potential for Iran to emerge as a major natural gas supplier will inevitably affect geopolitics as natural gas becomes more important for those seeking supplies. The Middle East possesses 41% of the world's natural gas supply — 79.1 trillion cubic meters (TCM) — and Iran controls almost half of that quantity. According to the 2018 BP Statistical Review of World Energy, Iran possesses the world's second-largest proved natural gas reserves totaling 33.2 TCM, approximately 17.2% share of the world's proved reserves. Iran produced 223.9 billion cubic meters (bcm) of natural gas in 2017, 6.1% share of the global production volume, earning the title of the third largest producer after the United States (20.0%) and Russia (17.3%). While major gas producers expand production to increase economic opportunities, major natural gas consumers in developing regions such as Europe and the Far East seek energy security by diversifying their supplies. For these reasons, Iran's natural gas will be very relevant to the future global supply and demand calculus.

The United States, with the endorsement of the European Union and the permanent members of the United Nations Security Council, attempted to reintegrate Iran economically back into the international community in exchange for non-nuclear proliferation through the signing of the Joint Comprehensive Plan of Action (JCPOA) in 2015. On 08 May 2018, President Donald Trump unilaterally withdrew the United States from the JCPOA, as he believed it was "defective at its core" and "does nothing to constrain Iran's destabilizing activities, including its support for terrorism." Many experts believe the United States' withdrawal from the agreement has several negative consequences, to include harming the country's transatlantic relationship with allies and partners, as it places a bind on European countries who are doing business with Iran and, more importantly, damaging the United States' legitimacy as a nation that is "unwilling to abide by its diplomatic agreements" established during previous administrations. Renewed economic sanctions on Iran will significantly hinder Iran's ability to attract foreign investments necessary to monetize its vast natural gas reserves.