January 3, 2017 / 9:09 PM / 7 months ago

Turkmenistan limits natural gas supplies to Iran over arrears

3 Min Read

ASHGABAT/ANKARA (Reuters) - Turkmenistan has limited natural gas supplies to Iran since Jan. 1 over unpaid past deliveries, the Turkmen Foreign Ministry said on Tuesday, a day after Iran said supplies through a cross-border pipeline had been cut off.

The ministry said Ashgabat, which exports to Iran about 9 billion cubic metres of gas a year, made the move after trying unsuccessfully to collect debts from the National Iranian Gas Company (NIGC) since 2013. It did not disclose the amount owed.

However, Iran's National Gas Company (NIGC) condemned the move by Turkmenistan as a violation of a bilateral accord.

"Cutting the gas flow is an obvious violation of the deal ... Referring the dispute to international arbitration is on Iran's agenda," it said in a statement published on the Iranian Oil Ministry's website SHANA.

"Under the agreement, the Turkmen side cannot halt the gas flow even if there is debt or a payment delay."

Urging the Turkmen Foreign Ministry to avoid getting involved in "a legal issue between the two gas companies", NIGC said Iran had already paid "over $4,5 billion" to Turkmenistan.

"Most of this debt dated back more than a decade to when Iran was sanctioned and could not transfer cash ... but even then, based on mutual understanding, NIGC exported parts and provided services to the Turkmen side in exchange," it said.

Iran emerged from years of economic isolation in January 2016 when world powers lifted sanctions against the Islamic Republic in return for Tehran complying with a deal to curb its nuclear ambitions.

NIGC said on Monday the cut-off was made "suddenly and ... in an illogical manner, contradictory to agreement".

Tehran said in December that Turkmenistan had threatened to stop gas exports because of arrears, which amounted to about $1.8 billion and dated back more than a decade. Iran wanted to refer the issue to arbitration.

But on Friday, Iranian oil minister Bijan Zanganeh was quoted by Mehr news agency as saying that Turkmenistan had reached a temporary agreement with Tehran to continue gas supplies.

Iran has major natural gas fields in the south but has imported gas from Turkmenistan since 1997 for distribution in its northern provinces, especially during the winter.

In November, France's Total said it had signed a deal with Iran to further develop its part of the world's largest gas field, becoming the first Western energy company to sign a major deal with Tehran since the lifting of sanctions.

Writing by Parisa Hafezi; Editing by Gareth Jones

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