Volume. 12229
From resistance to resilience
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Resistance economy simply describes the bypassing of sanctions. But economic resilience on the other hand describes the ability of Iran’s economy not only to retain function, employment and prosperity in the face of sanctions but also to rebound from economic shocks through building new capacity, functionality and capability. 
In fact, having resisted all the measures thrown against the Iranian economy, Iran is now in a position to move forward by transforming energy competition and conflict to energy cooperation. In this way, Iran may progress from a passive resistance economy to an active resilience economy.
The dialogue necessary to achieve energy cooperation has already begun, and important discussions are taking place in Tehran and around the current 10th International Energy Conference during 26-27 August 2014. 
Energy competition & sanctions
The history of international conflict and war is based upon competition for scarce resources, particularly land, energy and – increasingly – water. In his fine book “A Century of War: Anglo-American Politics and the New World Order” William Engdahl argues persuasively that the sole driver of English and American  foreign policy for the last 100 years has been the need for security of oil supply.
Conversely, from the producer perspective, despite attempts to cooperate – such as OPEC – oil suppliers have typically competed ruthlessly to secure demand at the expense of other producers. 
However, the current international sanctions regime has temporarily removed Iran from this energy competition, and for several reasons physical oil sanctions have acted to Iran's benefit. 
Firstly, had Iran's oil been sold on the open market, the price would certainly have been lower, and probably very much lower. Secondly, higher oil prices justified increasing Iran's petroleum product prices, which reduced the need for subsidies. Finally, because Iran still has the oil in the ground and available to sell at higher prices in the future.
Then, there is the question of financial sanctions. The international market expert and Senior Research Fellow at University College London, Chris Cook pointed out to Iran's Chamber of Commerce, Industry, Mines and Agriculture last year that these have acted very substantially to Iran's benefit, and this view surprised those present.  But as the scale of corruption of elements in the previous administration is daily becoming clearer, the benefits to Iran of being frozen out of dollar and euro accounts in Switzerland are also becoming evident.
In fact, some observers believe that if Iran had ceased to resist the United States and opted instead for the structural reforms and dollar economics of competition and greed which were inflicted on Russia after the fall of Communism, that the Iranian economy would have been drained of value and collapsed entirely into hyperinflation several years ago. So in a supreme irony perhaps the so-called 'smart' American financial sanctions may have had the unintended consequence of saving Iran both from itself and from American economic dollar hegemony.
Energy efficiency & renewable energy
There is a growing realization among Iran's leading energy policy makers that the cheapest carbon fuel is in fact carbon fuel saved, and that drilling for oil and gas savings and efficiencies – through mobilizing Iran's formidable intellectual capital – is economically preferable to drilling for physical oil and gas itself.
By way of demonstrating the potential Dr Katouzian, the director of the Research Institute of the Petroleum Industry (RIPI) at the forefront of Iran's energy policy development, recently pointed out at a conference that Iran's gas fired power generation is only 13% efficient. This compares to efficiencies of 40% using modern generation, and between 60% and 70% efficiency in countries like Denmark and Sweden where heat is also captured, stored and used. It means that for one unit of energy used by a Tehran household, perhaps nine units have been lost between the gas well and the consumer. Similarly, for every liter of gasoline saved by more efficient transport policy, perhaps three to four liters of crude oil have been saved at the well head. 
There is then the immense potential for Iran of renewable energy technology such as solar energy everywhere and wind turbines on coasts and mountains in particular.  Historically the combination of extremely low and subsidized carbon fuel prices with 'least dollar cost' economics has largely prevented the use of these technologies, but as with energy efficiencies, this is where Energy Cooperation and Energy Diplomacy may change the game.
Energy cooperation
One of the 'Big Trades' of the 21st century, as Chris Cook pointed out earlier this year to a symposium of the Expediency Council in Tehran, will be the exchange of Intellectual value (knowledge, know-how and technology) for the value of carbon fuel savings and renewable energy. But this cooperation requires – as President Rouhani said at Davos earlier this year – new international multilateral institutional frameworks for energy cooperation.
This means going beyond government to government (G2G) dialogue, through institutions such as the regional Economic Cooperation Organization (ECO) and the international Energy Charter Treaty (ECT) Organization, whose secretary generals, will be meeting in Tehran this week to discuss matters of common interest. These new frameworks must be research-focused and should aim to bring together an empowered private sector with the support and facilitation of governments.
This approach could as Mr. Cook proposed here in Tehran during a conference almost two years ago - constitute an additional and complementary agreement for what could be Eurasian Energy Cooperation centered upon energy efficiency; renewable energy, and a next generation “Natural Grid”, as distinct from competing national grids.
How may such energy development be financed and its long term operation funded?
Energy swaps
During my time as a director general for Caspian Sea Oil and Gas Affairs prior to my retirement at the Ministry of Petroleum and NIOC within the framework of what is now referred to as energy diplomacy, I was involved with the setting the policies based on the concept of the Caspian oil swap. This enabled oil delivered in the north of Iran at the port of Neka to be exchanged for prepaid rights to oil delivered in the Persian Gulf. This energy swap concept was then extended to, for instance, the exchange of Iran's natural gas for some of the Armenian electricity generated from it and gas for gas exchange between Iran and the Republic of Azerbaijan for energy supplied by Iran to the Nakhchivan Autonomous Republic. 
Unfortunately these mechanisms and instruments do not thrive in the dark, and energy swaps at the port of Neka (oil swaps) fell into disrepute under the previous administration due to a lack of transparency. However, they are now very much under review, and I understand are likely to be re-introduced if the correct framework of trust can be developed.
Last year Minister Zanganeh called upon retired senior managers of the petroleum industry seeking their expertise and advice for helping him to rescue Iran’s petroleum industry from its current corruption problems and mismanagement. Many retired personnel like myself responded by providing views and opinions which I understand are under consideration by the ministry officials.  This Saturday I found an opportunity to talk to a senior adviser of the NIOC Pension Fund and brought to his attention that in the government’s recent publicized economy package for rescuing the country’s economy from recession and inflation energy issues have a crucial role. 
I suggested that the government should act courageously to reduce and stop paying cash energy subsidies to the public and for Minister Zanganeh to revisit and reactivate his plan as minister of petroleum in 2005 to establish an Iran Petroleum Exchange Bourse at Kish Island. Regrettably, the desire on the part of certain elements to avoid transparency in physical market transactions also effectively killed any possibility of introducing the financial instruments identified by a comprehensive feasibility study in 2004.
However, a window of opportunity is once again open to access by energy consumers to new classes of exchange-traded energy swap instruments enabling financing and funding of energy projects of all types. This may be achieved through the use of direct investment in flows of energy and even energy savings through 'energy loans' offering a return in energy, rather than in any type of bank-created currency such as “dollars”. Furthermore, additional policies are made possible including the payment of subsidies using energy swaps (prepay energy credits) instead of potentially inflationary bank-created Riyals.
So a Eurasian Energy Clearing Union – where regional countries and populations enter into generic energy swaps within a suitable mutual guarantee of performance – could be a key institution created consistently with President Rouhani's proposal and the Supreme Leader's wise insistence on the energy independence and security which will flow from a resilience economy and transforming Iran from dollar economics and recession to energy economics and sustainable growth. 
Perhaps in this way Iran may also through energy cooperation and constructive energy diplomacy, make Mr. Cook's Big Trade, and achieve the transition to a low carbon economy in decades to come. 

(Mahmood Khaghani is a former director general of the Caspian Sea Oil and Gas Affairs Department of the Iranian Ministry of Petroleum. He is now retired and is a business development and joint venture advisor.)

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