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Iran claim clouds Turkey's energy goals

An Iranian official's declaration that his country has entered into negotiations with European firms about the supply of natural gas into the Nabucco pipeline intended to supply Europe via Turkey was rejected this week by one of the firms concerned.

Reuters quoted the managing director of the state National Iranian Gas Export Company as echoing last month's statement by former German chancellor Gerhard Schroeder (president of the North Stream project that seeks to take Russian gas under the Baltic Sea to Germany for distribution to the rest of the European Union) that the Nabucco project could not succeed without Iranian gas.

However, a spokesman for German energy company RWE reiterated in reply that "Iranian gas is not necessary" to the pipeline, adding that "Iran is not [even] a potential member of the consortium" and that political conditions remain "unfavorable" for cooperation with the country.

This most recent skirmish in the war of press releases came after Turkey signed an agreement to invest US$3.5 billion in the Iranian energy industry, including production of gas from Iran's South Pars field. The agreement would in principle allow the Turkish Petroleum Corporation (TPAO) to capture some of the gas produced for export to Europe.

Yet it is far from clear where the capital for investment will come from during the current worldwide economic crisis, which affects Turkey as well. Even governments in Europe are encountering difficulties in finding financial resources for their energy projects, and Ankara's own investment projects in southeastern Anatolia lack funding.

Meanwhile, a separate statement from the Turkish side mentioned that progress had been made in negotiations with Azerbaijan for the supply of gas from Azerbaijan to Turkey. Although this appears to refer to the ongoing dispute over price over the current contract (see Azerbaijan and Turkey clash over energy, 23 October 2009), such progress, if it is real, holds implications for future Turkey-Azerbaijan cooperation over Nabucco.

As Baku is delicately playing Ankara off against Moscow as a potential large-volume consumer, so Ankara has responded by seeking to play Tehran off against Baku. Thus Turkey threatens to use Iran rather than Azerbaijan as the preferred transit country for gas from Turkmenistan for its own domestic consumption and/or onward re-export to Europe through Nabucco.

Indeed, it has come to light in the press that, in view of the on-again off-again understandings with the EU over commercial and legal questions (see Nabucco is still alive, 3 July 2009), Turkey wishes to purchase gas at its own northeastern border, then sell it on its western border. This creates potential difficulties insofar as Turkey, being owner of the gas, could then choose to withhold it for domestic consumption or simply to hold it in the Lake Tuz storage facilities that Gazprom three months ago agreed to build for Turkey.

Another agreement concluded during a visit by Turkish Prime Minister Recep Tayyip Erdogan to Tehran calls for a $2 billion investment to construct a crude oil refinery in northern Iran, likewise with an eye towards exports to Europe. In the 1990s, some Kazakhstani oil was exported to Neka, in northern Iran on the Caspian Sea. However, these were "swaps" in return for which Tehran exported equivalent amounts of its own production from its own ports on the Gulf in the south.

Moreover, the Kazakhstani volumes were never very great, partly due to the high sulfur content of the Tengiz crude (a problem eventually overcome in principle), but also due to Astana's accumulated dissatisfaction with the Tehran bureaucracy's failure to execute in a timely and businesslike fashion. Some production of oil in Turkmenistan's offshore sectors today goes to northern Iran, but it is very low-volume. As a result of these and other issues, it is therefore difficult to adjudge this project for a crude oil refinery exporting to Europe as realistic.

There is a distinction between Turkey's seeking economic cooperation and advantage from Iran and its seeking to be a tribune for Iran's interests. Yet this distinction is not implemented in practice by Turkish diplomacy: thus, for example, Erdogan castigates permanent members of the UN Security Council who advocate implementing sanctions on Tehran for its non-fulfillment of previous resolutions in the sphere of nuclear activities.

Such declarations, together with other recent developments beyond the energy sphere, create more than the impression that Ankara sees a strong and defiant Iran as being in Turkey's own national interest.

Many international observers have noted, for example, that Turkey invited Syria to participate in joint bilateral military exercises the day after it disinvited Israel from a joint North Atlantic Treaty Organization exercise in which it had long participated in the past. It is difficult to reconcile such moves with Foreign Minister Ahmet Davutoglu's insistence that Europe remains a main axis of Turkey's foreign-policy doctrine and international orientation.

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URL:  http://www.robertcutler.org/blog/2009/11/iran_claim_clouds_turkeys_ener.html
First published in Asia Times Online, 6 November 2009.

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