December 2009, No. 54

Foreign Trade

Erdogan spoke of plans to increase trade to $20 billion in 2011 and said he welcomed an Iranian call for trade volume to reach $30 billion eventually.

Iran and Turkey have agreed to strengthen energy, banking and transport ties in a drive to almost treble trade between the two neighbors to $20 billion in the next few years.

“The two countries are seriously determined to expand their bilateral relations in all fields,” Iran’s first vice president, Mohammad Reza Rahimi, told a joint news conference with visiting Turkish Prime Minister Tayyip Erdogan (Oct. 28).

Erdogan spoke of plans to increase trade to $20 billion in 2011 and said he welcomed an Iranian call for trade volume to reach $30 billion eventually. Turkish Energy Minister Taner Yildiz said in October that bilateral trade was $7 billion in 2008.

Erdogan has steadily expanded Turkey’s influence in the Middle East since his Islamist-rooted AK Party took power in 2002. His visit to Iran has added to concern that Ankara may be slowly turning its back on its Western allies and trying to regain its status as a regional power in the Middle East.

The expansion of bilateral ties may cause concern in Washington, an ally of NATO member Turkey. The United States is embroiled in a long-running row with Iran over Tehran’s disputed nuclear program.

Iran, the world’s fifth-largest oil exporter, is Turkey’s second-biggest supplier of natural gas after Russia.

Rahimi said the two sides reached a series of agreements, including building two power plants, setting up a free industrial zone on both sides of the border and on Iranian and Turkish banks opening branches in the other country.

He said there were also agreements covering Iranian gas exports to Europe via Turkey and on Turkish investments in Iran’s South Pars gas field and in the Caspian Sea, but gave no details.

Erdogan, heading a high-ranking delegation arrived in Tehran (Oct. 26). His delegation comprised of 200 political and economic officials including 20 MPs, ministers of foreign affairs, energy, foreign trade, culture, environment and industry, and eighty representatives of private sector companies, as well as 30 media representatives.

Ankara and Tehran signed a variety of deals aimed at improving the flow of gas through Turkey to Europe, possibly through the Nabucco pipeline, officials said.

TPAO, the Turkish national energy company, signed a number of deals to invest in developments in the South Pars gas field in Iran, the largest in the world.

Ankara could get around 1.2 trillion cubic feet of gas per year from the field under the terms of the deal. Ankara said the gas could go to meet domestic and European demands as Turkey positions itself as a major regional energy hub.

The Turkish government said Iranian gas could go to supply the Western-backed Nabucco natural gas pipeline to Europe, which would contribute to the regional effort to ease Russia’s grip on the energy sector.

Despite the broad political backing for Nabucco, the project lacks firm commitments from potential gas suppliers.

The Turkish prime minister, however, said the Iranian gas deal has several obstacles to overcome as Iran faces punitive U.S.-backed economic sanctions targeting its energy sector, Turkey’s daily Today’s Zaman reports.

“We have more steps to take on the economy, trade, oil and gas to promote cooperation,” he said.

Tehran says some European companies have started ‘unofficial talks’ with Iran to supply the planned Nabucco pipeline with Iranian natural gas.

After years of stalling, Turkey, Bulgaria, Romania, Hungary and Austria finally sealed the Nabucco contract on July 13, as the first step toward building the multi-billion-dollar pipeline that is to break Russia’s near-monopoly on Europe’s gas supply by transferring Caspian gas to the heart of the continent in Austria.

As they inked the agreement in the absence of Iran, Turkey said Tehran should be brought into the project “when conditions allow.”

Reza Kasaeizadeh, managing director of the National Iranian Gas Export Co., said that the Nabucco contract, which was signed between the gas consumers and producers -- such as Turkey, Azerbaijan, Turkmenistan and Iraq -- had not reached any deal with the European state for injecting gas into the pipeline.

“Definitely, the Nabucco pipeline will not become operational in the absence of Iran,” Mehr news agency quoted Kasaeizadeh as saying.

“Unofficial negotiations between some European companies and Iran on the pipeline have started,” said Kasaeizadeh, who refrained from revealing the names of the companies.

The project, costing 8 billion euros ($11.74 billion), was scheduled for completion in 2014. After the European partners signed the deal, the US lobbied against Iran joining as a supplier. During his recent visit to Tehran, Erdogan said that without Iran’s involvement in the project, the Nabucco gas pipeline would fail to succeed.

Erdogan told reporters in October he would like Iranian gas to flow through the Nabucco pipeline. Emphasizing that the Nabucco project needs Iran’s natural gas, he said sanctioning Iranian gas would mean that “Nabuccowould come to a dead end.”

Tehran and Ankara also agreed to establish a crude oil refinery in northern Iran in a $2-billion joint venture project. The agreement signed by the Iranian oil ministry and Turkish energy and environment ministry in a recent meeting between the two countries’ energy officials also included transit of Iran’s gas supplies to European countries, specially Switzerland, via Turkey by Sam Petrol Company. Also, the two countries agreed to establish a company, with each side holding 50% of the stock, to deliver an annual volume of about 35 bn cubic meters of gas from Iran to the EU member states.

According to earlier agreements, the National Iranian Gas Export Company (NIGEC) will own 50% of the shares of this newly-founded company, which will be entrusted to the private sector in future.

Iran has been negotiating with over 30 companies from nine European countries in recent years for carrying out energy projects in the country despite mounting global economic sanctions and political pressures.

Iran’s First Vice President Mohammad Reza Rahimi proposed establishment of a joint airline by Iran and Turkey in a bid to streamline bilateral trade. Rahimi made the proposal in a meeting of Iranian and Turkish businessmen in Tehran, predicting the annual trade between the two states would rise to $30 billion within the next four or five years.

Turkish Prime Minister Erdogan welcomed the idea, saying the two countries should double efforts to remove obstacles on the way of border trade, specifically reduce customs charges.

Rahimi also proposed creation of a joint industrial border area, establishment of a joint bank, and adopting practical mechanisms to boost economic cooperation between the two sides.

Turkish Prime Minister Tayyip Erdogan said (Oct. 31) that countries opposed to Iran’s atomic program should give up their own nuclear weapons and attacked as ‘arrogant’ the sanctions imposed on Ankara’s neighbor. He also said he wanted the Middle East, and then the whole world, to rid itself of nuclear weapons. During a trip to Iran, Erdogan said he backed Tehran’s “right to peaceful nuclear energy” and called its approach in nuclear talks with Western powers “positive.”

“Those who criticize Iran’s nuclear program continue to possess the same weapons,” said Erdogan in a televised address, according to Anatolian news agency. “I think that those who take this stance, who want these arrogant sanctions, need to first give these (weapons) up. We shared this opinion with our Iranian friends, our brothers.”

During his 3-day stay in Tehran, Erdogan also met with IRI Supreme Leader Ayatollah Ali Khamenei; President Mahmoud Ahmadinejad; and Majlis Speaker Ali Larijani.