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Azerbaijan: Turkey Reportedly Agrees To Buy Azerbaijani Gas

Turkey has reportedly agreed to sign a deal next week to buy gas from Azerbaijan, ending months of delay. But the agreement may not end concerns that the Turkish economy may not be able to use any more gas than it is already committed to importing from Russia and Iran. Our correspondent Michael Lelyveld reports.

Boston, 8 March 2001 (RFE/RL) -- After months of pressure from Azerbaijan, Turkey is reportedly ready to sign a deal for gas imports during a scheduled visit by President Heidar Aliyev next week.

Turkish Energy Minister Cumhur Ersumer said on 6 March during a television interview that an accord would be signed, the Associated Press reported. Ersumer was quoted as saying, "We will seal an agreement both on a pipeline to transfer natural gas and for the sale of that gas."

The statement came two days after President Aliev's son Ilham made critical remarks about Turkey's long delay in signing a contract. In an interview on 4 March, Ilham Aliev, who is vice president of the Azerbaijani state oil company SOCAR, said the country might sell its Caspian gas to Iran unless Turkey agreed to a deal.

The Associated Press also quoted Ilham Aliyev as saying on 5 March that "If the agreement isn't signed during the visit, it won't be understood by the Azerbaijani and, I think, the Turkish public."

Azerbaijan has regarded a deal with Ankara as critical to the country's hopes of becoming a major exporter of Caspian gas, following the discovery of a giant gas field at the offshore Shakh Deniz deposit in 1999. Gas sales to Turkey have assumed even greater importance in light of the slow pace of new oil discoveries in Azerbaijan's sector of the Caspian during the past five years.

But Turkey has also been slow to respond to Baku's proposals. An agreement was originally expected in December. President Aliyev postponed a visit to Turkey in January when a deal still did not materialize.

Ankara's continuing reluctance seems to have surprised Ilham Aliev, who said in January, "I don't foresee any problems in signing a contract and selling our gas to Turkey." The younger Aliyev is often mentioned as a possible successor to President Aliev.

Unspecified problems have led to indefinite delays in the deal until now. Turkey reportedly balked at both the volume and the price of the gas that Azerbaijan wants to sell. Reports last year also suggested that Ankara preferred a deal that would include Turkmenistan as part of a plan to build a trans-Caspian gas pipeline.

Whatever the reason, the delay was seen as a setback for Azerbaijan's plan to offer gas that would be closer to the Turkish market than Turkmenistan. With the discovery of gas at Shakh Deniz in 1999, Azerbaijan suddenly demanded half the capacity of the trans-Caspian line to Turkey, making the project commercially unattractive to Turkmenistan.

Azerbaijan and Britain's BP oil company then decided to either upgrade an old Soviet-era pipeline through Georgia or build a new one. It was not immediately clear from Ersumer's statement which option Turkey will support. Officials have warned in recent weeks that any further delay in Turkey's decision could affect the timetable for pumping gas from Shakh Deniz starting in late 2002 or early 2003. Azerbaijan has hoped for a contract to sell 5 billion cubic meters of gas per year at the outset.

Turkey's delay began to take on political overtones after Azerbaijani officials noted that Ankara had signed large contracts for gas imports from countries including Russia, its main supplier, as well as Iran. There was a sense that Turkey's ethnic ties with Azerbaijan should have made an agreement easier to negotiate. The two countries are also united by their support for the Baku-Ceyhan oil pipeline.

But even with Ersumer's statement, Turkey may be even less prepared for a big gas deal now than it was one month ago because of the economic and political crisis that hit the country on 19 February. Although estimates of the impact vary, it seems likely to reduce the country's long-term demand for gas imports. The 25 percent devaluation of the Turkish lira since the crisis will also raise the cost of imported gas to consumers.

Russia and Iran already have a big lead on Azerbaijan in supplying the Turkish market. Even if Ankara signs an import agreement with Baku, there may be concerns that it will be unable to use large volumes of gas from Shakh Deniz in the coming years.

Azerbaijan has also viewed the gas link to Turkey as the first step in exporting through the country to Europe. Attention may have to turn soon to building transit gas lines through Turkey in case the country's economy proves unable to absorb Caspian gas.