Accessibility links

Breaking News

Turkey: Iranian Gas Import Delays May Favor Russia

Iran's 25-year gas deal with Turkey seems to have suffered a major blow with a report that deliveries may be delayed by more than a year. The setback could give Russia an edge in the race for the Turkish market after the official start of its Blue Stream project last week. Our correspondent Michael Lelyveld reports.

Boston, 10 July 2001 (RFE/RL) -- Turkey's pipeline monopoly may be preparing for a one-year delay in gas imports from Iran, despite assurances from the Turkish government that they will start at the end of this month.

On 7 July in Ankara, the head of the Turkish pipeline company Botas announced the postponement after meeting with Iran's ambassador, Mohammad Hossein Lavasani, the Iranian official news agency IRNA reported.

Botas General Director Gokhan Yardim was quoted as saying, "Gas imports will most probably start in September of next year."

The statement raised questions because Yardim said in May that gas supplies from Iran would be set back only until this September or October. In statements last month, Yardim declined to set a date. The two sides had previously agreed that Turkey would start accepting Iranian gas on 30 July following an earlier delay last year.

Yardim's latest statement comes less than two weeks after Turkish Foreign Ministry Undersecretary Faruk Logoglu told officials and reporters in Tehran that "by the end of July, Iran will start its gas exports to Turkey."

Conflicting comments have become common as the contractual deadline nears for deliveries under the huge 1996 gas deal, which has been valued at over $20 billion. Iran completed a pipeline to the Turkish border over a year ago for its first major exports of gas.

But the two sides have quarreled over Iran's failure to complete a metering station on the border to measure the gas. Turkey has also been slow in building the pipeline and distribution network on its territory. The country's economic crisis and a corruption probe of the energy sector are also believed to be holding the project back.

The faults on both sides have made it hard to tell where the blame lies. Turkey has issued contradictory statements, leaving the question unresolved. Iran has also avoided issuing public threats of fines under its take-or-pay contract, as it has in the past.

Last year, Iran said it would seek $200 million in damages after Turkey conceded that it was unprepared to honor the deal. That episode ended after Turkey agreed to extend the term of the contract from 22 to 25 years. This time, the conflict has been kept largely behind closed doors.

At the meeting on 7 July, Ambassador Lavasani reportedly gave Botas a report on Iran's progress in building the metering station. Both sides voiced willingness to speed up the process. But according to IRNA, "No definite date has yet been declared for the outset of Iran's gas exports to Turkey."

The admission seems to be a major step back from the assurances of a 30 July start date, and also from the estimates of a brief delay until this fall.

There may now be reason to wonder whether the contract will be fulfilled, in light of the progress of a competing pipeline across the Black Sea last week. On 5 July, officials marked the start of the controversial Blue Stream project to pipe Russian gas to Turkey with a ceremony at the port of Samsun.

Despite grave doubts about Turkey's economy, Italy's ENI oil company has vowed to finish the underwater section of the line by next year.

But if the economy continues to slump, the $3.4 billion project could give Turkey enough gas next year in combination with existing Russian routes. Major parts of the project are backed by loan guarantees from export credit agencies and state-owned banks in Italy, Germany, Britain, and Japan.

Iran's recourse may be uncertain, despite its take-or-pay contract. Other countries, including Azerbaijan, also have agreements to supply Turkey with gas in coming years.

The solution to oversupply will be transit lines through Turkey to Greece. But it is unclear how soon and how much gas can be passed on to the rest of Europe.

The net result of last week's announcements in Turkey is that Russia's gas plans have made progress while Iran's face delay.