Iran Still Prefers Talks on Turkmen Gas Dispute

EghtesadOnline: The National Iranian Gas Company will proceed with a complaint to the International Court of Arbitration (ICA) against Turkmenistan's decision to halt gas supplies late last year if Turkmengaz—the state gas company—fails to sign a new agreement with Tehran, the NIGC managing director said.

News ID: ۷۷۶۵۴۷

27 May 2017

"Tehran is still interested in purchasing natural gas from Ashgabat. Nonetheless, if they do not accept to lower their prices as per contractual terms, they will have to deal with the issue at ICA," Hamidreza Araqi was quoted as saying by IRNA on Thursday.

The Central Asian state unilaterally halted natural gas supplies Iran in December in a move that violated the terms of its contract with Iran. The country increased gas prices nine-fold to $360 per 1,000 cubic meters from $40, Financial Tribune reported.

"We prefer talks to settle the issue, not the court of law," Araqi said, adding that if talks fail to produce the desired results, the international arbitration tribunal will be the last resort.

Asked about compensation from Turkmengaz on cutting gas supplies that was intended to pressure Tehran to clear its debts for past gas purchases, he said, "We have already presented them with our claims. It cannot be disclosed."

Pointing to the terms of the contract between the Turkmens, Araqi noted, "Turkmengaz cannot unilaterally cut off the gas supply even if Iran had unpaid dues. The company has alleged Iran should settle roughly $2 billion unpaid dues for gas deliveries."

Based on a NIGC statement, the debt dates back to the sanctions era when Iran was not able to do business with most countries due to banking restrictions. Iran cleared a big portion of its unpaid debt by providing Turkmengaz with goods and engineering services.

According to Araqi, despite the recent contention, bilateral swap deals are effectively in place.

"We are now receiving Turkmen gas from the northeast for delivery to Armenia and Azerbaijan" in the northwest, he said, without referring to the volume of swaps.

Iran's gas production capacity has reached 885 million cubic meters per day. It exports the fossil fuel to three neighboring states, namely Turkey, Armenia and Azerbaijan via pipelines.

Ankara receives more than 90% of the gas exports under a long-term contract, and Yerevan and Baku receive around 6% and 3% under swap agreements.