Spain and Iran foreign ministers met last month in Tehran. / Picture: IRNA.
Celia Maza de Pablo. London.
Is Spain about to restart its friendship with Iran? The Spanish Foreign Minister Jose Manuel Garcia-Margallo met his counterpart Mohammad Javad Zarif on march 2nd in Tehran, in the wake of the Islamic Republic striking a historic agreement with the US last November. It accepted strict constraints on its nuclear programme in exchange for partial relief from sanctions imposed in 2012.
Before the sanctions, Spain was the Europe’s largest importer of Iran´s oil: 196,000 barrels a day, just over 14% of total Spanish imports. Both countries have missed each other during the last two years. They have much to catch up on, mutual cooperation in areas from trade to diplomacy. García-Margallo called for Iran´s support for Spain´s candidacy for non-permanent membership of the UN Security Council.
In 2012, Iran was Spain’s second-biggest source of oil: of almost 51.9 million tonnes of oil imports, Iran’s share (14.7 per cent) was behind only Russia (8.3 million tonnes, 16%) and ahead of Saudi Arabia (7.2 million tonnes,14%) and Nigeria (7.1 million tonnes, 13.6%.)
The value of Spanish oil purchases from Iran ranged from 1.53 billion euros in 2007 to 4 billion euros in 2011. Oil dominated Iranian exports to Spain. Meanwhile Spanish exports to Iran amounted to 450 million euros, according to Reserves Corporation Strategic Oilfield Products (CORES). Machinery and other capital goods dominated, accounting for 58% of the total, 2008-12.
Because of the benefits to Madrid of the Islamic Republic´s geographical position in the oil trade, Spain has tried to develop its relations with Iran during the past two decades. That trend has dominated Madrid’s foreign policy approaches both under Socialist Party and now under the Popular Party. Relations have been persistently developed through high-ranking visits by both countries’ officials and the conclusion of political, economic and cultural agreements. However, regarding Iran’s nuclear programme, Madrid’s position has been determined by EU and US decisions.
if Spain re-opens relations with Iran at the same level of 2012, Saudi Arabia could penalise it by stopping projects
When the sanctions came into force, Spain -with an overall energy dependence of almost 80% (20 points above the European average)- had to find new suppliers. As a result, at the end of 2013, Mexico was Spain’s largest oil supplier (15% of the total), followed by Saudi Arabia (14.1%) and Russia (14%). The Mexican connection came at a time when Mexican firms were pushing hard for more business in Spain, as with Sigma’s buyout of Campofrío, the Del Valle family’s investment in Banco Popular and Fintech’s in Banco Sabadell.
The Saudi connection is key. In fact, good relations between Riyadh and Madrid helped Spanish exports to Saudi Arabia to triple in 2013 over the previous year, to 103 million euros, according to the Spanish Institute for Foreign Trade (ICEX). In addition, in 2012, the excellent economic fit between the two countries led to a Spanish consortium signing a historic 6.7 billion euros contract to connect the Islamic holy cities of Medina and Mecca by high-speed rail.
Considered one of the most important infrastructure projects in the Arab world in recent decades, it has also had an impact on other Spanish engineering projects in Saudi Arabia. Spanish engineers FCC will be responsible for building three underground lines in Riyadh, a six billion euros mega-contract that is part of one of the largest civil engineering projects in the world budgeted at 16.3 billion euros, two and half times the Mecca-Medina AVE railway.
Meanwhile Spanish multinational oil and gas company Repsol closed its office in Tehran in February 2012, thereby ending its attempts to reach agreements with the Iranian oil authorities.
But now that US-led sanctions have been partially lifted, Spain has to make an important decision. Madrid´s dilemma is that if it re-opens commercial relations with Iran at the same level they were at in 2012, Saudi Arabia could penalise it by stopping projects of IBEX35 companies.
The ideal situation for Spain would be to maintain such links with both countries. But it is more likely that Riyadh, Tehran´s bitter enemy in the region, will push to keep sanctions in place until Iran proves its peaceful nuclear intentions. With sanctions on Iran partially lifted, Madrid now has to decide if turning to the Islamic Republic again as a principal provider of oil is really worth it.