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Iran: Dispute Over Gas Endangers Turkmenistan's Plans

Iran's decision to cut gas imports from Turkmenistan may be a sign of increasing tensions in negotiations and dealings with Russia. Our correspondent Michael Lelyveld reports:

Boston, 12 May 2000 (RFE/RL) -- A dispute with Iran over gas sales has burst out into the open this week, endangering Turkmenistan's plans to boost its exports this year.

On Thursday, the official Iranian news agency IRNA quoted informed sources as saying that the country has cut gas imports from Turkmenistan by half since April 1 following a disagreement over pricing.

The account is partially at odds with a report by the Reuters news agency, which said that a deal to nearly triple Turkmen commitments of gas to Iran is also at risk because of doubts that Ashgabat has adequate supplies.

According to Reuters, Iranian officials claim that Turkmenistan's exports through a two-year-old pipeline have dropped to only 1 billion cubic meters per year, far less than an agreement to ship up to 5 billion cubic meters annually. Turkmenistan President Saparmurat Niyazov has been publicizing plans to increase deliveries to 13 billion cubic meters this year.

But Iranian officials complain that Turkmenistan does not have enough gas at its Korpedzhe gas field and that other supplies are not connected to the 200-kilometer line that runs to Kord-Kuy in Iran. The Reuters report also cites pricing as an issue, although it stresses the inadequacy of supplies. In any case, Iran is concerned that it is not being compensated for its $195 million investment in the line, which was opened in December 1997.

The payback period, which was to have lasted two years, is now likely to be slower because of the lower volumes of gas. The news also means that Turkmenistan is earning no cash for its exports to Iran.

But the real source of the dispute is likely to be competition with Russia and Niyazov's increasingly desperate efforts to spark interest in Turkmenistan's gas exports.

While courting Iran, Niyazov has also been promoting a huge increase in gas sales to Russia, hoping to close a deal in time for President Vladimir Putin's expected visit to Ashgabat this month. Niyazov wants to raise the current contract commitments to Russia from 20 billion cubic meters to 50 billion cubic meters per year. But as with Iran, the sticking point with Russia has been the price.

Russia actually needs gas because of a domestic shortage due to lack of investment and high export commitments to Europe. But until now, it has only paid $36 per thousand cubic meters, and only 40 percent in cash. Niyazov has asked for up to $46. Iran has only offered $28, making the bargaining complex.

Even if Russia succeeds in continuing to pay only $36 per thousand cubic meters, the deal may put pressure on Iran to pay more than $28 at a time when Turkmenistan still owes Tehran for building the Korpedzhe pipeline.

At the same time, Niyazov has been discouraging offers from a U.S.-backed consortium to build a trans-Caspian pipeline to Turkey. This week, the U.S. government's representative on the Caspian, John Wolf, criticized the lack of progress on the pipeline, saying, "Delay in itself is rapidly becoming an answer." The deal has been plagued by Azerbaijan's demands for half of the line's capacity and Niyazov's concerns that the terms are not attractive enough. By negotiating with Iran and Russia, Niyazov has been sending signals that he can sell his gas elsewhere. The row with Iran can only be a blow to such a strategy.

But there are suggestions that Iran may have other reasons to be angry. Niyazov has also been promoting a link between Turkmenistan's huge Dauletabad gas field and the Iranian city of Masshad with a short 60-kilometer line from Serakhs.

Dauletabad, on the Iranian border, is the same field that Niyazov has tried to use for a pipeline through Afghanistan to Pakistan. A U.S.-backed plan for the line was cancelled due to concerns about terrorism in Afghanistan. That project was planned to carry 20 billion cubic meters of gas per year.

But industry sources say that Russia now has its eye on Dauletabad, which was originally developed with Soviet investment. A deal with Putin to increase deliveries to Russia could bring Gazprom to Dauletabad, said one industry expert, who asked not to be identified. The field is still connected to the old Soviet pipeline network.

It is not clear how far the talks went between Turkmenistan and Iran over a Dauletabad link. But a connection could provide substantial amounts of gas to Iran's northern cities, certainly far more than the Korpedzhe field.

If Russia succeeds in tapping Dauletabad, Iran is likely to see Niyazov as playing too many games. Iran's decision to cut its imports may be a punishment for Niyazov's tactics rather than a concern that Turkmenistan does not have enough gas.