nCa News and Commentary
Ashgabat, 5 December 2017 (nCa) — Turkmenistan has decided to take its gas-debt settlement dispute with Iran to the International Court of Arbitration.
The Turkmen TV reported on Monday that the latest round of talks between Turkmenistan and Iran on the clearance of huge outstanding debts had failed to reach any mutually acceptable solution.
Murat Archayev, the chairman of the state concern Turkmengaz, the prime agency of Turkmenistan responsible for production and export of gas, reported during the videoconference with President Berdymuhamedov that the NIGC (National Iranian Gas Company), instead of negotiations, had threatened to go to the International Court of Arbitration.
President Berdymuhamedov told Archayev that in that case Turkmenistan should also approach the International Court of Arbitration and prepare the case for presenting the facts to the Court.
Iran owes Turkmenistan more than USD 2 billion for the gas it used in 2007 and later. It has been about ten years since the accumulation of the debt.
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Iran is doing what Iran usually does – playing deaf to the arguments of the other side.
Turkmenistan has exercised tremendous patience in dealing with Iran and, quite clearly, the decision to approach the International Court of Arbitration has been taken with lot of reluctance.
For about nine years, Turkmenistan did not press Iran on debt settlement. It was a gesture of brotherly goodwill in view of the constraints of international sanctions on Iran. Even though Turkmenistan was going through a difficult period caused by the global financial and economic crisis and slump in the oil market, there was the thinking that as a neighbor Turkmenistan must give all possible relief to Iran.
The sanctions were eased in January 2016 and several Iranian banks came in a position to make international transactions. It was at that time that Turkmenistan brought up the matter of debt settlement. In doing so, Turkmenistan offered a number of options to make it easy for Iran to clear the debts.
However, Iran terminated the negotiations abruptly, with outright refusal to even talk about the debts. Left with no choice, Turkmenistan curtailed the supply of gas to Iran in January 2016.
Come this winter, Iran is back to its old attitude. Actually, it is quite scripted.
An Iranian lawmaker Assadollah Qarehkhani said in July 2017 that the country no longer needs to import natural gas from Turkmenistan.
He said that a new 175-km pipeline in northern Iran would obviate the need for imports from Turkmenistan.
Iran no longer needs Turkmenistan’s gas
Nevertheless, his statement took an about turn when he said, “If Iran’s demands related to natural gas imports from Turkmenistan are met and the two countries reach a compromise on natural gas imports, we can import natural gas from Turkmenistan, and, instead, export Iran’s natural gas to western neighbours via swap deals.”
In other words, he said that Iran doesn’t need gas but Iran needs gas.
The pipeline he was talking about is the Damghan-Neka pipeline. It is surely just 175-km long, but is the last segment of the trunk line that comes all the way from South Pars – a distance of nearly 1500 km.
Pumping the gas from South Pars to the northern provinces such as Mazandran is an expensive enterprise although Iran would like to keep quiet about it just for the sake of posturing. In economic terms, the gas from South Pars cannot be a viable substitute for the gas from Turkmenistan.
While July was the month for belligerence, November was the month for a conciliatory tone.
“Negotiations on the gas dispute are underway… We hope to end the dispute through dialogue,” Hamidreza Araqi, the managing director of National Iranian Gas Company, said in November 2017
Iran willing to settle Turkmenistan gas row out of court
Even when being nice, Araqi could not resist the temptation to inject a threat in his assuaging note. He said, “Nonetheless, if they do not accept to lower their prices as per contractual terms, they will have to deal with the issue at the International Court of Arbitration.”
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Turkmenistan can put a convincing case before the International Court of Arbitration.
The prices were in line with the prevailing global parameters and were mutually agreed under a well-defined formula. It was a simple case of sale-purchase, where one side kept its end of the bargain while the other side defaulted, and is now trying to squeeze out of its obligations.
It should also be kept in mind that some Iranian officials, from time to time, have reminded Turkmenistan that it is a landlocked country. This is blackmail.
This Iranian mindset should be highlighted when pleading the case before the International Court of Arbitration. Trying to leverage the landlocked position of a country to deprive it of its dues is a fundamental breach of ethics.
While going to the international Court of Arbitration, Turkmenistan also needs to underline that Iran never had the intention to repay the debts. Piecing together the statements of various Iranian officials and the attitude of the Iranian delegation during the talks, it is possible to prove that it is a case of malintent.
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The officials dealing with this issue from the Iranian side are showing shortsightedness. They are overlooking two important points: 1. The gas trade, in fact the entire concept of the use of natural gas, is undergoing major transformation and in about ten years’ time the dynamics of today would be irrelevant; and 2. A swap deal with Turkmenistan would be more beneficial for Iran than the illogical ostentation that is being exercised now.
There is also the need to register that the relations between Turkmenistan and Iran are not just about gas. There is whole lot more at stake.
For access to Central Asia and China, Iran is dependent on the territory and infrastructure of Turkmenistan. With the flurry of corridors in all directions, the revenues from the transport and transit activity will overtake the profit from gas in the foreseeable future. By looking at very fleeting interests, Iran is jeopardizing its long term prospects to be a productive part of the regional corridors network.
In any case, disputes are ultimately resolved on the negotiation table. Iran would be well advised, in its own interest, to make a genuine and sincere attempt to find common position with Turkmenistan. /// nCa