Experts said that a recent decision to take Iran to international arbitrary is proof that Turkey is trying its best to remain at the bargaining table and negotiate an impasse over the price of gas it buys from the Islamic Republic which it finds unfairly high while the latter is still adamant on keeping the rates unchanged.
Of the natural gas that Turkey buys, Iran charges the most and this is the main cause of rising tensions between the two countries. Turkey currently buys a cubic meter of Azeri gas for USD 330 and pays Russia USD 400 for the same amount. However, Iran sells its gas to Turkey for USD 505 for each cubic meter which increases Turkey’s natural gas bill by an extra USD 800 million annually. The price of a cubic meter of natural gas is sold for USD 400 in international markets.
Turkey wants Iran to bring the price down to international levels. A similar situation arose between Turkey and Russia in the past however it ended when Turkey traded an agreement allowing the Russian South Stream pipeline to pass through Turkish territorial waters for a price discount. As a result, the price Turkey pays to Russia was reduced to USD 400.
Mr Oğuz Türkyılmaz board member of World Energy Council’s Turkish Member Committee said that “Both parties have shown their trump cards yet continue to stay at the bargaining table and they will reconcile over the price sooner or later. The arbitration may take up to 4 or 5 years and it is not rational for Iran to scuffle with Turkey, who will be its only Western trade partner when the US and European sanctions against Iran take full effect.
Türkyılmaz suggested both countries should conduct barter trade in the future where Turkey can supply Iran with goods that are being embargoed by Western countries and in return, Turkey can receive natural gas. He believed it is a solution that can benefit and satisfy both countries since it will help Iran to cope with sanctions and help heal Turkey’s current account deficit. The idea of purchasing gas from for example, Russia is not a solution since the pipelines are already operating at full capacity and they would not able to supply the eastern region of the country due to the lack of the necessary infrastructure.
Mr Necdet Pamir an energy policy expert and also a World Energy Council Turkish National Committee board member underlined that Turkey has every right to take the issue to arbitration and has a high chance of being proven right. He said Iran will not step back and lower prices in order to protect its image, but since Iranian politicians always benefit from good relations in its domestic politics with Turkey who has not joined the West to impose an embargo on Iran barter is a great option for both sides. Barter will provide an advantage to Turkey since the current trade volume between the two countries is USD 11 billion in which Turkey exports USD 3 billion while Iran exports USD 8 billion.
Meanwhile, Iranian officials noted that the discount on natural gas is bound to legal limitations which will be presented during arbitration. Although it has not been specified where Turkey is seeking arbitration, the International Chamber of Commerce in Switzerland which awarded Turkey USD 800 million in compensation in 2009 in a previous dispute with Iran is the most likely place where the arbitration will be held.
Mr Taner Yıldız energy minister of Iran said that “The price Iran offers is way above international market prices. Iran’s refusal to lower the price the country is Turkey’s second largest supplier after Russia made it inevitable for Turkey to bring the issue to arbitration. Besides high prices the take or pay condition in the natural gas contract between Turkey and Iran also brings a challenge to the bargaining process. The condition requires Turkey to import a predetermined amount of natural gas annually, meaning Turkey has to pay Iran a specific amount of money whether it needs that much gas or not.”
(Sourced from www.todayszaman.com)
