VZCZCXRO8045
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHMK #1070 3321438
ZNY CCCCC ZZH
P 281438Z NOV 07
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 7449
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUEADOE/USDOE WASHDC PRIORITY
RHBVAKS/COMUSNAVCENT  PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

C O N F I D E N T I A L MANAMA 001070 
 
SIPDIS 
 
SIPDIS 
 
NEA/ARP, EEB/ESC/IEC/EPC 
COMMERCE FOR 4520/ITA/MAC/ONE/THOFFMAN 
 
E.O. 12958: DECL: 11/28/2017 
TAGS: ENRG EPET ECON ECTRD IR BA
SUBJECT: OIL MINISTER COMMENTS ON IRAN NATURAL GAS MOU 
 
REF: MANAMA 922 
 
Classified By: Ambassador Adam Ereli for reasons 1.4 (a), (b), and (d). 
 
¶1. (C) Summary.  Oil Minister Mirza told the Ambassador 
November 26 that although Bahrain had signed an MOU with Iran 
to ensure that negotiations remained on track, Bahrain 
continued to hope that a Qatari or Saudi alternative would 
emerge.  However, Bahrain needed to continue moving forward 
to ensure it would be able to meet the gas crunch it expects 
to face in five-years-time.  Mirza acknowledged U.S. concerns 
over any gas deal with Iran, but observed that it also served 
U.S. interests for Bahrain to avoid the popular instability 
that an energy crisis would bring.  End Summary. 
 
¶2. (C) Minister of Oil and Gas Dr. Abdul Hussein Ali Mirza 
November 26 confirmed to the Ambassador that Bahrain had 
signed an MOU with Iran during the November 17 visit of 
Iranian President Mahmoud Ahmedinejad.  The MOU stipulated 
that the two countries would work to conclude an agreement by 
the end of 2008 for Iran to provide gas to Bahrain.  Mirza 
said this MOU was a general document, and that it did not 
address certain basic questions; e.g., would Iran sell gas 
directly to Bahrain, or to an international company that 
would then provide the gas to Bahrain?  How would the project 
be financed? 
 
¶3. (C) Mirza told the Ambassador he had raised his concern 
over well-known Iranian foot-dragging with newly-appointed 
Iranian counterpart Minister Gholam Hossein Nozari.  "He said 
it would be different now.  Iran wants to move quickly." 
 
¶4. (C) Mirza reiterated that Bahrain would prefer to buy gas 
from Qatar or Saudi Arabia but that it could not stand still 
while hoping access to these sources would materialize. 
Bahrain's industrial expansion, land reclamation projects, 
and development of new municipalities all required power. 
However, Bahrain still hoped that its publicized talks with 
Iran would spur the Qataris or the Saudis to be receptive to 
Bahrain's proposals.  "His Majesty the King has told GCC 
General Secretary General Abdul Rahman Al-Attiyah that 
Bahrain wants gas from the GCC." 
 
¶5. (C) The Ambassador reminded Mirza that any future 
agreement between Bahrain and Iran would be scrutinized under 
the terms of the Iran Sanctions Act (ISA).  The U.S. strongly 
disapproved of any investment in Iran's energy sector.  Mirza 
acknowledged awareness of the ISA and U.S. concerns. 
Nevertheless, "Bahrain needs gas.  There are others that we 
would prefer to get it from."  Mirza then recalled that 
sporadic outages due to power transmission problems over the 
past summer had led to popular protests.  The situation would 
have been more dire if there had been no power at all. "In 
five years, we won't have enough gas to supply the power we 
will need.  The whole country could collapse.  I don't think 
that would be in the interest of the U.S." 
 
------- 
COMMENT 
------- 
 
¶6. (C) While Bahrain's gas MOU with Iran falls short of a 
firm agreement, it is a further step in that direction. 
Officials note that the MOU's language is general and that it 
is essentially an agreement to keep talking.  This may be 
true. (Emboffs have not seen the agreement.)  However, it is 
also true that GOB officials assess that Bahrain will face a 
major gas crunch between 2012 and 2014.  They further assess 
that a pipeline with Iran would take 3-4 years to build. 
Counting backward from 2012, and assuming a best-case, 
three-year project completion time-line, pipeline 
construction will need to commence not later than 2Q 2009 in 
order to see completion before 3Q 2012, when annual power 
consumption will peak.  But before construction can begin, 
financing needs to be secured and project tendering 
completed.  This highlights Bahrain's need to finalize an 
agreement in 2008.  Barring tangible developments with Qatar 
or Saudi Arabia in coming months, circumstances may well 
dictate that Bahrain's gas agreement will be with Iran.  End 
Comment. 
 
********************************************* ******** 
Visit Embassy Manama's Classified Website: 
http://www.state.sgov.gov/p/nea/manama/ 
********************************************* ******** 
ERELI