GRM 2010 GRM 2011

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The Iran -Oman Gas Deal: Its Positive Impacts on Bilateral and Regional Ties
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The Iran-Oman Gas Deal: Its Positive Impacts on Bilateral and Regional Ties
Behzad Shahandeh
Geography and common interests have bound Oman and Iran despite sometimes unfriendly relations. In 1973, Iran sent troops and fund to help the then newly-established Sultanate quell an uprising in the provinces of Dhofar(1). With regards to Iran relations with Persian Gulf littoral states, this support has set in motion a sense of good will on the part of the Omanis that is unprecedented in the region. As part of the Gulf Cooperation Council (the GCC), Oman has in general adhered to the organization’s posture in relation to Iran, while at the same time pursuing a pragmatic approach towards its northern neighbour. In November,1985 Muscat was instrumental in persuading the GCC to revise its stance on the Iran-Iraq war and end its all-out support of Baghdad, demanding a settlement of the conflict, and successfully hosting preliminary negotiations that led to the ceasefire of 1988 (2). The Sultanate denied the Iraqis the use of its territory to launch strikes against Iran. “The two countries’ bilateral relations are marked by a degree of historical depth and warmth that distinguish Oman from its fellow GCC members…” (3).
The historical trend to good neighbourly relations has been augmented by the need for more energy cooperation due to the mutual benefits envisaged for both sides. While Iran holds the world’s largest gas reserve of 33.6 trillion cubic meters, accounting for 18 % of all deposits worldwide, its sanction-ridden economy is in dire need of foreign exchange. Conversely, Oman’s continuing efforts for modernization and energy diversification call for increasing gas imports, as witnessed by its domestic consumption which soared from 5.5 bcm in 2002 to 17 bcm in 2013, failing which the country’s energy security might be jeopardized in the coming years (4). Moreover, Oman-Iran energy cooperation is facilitated by their geographical proximity across the narrow but bilaterally and internationally strategic Hormuz strait, with numerous ports that are sometimes only tens of kilometres away from one another.
In this context, the largest gas deal in the region was concluded in May 2014 by Muscat and Tehran. It provides for the construction of a 1 billion dollar, 200 km undersea pipeline which will allow 60 billion dollar worth of exports over 25 years. The first ever to cross Iranian territory, it is scheduled to become operational by 2018 in exporting 10 bcm of gas from Iran’s giant off-shore South-Pars gas field (5). Oman’s economy will benefit from the deal through increased energy security and contribution to gas import resource diversification. On the Iranian side, the deal will boost the cash-stripped economy and enable it to upgrade the investment-hungry energy industry. As the gas sector is more sanction-free than the oil sector, the plan to initiate the deal is expected to face fewer obstacles, and once overall sanctions are eased and in time lifted, the operation will gain momentum. Not only will their gradual loosening open up the great potentials that Iran has economically, but it will also pave the way for political dialogue and fence-mending. As far as bilateral ties are concerned, the deal already has solidified them to an unprecedented level, and it can only be conducive to better relations across the board. As the benefits of deepening economic bilateral ties come to the fore, they will open up new venues for cooperation between Iran and other states within the region.

1. Ibrahim Nawar, Omani foreign policy from isolation to diplomatic mediation, Ahram, 1992 (reprinted in 2013).
2. Iran and Oman: Relations based on rationality and peaceful co-existence, Fars News, February 1, 2013.
3. Kristian Coates Ulrichsen, Don’t Overestimate Iran-Oman embrace, Middle East Eye, April 22, 2014.
4. Dalga Khatnoglu, Iran Lunges to end Qatari gas export monopoly to Oman, TREND News, March 14, 2014.
5. A Done Deal: Iran-Oman Finalize on $ 60 billion Gas Arrangement, Albawaba Business, September 3, 2014.