Publication: Eurasia Daily Monitor Volume: 4 Issue: 161

On July 14 Turkey signed a Memorandum of Understanding with Iran related to gas and oil transit and joint energy investments. Turkish Energy Minister Hilmi Guler and a team of officials are currently in Tehran meeting with Hojjatollah Ghanimifard, international affairs director of the state-owned National Oil Company (Zaman, August 13). The two sides also agreed to increase their cooperation in electricity production and in the construction of natural gas power stations (Iran Press TV, August 13). On August 19 Turkish Energy Minister Hilmi Güler will make an official visit to Tehran, during which he is expected to sign a deal on electricity generation (NTV, August 13).

Moscow and Washington are both unsettled by the deepening Turkish-Iranian cooperation, because it threatens Russian access to Turkmen natural gas supplies and undercuts the U.S. strategic policy of isolating Iran.

Turkish Foreign Trade Minister Kursad Tuzmen said, “Approval of the agreement by the Iranian parliament is a very important development. Trade among the ECO [Economic Cooperation Organization] member states constitutes only 5 or 6 percent of the total, a very small percentage. We need to increase it and with this agreement in force, trade among the ECO member states will rapidly increase. I’m expecting an explosion in Turkey’s trade with Iran and Pakistan. The improvement in economic and commercial relations between Iran, Pakistan, and Turkey, which have many commonalities, cannot be left to chance. Today, the political determination on this issue exists in all countries. We expect the participation of the other ECO member states in ECOTA [ECO Trade Agreement] later” (Anadolu Ajansi, August 13). Tuzmen added that the preferential trade deals among Iran, Pakistan, and Turkey would begin to operate in early 2008, adding, “I’m expecting a boom in Turkey’s trade with Iran and Pakistan” (Aksam, August 13). Iran, Pakistan, and Turkey founded the ECO in 1985; the grouping expanded seven years later to include Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

In July Turkish Energy Ministry senior officials stated that, starting next year, Ankara intends to invest $3.5 billion in Iran’s South Pars offshore gas field, possibly by developing a joint venture with a European Union member state already operating in Iran, along with cooperation for exploration of gas fields in Assalouyeh. The Persian Gulf’s South Pars-North Dome gas-condensate field is the world’s largest. Shared by Iran and Qatar, it holds an estimated 53.8 billion cubic meters of natural gas in place and 56 billion barrels of condensate. Guler told journalists that rather than Turkey being solely a transit corridor for Caspian energy, Ankara is interested in establishing a Turkish-Iranian-Turkmenistan joint venture to sell natural gas to the European Union. In return, Turkey wants lower prices on its own imports of Iranian natural gas (Zaman, August 11). In a nod to a favored U.S.-European project, Iranian Oil Minister Kazim Veziri Hamane said that with growing European interest in purchasing Iranian natural gas via Turkey, discussions between Turkey and European countries could resolve all outstanding problems concerning the Nabucco natural gas pipeline (Keyhan, August 1).

The Bush administration does not want Ankara cooperating with Iran or Russia. Instead, it wants Turkey to place more importance on Azerbaijan’s Shah Deniz project or a proposal to buy natural gas from Iraq, even though U.S.-Turkish tension over northern Iraq and the ongoing insurgency there make the short-term success of a gas project with Iraq doubtful. U.S. Ambassador to Turkey Ross Wilson expects that Ankara would take U.S. concerns into consideration before implementing the terms of the MoU. On the embassy’s website Ross commented, “First, an MoU could seriously set back the work that Turkey and the United States have been doing for a decade to develop the Caspian Basin gas resources as well as a pipeline infrastructure to bring those resources to Turkey and to international markets. By continuing to support projects like the trans-Caspian gas pipeline, Turkey’s regional leadership will help diversify its and other European countries’ energy supplies, make Turkey a key gas transit country, and strengthen the developing economies of Turkey’s neighbors. A major increase of Iranian gas exports to Turkey and beyond may hinder the development of gas resources in Azerbaijan, Kazakhstan, and western Turkmenistan that might come to Turkey” (https://turkey.usembassy.gov/).

Washington has adopted an increasingly bellicose tone toward Iran, with the Bush administration reportedly considering adding Iran’s Revolutionary Guard to its list of terrorist organizations even as Congress mulls legislation that would require President George W. Bush to impose sanctions on European and other foreign companies that invest more than $20 million in Iran’s petrochemical industries. Should Turkey proceed with implementing the MoU, it would weaken, perhaps fatally, Washington’s ongoing attempts to isolate Iran. But if Turkey chooses solidarity with Washington over securing its energy needs, what will Washington offer in return?

The Bush administration will have a chance to voice its objections to Turkey’s deal with Iran at the International Black Sea Oil and Gas Summit, scheduled for September 6-7 in Istanbul, where topics for discussion will include regional cooperation and opportunities, energy security, relations with the European Union, environmental issues, the security of the Turkish Straits, and pipelines (Turkish Daily News, July 16). State Department diplomats have three weeks to come up with an attractive alternative to Iran’s offer. If there is a silver lining in all this for Washington, it is the fact that the MoU’s terms will be valid for only six months.