Iranian Petroleum Minister Seyyed Kazem Vaziri-Hamaneh and Turkish Energy Minister Hilmi Güler signed a Memorandum of Understanding (MoU) under which Iranian and Turkmen gas will be exported to Europe via Turkey. Also agreed upon in the MoU was the development, on a buyback basis, of part of the giant South Pars natural gas field in the Persian Gulf.
"It was agreed that Turkey would develop three phases -- 22, 23 and 24 -- of South Pars and offer the gas produced to Iran on a buyback [basis]," Iranian state-run radio quoted Vaziri-Hamaneh as saying.
According to the two-page MoU, working groups will be set up to prepare another draft MoU in the third week of August concerning gas exports via Turkey to Europe. Those working groups will also finalize terms and conditions concerning Turkish development of the South Pars field within four months and, if the details cannot be finalized by then, negotiations will be extended for another two months.
The MoU already signed between Turkey and Iran will be valid for six months.
The energy cooperation between the two countries now embodied in the MoU was criticized by the US, who has reminded Ankara of existing sanctions against Iran while also stressing a commitment to trans-Caspian energy projects that would bypass the Dardanelles and Bosporus Straits and Iranian routes.
US companies are barred from doing business with Iran and a law passed in 1996 allows Washington to penalize even foreign firms engaged in commerce with Tehran over a certain value.
The contents of the MoU seem positive for Turkey, which has long wanted to become an energy route between the energy-rich Caspian region and Europe.
However there are still several issues that come to my mind before this cooperation becomes a viable deal.
For example:
(1) Among the conditions for Turkey to enter into energy cooperation with Iran is Tehran reducing the price for the gas it has been selling to Ankara since 1994. My well-informed sources stated that there has been no such pledge from Iran on the gas price issue. An international court of arbitration has been examining Turkish complaints over the high gas prices that Iran has been charging.
(2) Turkey would develop three phases -- 22, 23 and 24 - of the South Pars field and offer the gas produced to Iran on a buyback basis. Under this model, Turkey would resell the gas it extracted from the said field to Iran. Thus Turkey will not have control of the price of gas that it will develop and sell to Iran. What kind of profit can Turkey expect?
(3) Turkey has been negotiating an energy cooperation deal with Iran since October of last year and it finally culminated with the announcement of the MoU this past week. But during these long negotiations Turkey, among other things, suggested that Iran set up a joint company so Ankara will know how much Iran will charge for the gas from South Pars that it will sell to Turkey. But Iran turned this offer down.
(4) Iran has long been insisting that Ankara permit a transit route to Europe via Turkey for both Iranian and Turkmen gas. But Iran did not want to give Ankara gas in return.
(5) Will Iran remain a reliable partner in long-term energy cooperation deals? Turkey has suffered, particularly in winter, from Iran frequently cutting the flow of gas to its neighbor.
(6) Turkish-Iranian gas cooperation may also accelerate the Nabucco project intended to carry first Caspian and then Iranian gas to Europe via Turkey. But both Turkey and the Nabucco partners have been blaming each other for the project's delay. For its part, Turkey raises questions such as the lack of an agreement about gas suppliers for Nabucco. The Nabucco natural gas pipeline project was intended to reduce Europe's dependency on Russian gas.
(7) Ankara has a deep suspicion that Austria, whose OMV company is heavily involved in gas deals with Iran and which has been the leading partner in the Nabucco project, is pursuing a policy to ensure first that the Nabucco pipeline is built and then that Iranian gas sells cheaper to Nabucco partners. Thus Turkey is concerned that Tehran and Vienna have a secret deal for this purpose.
There might be more questions to be asked, but these are a few I find vital to Ankara and Tehran's cooperation becoming viable.
Still, after speaking with senior Turkish officials, my impression is that Turkey is firm in its decision to go ahead with Iran provided Ankara will ensure maximum guarantees for its own energy security. In other words, Ankara will continue negotiations or cooperation if it is not satisfied with Iran's responses to the above-mentioned questions, as well as some others I may have forgotten to pose.
