Iran-Turkey gas deal suffers setback

Sep 21, 2002 02:00 AM

Iran's bid to become a sustainable supplier to Turkey and Europe has suffered a setback after Turkey decided to halt importing Iranian gas out of quality considerations.
Turkish Energy and Natural Resources Minister Zeki Cakan said the purchase of gas from Iran had been suspended since June because of the poor quality of the gas, while adding that the imports would resume once the gas quality was upgraded.
Dismissing the Turkish assertions on sub-standard Iranian gas, Iranian Oil Minister Bijan Namdar Zanganeh claimed that "our gas has absolutely no quality problems". Trying to defuse the row over Turkey's suspension of Iranian gas, Zanganeh said international experts' opinions would be sought for establishing quality of the gas, while blaming Turkey's action on its economic woes.

The Iranian energy czar also pointed out that Turkey may have decided to increase its import from Russia at prices lower than the deal it previously signed with Iran. Under a $ 20 bn contract between Iran and Turkey, Iran is to supply 228 bn cm of gas via a 2, 577 km pipeline in a 25-year span, starting with an initial 3 bn cmpy and up to 10 bn cm by 2007.
Ranking second worldwide after Russia in natural gas deposits, Iran's whopping 20,000 bn cm account for 18 % of the world's proven reserves, making it a supplier long favoured by energy- strapped neighbour Turkey. Facing Turkey's objection to taking more gas, Iran threatened to claim compensation from Turkey, the amount of which depends on the volume of Iranian gas projected for export to the Turkey until the end of 2002.

Zanganeh said it is "not in Turkey's interests" to stop importing Iranian gas under the "take-or-pay" agreement, which made Turkey financially liable even if it does not take the gas it has agreed to buy from Iran.
The Iran-Turkey pipeline, which runs from the north-western Iranian city of Tabriz to the Turkish Capital Ankara, started pumping in December 2001, two years behind schedule due to delays in the construction and subsequentwrangling between the two sides over technical matters. The deal has been opposed by the United States, which said it rivalled a major project to carry natural gas from Turkmenistan to Western markets via Turkey.

While asking Ankara to honour the lucrative deal, Tehran should form a "grand strategic alliance" with Russia to avoid unnecessary and costly competition and rivalry between the world's number one and number two natural gas producers.
Meanwhile, looking for alternative market, Iran is currently holding talks with the Persian Gulf littoral states for the sale of gas. "Iran will not move quickly to seek a replacement for Turkey, but we have entered talks with some of the southern Persian Gulf countries on gas sales," Zanganeh told. He also rejected speculations that talks between Iran and Greece for the transfer of Iranian gas to Europe has been held up due to US pressures.

Iran sees the potential purchasing power in the European market and has stepped up efforts in lobbying for Europe's favour on Iranian energy following the start of pumping gas to Turkey, which serves as a bridge linking the two sides. Iran has hoped that Turkey can play a "central role" as a point of connection, by receiving gas from Iran and distributing it among European customers.
However, the Turkish decision has partly blocked Iran's efforts to become less dependant on oil selling for export revenue. This has been a headache for Iran's reformist President Mohammad Khatami, who has been groping for remedies for Iran's ailing economy.

Source: Xinhua
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