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Turkey: Deferred Gas Imports May Lead To Feud With Iran

Turkey suggested last week that its gas imports from Iran may be delayed until next year. Our correspondent Michael Lelyveld says Ankara is trying to place the blame on Tehran, but so far, it has said nothing about the effect of its slowing economy.

Boston, 3 April 2001 (RFE/RL) -- As it struggles to recover from an economic crisis, Turkey may be on the verge of a feud over gas imports from neighboring Iran.

Late last week, Turkey's Anatolia news agency reported that Iranian gas deliveries may be delayed from July until early 2002 because Tehran has failed to build a metering station between the two countries as required under a 1996 contract.

Platt's Oilgram, an industry news service, said 30 March that it confirmed Turkey's version of the story with an unnamed energy official, who blamed Iran for the setback despite a long series of problems on the Turkish side.

Iran has been slow in responding to the story, perhaps due to its national holidays for the new year. But earlier delays have led to frosty relations and threats of big fines.

Last week's warning is the latest hurdle for Iran's huge 22-year deal to supply Turkey with gas. The contract has been controversial from the start.

The United States opposed the $23 billion gas pact when it was signed by the Islamicist government of Turkey's former prime minister, Necmettin Erbakan. But after Erbakan was ousted, Ankara vowed to honor the contract, saying the country's growing economy needed the fuel.

Both sides were supposed to build pipelines to join at the border, but Turkey's part of the project was repeatedly stalled. In December 1999, Iran raced to finish its line from Tabriz, lighting a flare on the frontier as a sign that it had fulfilled its part of the bargain.

Turkey was forced to admit that it was not ready to take delivery of the gas. Iran responded by demanding $200 million in fines to cover its costs under the terms of a take-or-pay contract. Turkey said it had been unable to secure financing due the worldwide crisis in emerging markets in 1998. It also cited trouble in buying a compressor because of U.S. export controls.

Eventually, the two sides compromised by agreeing to start deliveries on 31 July and to extend the terms of the contract. Turkey also took the opportunity to note that Iran was responsible for building the metering station, so that the amounts of gas could be properly billed.

In the latest episode of the dispute, Ankara has tried to put the burden back on Iran. As Platt's reported last week, "Energy officials now accuse Iran of having misled Turkey when it said it was ready to begin deliveries in January 2000." The news service quoted a Turkish official as saying, "If the metering station wasn't ready, how could they have pumped any gas?"

Turkey has refused to accept a temporary metering station on the border. At the same time, officials concede that Turkey's own pipeline work is not finished, although they promise that it will be complete in July.

But officials have made no mention of Turkey's current economic difficulties, which have raised doubts about its ability to pay for or use large additional volumes of gas.

The value of the Turkey's currency has fallen by one-third since February, when a political row erupted between the country's president and its prime minister. A Turkish delegation returned from Washington last week without a commitment for additional loans.

In meetings with experts in Washington, Turkish Energy Undersecretary Yurdakul Yigitguden stuck to the official line that the country's electricity demand would grow 8 percent annually, even though the government has forecast an economic decline of 2 percent this year. Yigitguden made no mention of any delays in Turkey's gas import plans.

But the country is also due to accept large increases in gas imports from Russia, which also holds take-or-pay contracts. Moscow is expanding deliveries through Bulgaria and is adding its new Blue Stream gas pipeline under the Black Sea.

A delay in supplies from Iran could give Turkey more time to recover from its economic slump so that it can use all the gas that it is obligated to buy. While Turkey's economy may be the real reason for slowing the gas import schedule, Iran's ability to deliver may also be questioned. Until the country's giant South Pars gas field in the Persian Gulf starts to produce, it is unclear how much excess fuel Iran really has.

But Tehran is unlikely to accept the blame for Turkey's predicament or the explanation that the minor matter of the metering station is at fault. Trouble has been brewing for years over Turkey's rosy forecasts of demand for foreign gas, and the July deadline for the Iran deal may only be the first that Ankara will miss.