Ashgabat, 3 January 2017 (nCa) — The matter was actually quite simple: You pay for what you use, you pay what you agreed to pay, and you pay when you are supposed to pay.
We are talking of the Turkmen natural gas supplies to Iran, a purely economic matter that has acquired a multitude of unpleasant hues because of the irresponsible statements of some officials and off-the-cuff media coverage by the Iranian side.
Turkmenistan supplies natural gas to Iran under a long-term agreement. According to the terms of the contract, the price is determined on a formula based on a basket of perhaps eight hydrocarbon products, and payments must be made on weekly basis for the transported volume.
The parties to the agreement are Turkmengaz from the Turkmen side and NIGC (National Iranian Gas Company) from the Iranian side.
Hamidreza Araqi, the managing director of NIGC visited Turkmenistan in the last week of December 2016 to negotiate the terms and volumes for the supplies in 2017.
The Iranian delegation arrived in a defiant attitude because Turkmenistan had been reminding them throughout 2016 to find a way to clear the outstanding dues – about USD 1.8 billion – and they were clearly not prepared to do so.
The talks were complicated, mainly because of the uncooperative and sulky attitude of the Iranian side. Apparently they were in no mood to consider the settlement of the huge debt they had incurred.
On return to Tehran on 30 December 2016, they or at least their media, thumped their chest in victory and worded the outcome in such a way that harmed the atmosphere of trust and brotherhood that Turkmenistan always tries to cultivate with its neighbours.
Nevertheless, the question of debt settlement remained in its place and Turkmenistan had no choice but to terminate the gas supplies to Iran on 1 January 2017. This led to soiled and unparliamentarily barrage of statements and media reports from the Iranian partners. Except from the foreign ministry of Iran, it was hard to find a sensible word in the entire infosphere of Iran.
In this report we have pieced together the story as it unfolded inside Iran, clearly showing the inability to resist the urge to introduce drama and exaggeration in their narrative.
But, first we must look at the press release issued by foreign office of Turkmenistan on 3 January 2017. Here is the paraphrased, slightly abridged translation of the press release:
The message for the media
In the recent days, the media of Iran and other states have carried conflicting reports relating to the Turkmen-Iranian relations in the gas sphere. Some of them are talking about the alleged sudden and inappropriate termination bilateral agreement of deliveries of Turkmen gas to Iran from January 1, 2017. In other publications, on the contrary, it is noted that ‘Iran has signed a contract with Turkmenistan on Turkmen gas supplies for 5 years.’
In this regard, the Ministry of Foreign Affairs states that such diametrically opposite in nature and illogical content has no basis.
In fact, since December 1997, Turkmenistan in accordance with the contract of purchase and sale of gas, and supplies of gas to Iran, has strictly respected all the conditions of the bilateral agreement.
However, unfortunately, the National Iranian Gas Company, beginning in 2013, has not made the necessary effort to pay off its debt for natural gas previously delivered to the Islamic Republic of Iran. As a result, it formed a considerable debt on the Iranian side, which creates financial difficulties for the maintenance work in a normal mode of gas transportation infrastructure of Turkmenistan, focused on gas supplies to Iran under the long-term contract.
During 2016, the Iranian side has officially been repeatedly informed of the prevailing adverse situation in the gas supply and the possible restriction of Turkmen natural gas supplies. It was stressed that the delay in the payment of funds, due to the State Concern “Turkmengaz” which works on the principle of self-sufficiency and self-financing, may lead to a technical stoppage of work on gas wells, compressor stations, treatment plants and other elements of the gas system of Turkmenistan, in which natural gas is supplied to Iran. At the same time, the Turkmen side has made a series of proposals aimed at the prompt resolution of issues.
However, the lack of a positive response by the National Iranian Gas Company on the constructive initiatives of Turkmenistan, its passivity in the search for a mutually acceptable solution options have led to the forced restriction of deliveries of Turkmen gas to Iran from January 1, 2017.
The Ministry of Foreign Affairs of Turkmenistan, expressing the above, stresses that any attempts to politicize this issue, no matter where they may come from, will be regarded as unfriendly towards Turkmenistan action and immediately refuted by the Turkmen side.
As can be seen in this press release, Turkmenistan spared no effort in solving the issue but met no success because of the pre-determined attitude of the Iranian side.
Now, let’s see how Iran kept giving spins and counter-spins to the issue, with no regard to the fact that the relations between Iran and Turkmenistan are broad-based in nature and both the countries are partners in a number of regional processes, many of which are of vital importance for Iran:
The initial media reports were that the talks were in a deadlock because of outstanding payments of gas by Iran – some USD 2 billion – and Turkmenistan reportedly insisted that gas flow would be shut off on Saturday (31 December 2016) unless the dues were cleared or at least a clear-cut timetable was available for doing so.
Later, it was reported that gas supplies would continue because both sides had found a common position.
Still later, on 1 January 2017, it was reported that Turkmenistan had halted the gas supplies.
Here is the picture that emerges, piecing together the information from the Iranian media:
On 31 December 2016, Shana, the official news agency of Iran focused on the oil and gas sector, reported that “Iran and Turkmenistan have agreed to continue gas cooperation for a period of five years.”
This announcement was attributed to Hamidreza Araqi, the managing director of NIGC (National Iranian Gas Company), who had visited Ashgabat for the gas talks.
Araqi said that NIGC and Türkmengaz have reached an understanding for export and swap of natural gas between Iran and Turkmenistan as well as sketching future relations between the two companies.
He said that the two companies would form a joint committee to consider the disputed topics in the gas deal between the two countries.
This piece of information was given several twists by the Iranian media. At play was the Iranian inclination to shoehorn drama and exaggeration into the narrative wherever possible.
The Mehr news agency of Iran reported on 30 December 2016 that a breakthrough had been reached
Here is the Mehr news report, attributing the information to the ministry of petroleum:
“Turkmenistan’s President has signed a new gas deal with Iran under which Ashgabat will continue its gas exports to the Islamic Republic, an official at Iran’s Ministry of Petroleum (MoP) said Friday.
“The Iranian official went on to add that the details of the new gas agreement will be worked out in the presence of experts.
“This morning, due to Turkmens’ persistence on threatening to cut gas exports to Iran over claims of a $2 billion debt, the Iranian delegation left the negotiating table to return home. At the airport, Turkmenistan’s officials persuaded the Iranian delegation to come back to the negotiating table in hopes for reaching an agreement on gas delivery to Iran.
“An informed source had told Mehr News that if the two sides did not reach an agreement today, Iran was likely to cancel the gas deal from Saturday and start supplying northern provinces with domestic production.”
Simultaneously, Press TV, the state sponsored international TV channel of Iran, reported that the Iranian media had hailed the success in resolving the gas dispute with Turkmenistan.
The Press TV quoted some passages from an article from an Iranian news agency, presumably IRNA. Here is an interesting passage: “This deal proved that negotiation … is still the best way to resolve differences. That is the reason why some describe the recent agreement [with Turkmenistan] as the JCPOA-style gas deal,” it added in reference to the Joint Comprehensive Plan of Action that Iran sealed with the five permanent members of the Security Council plus Germany – the so-called P5+1 group of countries.
On the other hand, Tehran Times, the foremost English language newspaper of Iran, reported that an MP had asked for retaliatory action against Turkmenistan “for setting precondition for signing a new gas deal.”
The Times quoted Ardeshir Nourian, an MP from Shahrekord, as saying in the parliament, “The foreign minister should take immediate action against Turkmenistan in this regard.”
The MP was angry that Turkmenistan had asked for the settlement of the outstanding debt.
On 1 January 2017, the Mehr news and some other Iranian media reported that Bijan Namdar Zanganeh, the oil minister, had announcement that a preliminary agreement to settle the gas dispute had been reached instead of going to international arbitration. He gave some details of the agreement and said that efforts were underway to put a permanent end to the issue.
Zanganeh reportedly said that the gas contract would be valid for five years.
He said that currently Iran was importing 10 million cubic meters of gas per day from Turkmenistan and this volume would rise ‘within the next few days.’
Zanganeh said that the half of gas imports from Turkmenistan could have a profound environmental impact: “Interruption in gas imports will mean less supply of gas feedstock to power plants which will then have to burn more polluting fuels such as mazut,” adding that using mazut in power plants will only add to the worsening air pollution in urban areas, particularly Tehran, which is grappling with alarmingly high levels of air pollution that has closed schools and filled hospitals for the past several years.
The same media reports said that Araqi, the MD of NIGC, had said that plans are in place to speed up gas pipeline laying from the oil and gas-rich southern fields to the north if Turkmen gas is cut off. He said any possible major shortage of gas in the winter months can be avoided if consumption nationwide is reduced by 10%.
On 1 January 2017, Shana reported, “Turkmenistan has cut its gas supplies to Iran in an unexpected move one day after the two neighboring countries announced they had reached an agreement to continue their gas cooperation for at least 5 years.”
Shana reported that in reaction to the halt of gas, the NIGC (National Iranian Gas Company) had issued an appeal to the Iranian nation:
NIGC Statement on Türkmengaz Cutting Gas Supply to Iran
“The esteemed Iranian nation,
“Please be informed that:
“The National Iranian Gas Company (NIGC) and Türkmengaz signed a gas deal some 20 years ago for supply of a part of the gas consumed in Iran’s northern provinces by the Turkmen company.
“However, over the course of these 20 years, the Turkmen side has, from time to time, acted in such manners that would violate the deal and the spirit of good neighbor policy. An example of such behavior was curtailing gas supply to Iran in 2007 during the penetrating cold snap of the same year which forced the then-Iranian administration to undergo the unreasonable demand of Türkmengaz for a 9-time price rise in the gas it supplies Iran.
“Over the past three years, Iran has fully settled its debts to the Turkmen side based on the price agreed upon in the aforementioned deal, and talks began between the two companies for settling the issue and repayment of delayed debts with Iran claiming it has also undergone quality and quantity losses in the deal. The two sides reached an agreement in their latest round of talks.
“However, in an unanticipated move and disregarding the agreement, the Turkmen company has curtailed gas supply to Iran since this morning (Sunday, January 1, 2017).
“Regarding the fact that such a move by Turkmengaz is sheer violation of the gas deal between the two companies, we [NIGC] insist on our stance in the dispute and call on the Iranian nation to optimize gas consumption.
“We shall also proudly announce that Iran’s gas output has risen so much in the past 3 years that no more imports of the item would be needed and lack of supply in the cold could be met by conservation of gas in power plants, industries and the household sector.
“Furthermore, please be informed that our colleagues in the petroleum industry and the NIGC have set arrangements to prevent any gas cuts in the household sector so that with the help of God and people’s cooperation, this cold will be passed behind with minimum problems.”
On 2 January 2017, the Tasnim news agency of Iran reported:
“An Iranian energy official denounced Turkmenistan for going back on its word and cutting off gas supplies to Iran abruptly, saying, however, that Iran’s ability to feed the countrywide gas grid remains unaffected by such “immoral” measure by the Ashgabat government.
“In an interview with Tasnim on Sunday, spokesman for the National Iranian Gas Company, Majod Boujarzadeh, said the two countries had been holding talks on the payment and amount of the debts Iran would pay to Turkmenistan, saying an agreement was finally reached for settlement of the debts after more talks and in the long term.
“The Turkmens reneged on the promise and cut off gas supplies to Iran suddenly on Sunday, he added, saying that they have gone on New Year holidays and are not available to answer the calls.
“Nevertheless, Iran has no problem is feeding gas to the national grid, even in the northern parts of the country, he underlined.”
NIGC described the halt in gas supplies as “sabotage of the Central Asian state and invited Iranians to optimize gas consumption accordingly.”
NIGC also said, “Given that the measure taken by Turkmenistan is against contract provisions, Iran insists on its positions and invites the nation to optimize consumption. Moreover, with efforts of oil industry employees, natural gas production has reached a level which alleviates the need for imports.”
Iranian Foreign Ministry Spokesman Bahram Qassemi said on 2 January 2017, “[G]as dispute with Turkmenistan is not a political quarrel, either, but only involves technical and financial issues,” reports Tasnim news agency.
Qassemi said, “We will have no serious problems” and expressed the hope that the two sides would reach an agreement, given their rights.
The refusal to consider the settlement of a huge outstanding debt and the issuance of the kind of statements that are enormous embarrassment to themselves has put a question mark against the credentials of Iran as a reliable partner.
We can only hope that Iran will take quick steps to repair the damage it has caused to its reputation.