Ashgabat, 5 January 2017 (nCa) — It is perplexing – Hyperbole is the default mode of the Iranian side whereas Turkmenistan is explaining the situation in a calm and measured manner.
What does Iran actually want?
On 3 January 2017, NIGC (National Iranian Gas Company) issued a statement, adding several layers of untruth to the already high mountain of misstatements by the Iranian officials and imaginary tidbits by the Iranian media.
At the heart of the matter is a simple truth – Iran owes Turkmenistan about USD 2 billion in the arrears of the natural gas it consumed several years ago and is now trying to wiggle out by whatever means.
An Iranian delegation led by the head of NIGC visited Turkmenistan in the last week of December 2016 with a pre-determined attitude to refuse to discuss the issue of settlement of the outstanding debt. The logical outcome was that the Turkmen gas supplies were curtailed on 1 January 2017.
Since then, the Iranian officials and media have been issuing conflicting statements, which have been covered in our analysis on 3 January 2017.
In reply to the NIGC statement of 3 January 2017, the foreign office of Turkmenistan released a press statement on 4 January 2017.
First, let’s look at the NIGC statement issued on 3 January 2017, as carried by Shana, the specialized news agency of Iran focused on the oil and gas sector. We have highlighted the passages in bold italics in search of some clues for the direction the Iranian narrative wants to take:
NIGC Statement on Turkmenistan Cutting off Gas Flow to Iran
23:39 (Tuesday, January 03, 2017)
TEHRAN, Jan. 03 (Shana) — The public relations department of the National Iranian Gas Company (NIGC) has released a statement in response to Turkmenistan government’s decision to restrict gas shipments to Iran since January 1.
The Turkmen foreign ministry released a note on January 3 which said the Turkmen government has decided to restrict natural gas exports to Iran, saying, “Its ability to maintain its gas transportation infrastructure has been compromised by Iran’s failure to continue paying off old debts since 2013.”
The statement reads as follows:
In response to the recent move by the Turkmen government to restrict natural gas shipment to Iran, NIGC would like to announce that:
- the company, over the course of the recent years, has had the courtesy to clear all its dues and a part of the debt arrears through various methods to Turkmengaz which amount to over $4.5 billion.
What remains to be paid by NIGC is the amount the company could not have been able to clear during the years Iran was targeted by the sanctions which restricted direct payments to foreign banks; however, settlement of some debts was made under the sanctions by exporting goods and services to the Turkmen side besides issuance of guarantees by NIGC for the export of hundreds of millions of dollars worth of goods and services for exporters to Turkmenistan.
- parallel with talks concerning repayment of its debts to Turkmengaz, NIGC regards the Turkmen side responsible for violating articles of the export deal time and again which affected the quality and quantity of the gas flow to Iran and has earnestly demanded to hold talks for resolving such matters without any response from the Turkmen side.
- NIGC is currently under the impression that the legal, contractual and financial disputes between it and the Turkmengaz have been addressed in the gas deal and solutions have been offered in its articles, and that the two sides shall act solely in accordance with the path stipulated by the contract. Likewise, NIGC trusts that direct dialogue shall be the only way to address mutual disputes, however, given the fact that hour-long discussions between the two companies have proved futile, NIGC has reserved itself the right to follow up on the issue through international arbitration.
- it has been specifically made clear in the contract that Turkmengaz, even in the case of mounting debts or dues by NIGC, shall not be allowed to cut off gas shipments to Iran and such acts would be outright violation of the initial gas deal between the two companies and an indication that Turkmengaz is not a reliable partner in international transactions.
- regarding the fact that NIGC maintains that the created financial and legal row is merely an issue between NIGC and Turkmengaz, political authorities of Turkmenistan are respectfully expected to let the two sides of the dispute resolve their issues based on the articles set out in the contract and in accordance with commercial principles. Moreover, interference of the respected foreign ministry of Turkmenistan in this legal row is a vivid violation of the deal’s articles.
- NIGC has publicized its official stance regarding the dispute on its website on January 1 2017; with regard to the freedom of speech for the media in the Islamic Republic of Iran, NIGC shall not be held responsible for the veracity of what Iranian media outlets have released regarding the issue.
Public Relations Department, National Iranian Gas Company
There are a number of revealing facts in this statement. Let’s take the passages highlighted in the above statement and look at them one by one:
What remains to be paid by NIGC is the amount the company could not have been able to clear during the years Iran was targeted by the sanctions which restricted direct payments to foreign banks – While admitting that debts are there, NIGC still remains silent on offering any viable roadmap for their clearance.
NIGC regards the Turkmen side responsible for violating articles of the export deal time and again – This is the first time Iran is talking about any violations by the Turkmen side. Looking at the general pattern of how Iran conducts its affairs, we would have heard long ago had there been any violations of the contract by the Turkmen side.
NIGC is currently under the impression that the legal, contractual and financial disputes between it and the Turkmengaz have been addressed in the gas deal – If this is actually the impression in the Iranian minds, it has no justification to exist because the core issue i.e. the debt settlement is still untouched in a satisfactory manner.
NIGC trusts that direct dialogue shall be the only way to address mutual disputes – This would have been funny had this not been a serious matter because of the fact that the Iranian officials, particularly the NIGC management, are using their media in a frivolous and reckless manner to drain the pool of goodwill. If there actually is a desire for dialogue to deal with the mutual dispute, it has not shown itself so far in the flood of rhetoric emanating from their side so far.
hour-long discussions between the two companies have proved futile, NIGC has reserved itself the right to follow up on the issue through international arbitration – This threat of international arbitration is in the same paragraph of the NIGC statement that calls for ‘direct dialogue.’ It creates a hilarious image – someone holding a thick olive branch in a threatening manner. Clearly, the NIGC statement was drafted by the people with very limited intellectual capacity.
political authorities of Turkmenistan are respectfully expected to let the two sides of the dispute resolve their issues – What does it mean? Is it a street fight between two children in which the parents should not interfere? It is a matter of national importance. USD 2 billion amounts to a sizeable chunk of the GDP of Turkmenistan. The foreign office of Turkmenistan is responsible for looking after the national interests of Turkmenistan.
Obviously, amateurish and immature people in Iran are running with this issue, unmindful of the fact that they are damaging immediate and long-term interests of their own country. They seem to forget that Iran is dependent on Turkmenistan for its land trade with Central Asia and China. They also seem to forget that North-South railway line is poised to be a huge revenue generator and economic booster for Iran and it cannot function without Turkmenistan. They also are heedless of the negative implications their racket will have for the Central Asia-Middle East corridor.
In still broader terms, they are damaging several initiatives of Russia and Turkey, in which Iran and Central Asia are also onboard.
On the other hand, the foreign office of Turkmenistan is trying to handle the matter in a mature. Here is the translation of the press release issued by the foreign ministry of Turkmenistan on 4 January 2017:
In connection with information, published at official website of National Iranian Gas Company (NIGC), ministry of foreign affairs emphasizes the following:
The information of NIGC, being of slanted and biased nature, is considered by us as an attempt to mislead all regarding the issue of repayment of Company’s debt to the Turkmen side.
In particular, the statements, claiming the breach of contract by the State Concern “Turkmengaz” in terms of quality and volume of gas supplies, are untrue.
Actually, in the course of implementation of Contract for the supply of Turkmen gas to Iran, numerous violations of commitments taken by NIGC had been recorded. So, despite the fact that the principle “take or pay” is one of the main clauses of the Contract, during several years NIGC had not taken delivery of contracted gas in large quantities. At the same time, the Company did not pay any financial compensation to the Turkmen side.
The unilateral claims of NIGC on spending “long-hours of fruitless negotiations” are unfounded and emotional.
In this regard, it should be noted that Turkmen side regularly initiates the meetings, consultations and negotiations with representatives of the petroleum ministry of Iran and NIGC. In this process, the Turkmen side had repeatedly come out with concrete offers, aimed not only at addressing emerging issues on gas supplies under long-term contract, but also at the expanding Turkmen-Iranian cooperation in the gas sphere. Due to constructive approach of the Turkmen side, the parties had reached outcomes on pressing issues of gas partnership between Turkmenistan and Iran.
The company’s remark that “meddling of Ministry of Foreign Affairs into the legal dispute between the two companies is a breach of contract” is unexpected turn of information.
In this case, there is no breach by definition, since these kinds of issues are not fixed in commercial agreements or contracts. And it is well known that one of the main tasks of foreign ministry of any country is to protect the country’s interests (including economic one), rights of citizens and legal entities. The activity of ministry of foreign affairs of Turkmenistan in dealing with this subject matter should be understood exactly from this point of view.
Instead of raising the noise level, it would be advisable for the NIGC to seek help from more experienced people in the oil ministry and foreign office of Iran to handle the issue in a professional manner.
It is difficult to say as what does Iran actually want but what can be said with certainty is that Iran urgently needs intervention by wiser elements to solve the issue amicable without causing further damage to the brotherly relations between the two countries. /// nCa