Ashgabat, 26 January 2017 (nCa) — In search of a textbook example of how to damage own interests, we don’t have to go far.
NIGC, the national Iranian gas company, is doing just that in a big way.
After refusing to talk about the settlement of nearly USD 2 billion debts with Turkmenistan, after violating the basic terms of the gas sale-purchase agreement for several years, after making false statements and failing to apologize when caught red-handed in a lie, the NIGC is now threatening to take Turkmenistan to the arbitration court.
The company has become a huge embarrassment for Iran.
First, a bit of context — The Turkmenistan-Iran gas sale-purchase agreement was up for renegotiation on volume and price for 2017. The NIGC delegation arrived in Ashgabat with a belligerent attitude in the last week of December 2016, threatening that they will stop buying gas if Turkmenistan brought up the issue of outstanding debts during the talks. Subsequently, on 1 January 2017, Turkmenistan cut down the gas supplies to Iran because of the heavy and long outstanding debts. This led to badmouthing by NIGC officials, mixing insults with threats. The last of which is that NIGC will go for international arbitration to penalize Turkmenistan for cutting down the gas supplies.
It is important to underline here that NIGC is the only entity or organization in Iran that is carrying on with this self-damaging attitude. The government of Iran, on the whole, is maintaining an uneasy silence, with some remarks hinting that the higher officials are embarrassed by the lunatic attitude of NIGC.
The Iranian Oil Minister Zanganeh, speaking in a TV programme of IRIB on 15 January 2017, said that NIGC had been put in charge of pursuing the issue with Turkmenistan and the oil ministry of Iran “would not follow up the issue.”
He added that Iran follows a policy of holding friendly relations with all the neighbouring countries and the “existing dispute between NIGC and Turkmengaz needs to be resolved.”
Earlier, the foreign ministry of Iran said that the dispute was of a technical nature and should be resolved amicably.
While the oil ministry and the foreign office of Iran have distanced themselves from this one-sided war of words, NIGC continues to dig a bigger hole for itself because of its shortsighted rhetoric.
While preparing to go for international arbitration, they must remember that they are in huge default on a vital clause – take or pay.
According to the statistics issued by the Iranian ministry of oil, Iran imported 74.35 bcm (billion cubic meters) of gas from Turkmenistan from 2006 to 2016. According to the contract, they should have imported 130 bcm during this period. It means that they imported nearly half the volume they were to buy under the take-or-pay clause.
Also according to the contract, the price is determined every quarter but payments must be made on weekly basis. In addition to the default on take-or-pay clause, Iran has failed to keep up with this provision of the contract. The debts have been piling up since the last five years.
The contract stipulates that any change in the intake of gas volume must be done with adequate notice to safeguard the infrastructure facilities. The gas pipelines between Turkmenistan and Iran are medium pressure pipelines – the gas travels at 30 km per hour in such pipelines. It means that whenever Iran wants to decrease the intake, it must give a notice of at least 72 hours. This has rarely been done, causing damage to the gas facilities of Turkmenistan.
Turkmenistan is still dealing with the matter politely and quietly. A press release issued by the foreign office of Turkmenistan on 26 January 2017 regrets the irrational approach of NIGC and reminds, without specifying the points that have been mentioned above, that Turkmenistan has adequate grounds to take Iran to the arbitration court.
Actually, NIGC could possibly be looking for a scapegoat.
In a case recently decided by the International Court of Arbitration, Iran has been asked to pay Turkey USD 1.9 billion in compensation. The case pertains to overpricing of gas by Iran to Turkey from 2011 to 2015. In addition to the settlement sum of nearly USD 2 billion, Iran has also been asked to give 13.5% discount to Turkey on gas price.
Keeping in view that Iran must pay Turkey nearly USD 2 billion in retribution, we should also recall that the outstanding debt that Turkmenistan wants Iran to settle is also about USD 2 billion. — Is NIGC trying to ‘Rob Peter to pay Paul?’
In a broader perspective, Iran is looking for huge investments in its oil and gas sector – in near future USD 3 billion for IGAT-9 and USD 3 billion for upgrading refining. This unethical and unprofessional behavior of NIGC will deter the potential investors.
It is about time the higher authorities in Iran stepped in to resolve the matter in a civilized and professional manner.