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Iran: Tehran Seeking Foothold For Its Gas In Europe

Iran is seeking a foothold for its gas in Europe with a new pipeline across Turkey and a supply deal with Greece. But Russia seems to be keeping one step ahead with agreements reached by President Vladimir Putin during a visit to Greece last month.

Boston, 30 January 2002 (RFE/RL) -- A new competition may be shaping up between Russia and Iran for the gas market in Greece as both face the problem of a growing fuel glut in neighboring Turkey.

This week, Iranian Oil Minister Bijan Namdar Zanganeh is due to hold talks in Athens on possible gas sales, the official Iranian news agency IRNA said.

Greece has reportedly voiced interest in buying Iranian gas following the opening of a pipeline across Turkey on 10 December. While Greece's business is tiny, it could throw open the door for Iranian gas shipments to the rest of Europe, a goal long sought by Tehran.

The potential to link the Turkish and Greek gas grids may also be crucial to future gas exporters in the Caspian region, including Azerbaijan and Turkmenistan.

In a recent report, the U.S. Department of Energy called Greece "an important potential transit site for energy exports from the Caspian/Caucasus regions, with limited energy reserves of its own."

U.S. officials regard a Greek transit route as a potential relief valve for excess gas in Turkey, which has already signed import agreements with at least six countries. According to recently revised figures from the Turkish state pipeline company Botas, the country's gas supplies will exceed demand by 5 billion cubic meters, or 25 percent, this year.

Gas deliveries from both Iran and Russia are flowing into Turkey at a time when its economy is stuck in recession, raising the importance of passing the gas on to other countries.

The government estimates that Turkey's gross national product fell 8.5 percent last year. But it is still scheduled to import gas in huge amounts that were planned before an economic crisis struck the country 11 months ago.

Turkey has tried to bargain down the volume of gas it must buy from Russia under a take-or-pay contract. Russia already has two gas pipelines to Turkey, but it is continuing work on another $3 billion line across the Black Sea. Like the Turkish government, the partners in the huge project known as Blue Stream have been slow to admit that growth forecasts for Turkish gas use were overblown.

On 25 January, Gazprom executive board member Bogdan Budzulyak told reporters in Berlin that the opening of the Blue Stream route would be delayed from the first quarter of this year until at least the third quarter. Budzulyak blamed the setback on late deliveries from an Italian pipe supplier.

An official of ENI, the Italian gas giant which is Gazprom's partner in Blue Stream, did not respond to an RFE/RL request for comment. But a breathing space could come as a blessing, since Turkey has no storage for excess gas and no funds to pay fines for refusing the fuel.

The European Union has long envisioned a tie-in to Greece as part of its Interstate Oil and Gas Transport to Europe, or INOGATE, project. But Turkey's squeeze is likely to give it an added push.

The situation in Turkey has been aggravated by protests over rising gas prices that have soared far above the country's 68.5 percent rate of consumer price inflation, forcing the government into a dispute over price cuts with municipalities.

While Greece's gas use is only about 2 billion cubic meters per year, the INOGATE project foresees further links to a gas "ring" for Southern Europe, including Italy. Iran's entry through the newly opened pipeline to Ankara could be its first foray into Europe. Tehran has fostered good relations with Greece through one of its trilateral foreign policy structures that includes Armenia.

But Iran is likely to find Russian interests already entrenched. Gazprom provides about 80 percent of Greece's gas, with a similar proportion for Turkey.

During a visit to Greece in December, Russian President Vladimir Putin deepened his country's involvement in the energy sector. According to the Russian investment firm Troika Dialogue, Putin sealed an agreement to set up a Gazprom joint venture known as Prometheus Gas for marketing in the country.

Gazprom reportedly holds contracts for delivering over 6 billion cubic meters of gas to Greece annually, suggesting that Athens has plans for either enormous growth or transit to other countries. This week, Gazprom reported that it sold only 1.5 billion cubic meters to Greece last year.

Russia's Lukoil has also been seeking a share in Greece's Hellenic Petroleum, while Moscow is backing a Bosporus bypass line for Black Sea oil shipments from the Bulgarian port of Bourgas to Greece's port of Alexandroupolis. On the other hand, reports suggest that Greece has not been pleased with recent Gazprom price increases.

Despite the importance of a Turkish pipeline connection to Greece, conditions for the project may be fragile, considering the long history of conflicts between the Mediterranean neighbors. Botas signed a cooperation protocol with the Greek national gas company DEPA for starting feasibility studies a year ago.

All of Turkey's regional gas suppliers will have interests in seeing that the connection is made. But as the first two countries to reach the Turkish market, Russia and Iran seem likely to come into competition first.