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Analysis: Turkey and Iran's energy ties

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by John C.K. Daly
Washington (UPI) Oct 30, 2008
The collapse of the Soviet Union in 1991 opened rich new vistas for Western oil companies, which suddenly saw the possibilities of participating in the development of Caspian energy reserves in the three new former Soviet republics there -- Azerbaijan, Kazakhstan and Turkmenistan. Western efforts have been mixed, but amid the flood of articles on the new energy frontier, relatively little has been written on the impact of Washington's policies on neighboring states, as a key tenet of U.S. policy has been that export pipelines should avoid both Russian and Iranian territory.

In the opening shot of what might become the eventual death knell of the U.S. sanctions policy against Iran, Turkey, in what diplomatic parlance terms "frank and candid discussions," informed U.S. Undersecretary of State for Political Affairs Nicholas Burns last month during his visit to Istanbul that its advice on its energy policies toward Russia and Iran was neither sought nor appreciated.

On Sept. 5 Burns met with Turkish Prime Minister Recep Tayyip Erdogan at his office in Istanbul for 40 minutes of closed door discussions. The pair had a lot to discuss, including the shutdown on Aug. 5 of the Baku-Tbilisi-Ceyhan pipeline, as well as the five-day Russo-Georgian conflict that erupted two days later.

Getting right to the point, at a press conference that followed the meeting Burns told reporters, "We don't think that it makes sense (for Turkey) to announce long-term oil and gas deals with Iran," before adding diplomatically, "But again, we are not singling out Turkey for criticism or attention; this is the general U.S. and West European message to many other countries."

In reply, the Turkish prime minister pointed out a simple economic reality that Washington has either neglected or ignored, saying, "Russia and Iran are Turkey's most important sources in terms of natural gas. Currently our people consume natural gas in 47 out of 81 provinces. We aim at making use of natural gas nationwide."

After returning to the United States, during a presentation on Sept. 13 to the Atlantic Council Burns returned to his theme, saying, "We have worked well together to support the clear international consensus demanding that Iran cease its nuclear weapons development programs. Turkey has also proven to be a strong partner in countering Iran's support for terrorists in the Middle East. But the United States and Turkey still need to work out some tactical differences in handling Iran. We understand that Iran is a neighbor of Turkey and key trading partner, which sends over a million tourists to Turkey each year. Turkey's recent conclusion of a memorandum on energy cooperation with Iran, however, is troubling. Now is not the time for business as usual with Iran. We urge all of our friends and allies, including Turkey, to not reward Iran by investing in its oil and gas sector, while Iran continues to defy the United Nations Security Council by continuing its nuclear research for a weapons capability."

The "long term" gas deal that so distresses Washington officials is a July 24 preliminary agreement signed between Turkey and Iran to construct two pipelines to supplement the current 1,601-mile-long Tabriz-Ankara natural gas pipeline. The first pipeline would transit gas from Iran's offshore Persian Gulf South Pars gas field and the second, far more problematic, from Iran's neighbor Turkmenistan.

Even worse, from Washington's viewpoint, according to the Iranian media, Turkey intends to invest $3.5 billion in Iran for natural gas production.

U.S. foreign policy has sought to contain foreign investment in the Islamic Republic of Iran with the 1996 Iran-Libya Sanctions Act, which threatens even non-U.S. countries and companies with potential stiff sanctions if they invest more than $20 million in developing Iran's energy resources. The same year Turkey first crossed swords with Washington over its Iranian policy by signing a contract with Iran for natural gas deliveries, which began in December 2001 via the Tabriz-Ankara pipeline.

Up to now the sanctions overall certainly have produced the desired effect. On Oct. 11, speaking at the International Oil Refining Forum in Tehran, Iranian Oil Minister Gholam Hossein Nozari told his audience that Iran needs more than $20 billion investment in the country's oil refining industry alone. Given the size of the proposed Turkish outlay, the question is whether Washington will studiously ignore the cooperation, as it did in 1996, or will it see the $3.5 billion as a gesture too broad to ignore, which could prompt other nations to do the same.

Ankara's reaction to Washington's implicit threats is already evident; next month Turkish Energy Minister Hilmi Guler will visit Tehran for further discussions with Iranian officials on the gas agreement.

Bad as Washington views Turkey's increasing energy rapprochement with Iran, Turkey's dependence on Russia, its other bete noire, is even worse. Erdogan's chief foreign-policy adviser, Professor Ahmet Davutoglu, recently noted that Turkey is between 75 percent and 80 percent dependent on Russia for energy imports of natural gas and oil. Turkey currently relies on Russian imports for 29 percent of its oil and 63 percent of its natural gas, with Iran supplying the remainder of its natural gas.

The Russian-Georgian military confrontation highlighted the West's naivete in placing all its hopes in utilizing Georgia as an energy corridor for the export of Caspian hydrocarbons, and dealt a severe setback to Turkish aspirations to position itself as the premier transit corridor for those exports. Beyond those hopes, the more immediate concern of the Erdogan administration is to ensure the country's continued access to natural gas for indigenous needs, even if it comes from countries that Washington views with disfavor. As Erdogan said, "It is impossible for us to say, we are cutting natural gas cooperation with these countries."

As for sanctions, January will see a new administration in Washington, and apparently Turkey, Russia and Iran, along with millions of Americans, are waiting until January for the clock to run out, as the new year holds out the possibility of real "change."

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