AHMADINEJAD AND OIL MINISTER TAKE THE HIT FOR GAS SHORTAGES

C O N F I D E N T I A L SECTION 01 OF 02 IRAN RPO DUBAI 000002

SIPDIS

SIPDIS

E.O. 12958: DECL: 1/22/2018
TAGS: ECON ENRG EPET PGOV PREL IR
SUBJECT: AHMADINEJAD AND OIL MINISTER TAKE THE HIT FOR GAS SHORTAGES

REF: A. ANKARA 0035; B. ASHGABAT 0007; C. ASHGABAT 0075

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CLASSIFIED BY: Ramin Asgard, Acting Director, Iran Regional
Presence Office, Department of State.
REASON: 1.4 (d)

1.(C) Summary: Due to gas cuts from Turkmenistan, northern and
northwestern parts of Iran have been facing gas shortages since
December 29; which in turn has forced Iran to cut its gas
exports to Turkey (reftels). The Guardian UK reported 22
January that at least 64 Iranians have died due to gas shortages
in freezing temperatures. Iranian political and economic
analysts initially joined the government in blaming Turkmenistan
for their woes, claiming that Turkmenistan is looking to secure
a higher price for its gas. After more than 3 weeks of
persistent shortages, however, blame has shifted to the Oil
Minister and President Ahmadinejad, with the Supreme Leader
siding with the Majles and forcing the government to provide gas
supplies from emergency gas funds. President Ahmadinejad is
taking a significant political hit for his initial refusal to
dip into emergency reserves for northern Iran which is suffering
from a particularly cold winter and record snowfalls. The
longer the shortages persist during the winter months, the less
popular Ahmadinejad will be in the northern provinces. End
Summary.

Turkmenistan cuts its gas supplies to Iran

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2.(U) Managing Director of the National Iranian Gas Company
Seyed Reza Kasayeezadeh announced December 30 that as of 1030
December 29, Turkmenistan had halted its gas exports to Iran.
Kasayeezadeh called on Iranians to temporarily curb their
consumption in a bid to make up for the shortages felt most
significantly in northern Mazandaran province. Kasayeezadeh
confidently asserted that gas imports would resume within 24
hours, as Turkmen officials blamed "repair and maintenance
operations" for the "temporary" halt of gas supplies to Iran.

3.(U) In the face of gas shortages Iran, in turn, reduced its
gas exports to Turkey by 75% January 1 and then cut them off
completely January 7. Embassy Ankara reported January 8 that
according to press reports, Iran said it had no choice but to
cut off its supplies to Turkey to make up for its own domestic
shortages due to the Turkmenistan losses (ref A).

4.(U) Over three weeks into the cuts, the Guardian UK reported
22 January that at lest 64 people have died in Iran due to the
gas shortages in the freezing winter temperatures.

Blame shifts from Turkmenistan to IRI government

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5.(C) One Iranian political and economic analyst, in a 14
January industry publication, echoed other reports that Iran
believes the reason for the halt is an attempt by Turkmenistan
to secure a higher price for its gas. According to the analyst,
Turkmenistan's move has led to an impasse between the two
countries, with Iran's oil minister refusing to hold talks on
the issue until Turkmenistan resumes its exports, while Turkmen
officials are refusing to talk until Iran pays higher prices for
its gas imports. (Note: According to RFE/RL Iran is currently
paying Turkmenistan $75 per 1,000 cubic meters, while Turkmen
officials are asking for $140. Asian news sources reported 21
January that China just signed a deal to import natural gas from
Turkmenistan at $195 per 1,000 cubic meters. Endnote)

6.(U) Continued shortages and mounting death tolls are forcing
Iranians to look at internal fixes instead of blaming
Turkmenistan for its woes. Rooz Online reported 21 January that
Oil Minister Nozari was called before the Majles to answer to
the shortages. Guardian News UK reported 22 January that
President Ahmadinejad suffered a "serious blow" after Ayatollah
Khamenei sided with the Majles, requiring him to supply the
villages suffering from power cuts with cheap gas. The Supreme
Leader ordered the enactment of a law requiring the government
to provide $975 million worth of gas supplies from emergency
reserve funds. Ahmadinejad had reportedly initially refused to
implement the bill, accusing the parliament of exceeding its
powers in passing the legislation.

7.(C) Comment: President Ahmadinejad stands to be the biggest
loser in this latest energy shortage. His political backing
comes largely from the provinces, not the capital. The longer
the northern provinces suffer from gas shortages during the cold

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winter, the more unpopular Ahmadinejad will become in the run-up
to the March parliamentary elections. This could have a
negative impact on candidates seen as aligned with him. It is
also noteworthy that the Supreme Leader publicly criticized
Ahmadinejad for the first time on such a sensitive issue, as he
has long expressed public support for the President.

8.(C) Comment continued: The irony that Iran is suffering gas
shortages and needs to import gas even though it is home to the
second largest gas reserves in the world, has not escaped the
attention of the Iranian public. With the population calling
for gas to remain within Iran it will be difficult for Iran to
make good on its promised exports until it receives foreign
investment and technology in the natural gas sector.
ASGARD