[Premium] Turkey Plans to Keep Iran Trade As Is
Turkey is not planning any changes in its trading relationship with Iran following the decision May 8 by the US president Donald Trump to withdraw from the Iran nuclear deal and re-impose sanctions, apparently safeguarding the 9.6bn m³/yr of gas the country imports from Iran.
In an interview, Turkey's economy minister Nihat Zeybekci pointed out that the two countries have a trade balance of around $20bn, of which Iranian oil and gas exports to Turkey are a significant part. "Iran is our neighbour, and a very important trading partner," he said.
Turkey's state news agency Anatolia reported May 10 that Turkey's president, Tayyip Erdogan, has spoken to his Iranian counterpart Hassan Rouhani by phone and criticised the US' decision as "not right" but did not mention whether the two leaders had discussed energy trade.
Iran has, for most the past 15 years, been Turkey's leading supplier of crude oil, and a major supplier of natural gas under a 25 year supply agreement. Turkey imports up to 9.6bn m³/year of gas from Iran under a 25-year deal signed in 1996 and which became active in 2001.
Imports are conducted via a purpose built 14bn m³/yr pipeline between the two countries which connects with Turkey's main east-west transit line operated by state transit operator Botas, which also imports and markets the gas.
Botas bought 9.36bn m³ of Iranian gas last year, a sixth of the total, down from 20.4% of imports in 2010, as the recent increase in Turkish demand in mid winter was met with spot LNG purchases.
Botas' gas imports from Iran were exempted from the previous sanctions regime imposed by the US before the conclusion of the nuclear agreement. However Turkey's sole refiner was obliged to agree to a 20% cut in crude imports in return for a waiver renewed every six months. Both companies were barred from making payments directly to Iran, whose banking sector was isolated from the global banking system and instead had to pay into accounts held by Iran at Turkey's state owned Halkbank.
Washington has yet to announce whether the re-imposed sanctions will also include a waiver for Turkeys Iran gas imports. Its relations with Ankara have deteriorated markedly over the past few years for a variety of reasons, including the discovery that Halkbank had been involved in a scheme to transfer money held by Iran as payment for oil and gas, back to Tehran as gold bullion.
The deputy head of Halkbank was earlier this year found guilty in a New York court of having breached the sanctions regime and is awaiting sentencing having been implicated under a plea bargain by the Turkish-Iranian businessman who organised the scheme who also remains in US detention.
Having been found to be in breach of the previous sanctions regime Washington may be less inclined to offer waivers to Turkey this time round.
Although given the lack of support for re-imposing sanctions among the Washington's western allies, it also remains to be seen just how effectively implemented a new sanctions regime could be. If nothing else though it could serve to stall any interest from Ankara in increasing the volume of gas imports from Iran, which has been suggested for some years but was delayed due to an ongoing international arbitration case over the existing supply contract.
That case, brought by Turkey following unannounced supply cuts during mid winter peak demand periods, was finally resolved in January last year with Tehran obliged to supply gas to Botas free of charge for several months to cover an agreed backdated price cut.
Speaking to NGW at the World Petroleum Conference in Istanbul last summer year, Iranian officials confirmed that despite losing the arbitration case Tehran remains interested in increasing gas exports to Turkey to fill spare capacity in the existing export line.