The National Iranian Gas Company (NICG) seems inclined to resolve through dialogue a quarrel with Ashgabat over the halt of Turkmengaz’ gas supplies to Iran, at the end of 2016, instead of suing the company in the International Court of Arbitration. According to Hamidreza Araqi, NICG managing director, ‘’Iran still has time for taking legal action against Turkmenistan but any issue, in my opinion, can be settled in negotiations.’’
As of January 2017, Ashgabat has limited its 9BCM of annual gas exports to Tehran, until then delivered on the base of a bilateral accord with NICG, because of the latter’s arrears, amounting up to $1.8bn and dating back more than a decade. The Iranian side claims that its debt had been accumulated during the sanctions years, when banking restrictions had locked the country out of the global financial system, and that it has already partially paid back Turkmengaz with goods and engineering services. Still in need of Turkmen imports for the satisfaction of domestic demand, Tehran has numerous times accused Turkmengaz of breaching their supply contract, the terms of which do not provide for a unilateral gas cut-off even in case of unpaid deliveries.
Turkmenistan’s decision to shut off gas flows to Tehran follows an announcement made by Gazprom, in early 2016, that it would cease buying Turkmen gas. These consecutive developments, topped by the excruciatingly tentative execution of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and the dilatory progress of the Trans Caspian Pipeline towards the EU markets, has progressively isolated Turkmenistan, leaving the Caspian Sea littoral state with only one remaining notable customer -China. Ashgabat expects exports to Beijing to grow to over 60BCM/a by 2020 (from today’s 30BCM/a), however overreliance on a single consumer market might endanger its long-term profitability and lessen contribution to its hard currency revenue.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-november-8-2017/#5
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