Iran: Turkey's price decrease request

National Iranian Gas Company (NIGC) manag­ing director Javad Oji acknowledged that Iran has received a request from Turkey to decrease the gas it exports to that country. Oji said Iran is looking into the request and plans to take measures.

He also noted that the government has no plans to increase gas rates with the implementation of the second phase of the subsidies reform plan.

Oji's remarks followed those of Turkish Energy Minister Taner Yildiz, who said that Iran had rejected its demand for cheaper natural gas and that Ankara might resort to international arbitration: 'We voiced our discomfort to them [Iranian officials] over the price of the natural gas we import and told them that the prices are high … so an international arbitration court seems inevitable.'

The announcement that Iran and Turkey are engaged in a spat over gas rates was a surprise, particularly as it came amid diplomatic visits by Iranian officials to Ankara. Iran views its gas exports to Turkey strategically, given that the country could provide a gateway to the European gas market.

Evidently, Ankara has leverage as it imports gas from both Iran and Russia. Turkey may also be taking advantage of the international pressure currently being applied against Iran in order to bargain for better conditions. Tehran will not be interested in prolonging a dispute over gas prices with one of its most important customers.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2012 Menas Associates

Turkey-Iran finalise energy roadmap

Energy Minister Majid Namjoo announced on 3rd May at a joint press conference in Ankara with Turkish Energy Minister Taner Yildiz that Iran and Turkey have finalised an energy roadmap aimed at promoting investment and cooperation between the two neighbours. Namjoo stated that the agreement will have a "promising prospect" for Iran–Turkey energy transactions, boosting the two countries' electricity transmission capacity from "the current 500 MW to 1,000 MW."

According to analysts, Iran has several important reasons for seeking to increase its electricity cooperation with neighbouring countries. First, selling electricity instead of gas and crude oil will give Iran added value for its exports. Second, such exports allow Iran to maintain its energy balance as it exports gas and consumes electricity in the summer (when domestic gas demand is low), and exports electricity and consumes gas in the winter (when domestic electricity demand is low).

Lastly, by connecting its grid to neighbouring countries, Iran is making it more difficult for its energy sector to be placed under sanctions, as neighbouring countries would find it difficult to replace their reliance on Iran's electricity exports and would therefore resist or circumvent such measures by the international community.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2011 Menas Associates