In mid-July, Ankara and Tehran signed a memorandum of understanding that would allow the transport of natural gas from Iran and Turkmenistan to Europe, through Turkey. It would also reportedly allow Turkey to invest $3.5 billion in developing Iran’s enormous South Pars natural gas field in the Persian Gulf.

While Tehran has standing agreements to send natural gas to Turkey by pipeline, Iranian shortages last winter forced Ankara to turn to Moscow, its primary supplier, for extra shipments. But in the wake of the July deal, Russia announced it would not sell Turkey more than it is contracted for, the Turkish newspaper Zaman reported.

Iran, struggling to increase its natural gas production, also hopes to increase its sale of gas to Europe, and Turkey is a logical route for Tehran to pursue.

“Turkey is important from the standpoint of throughput. It is the principal southern gateway to pass though of gas volume to the Western European market. Moscow already controls the northern gateway with the Yamal-European pipelines and the new, under-construction Nord Stream under the Baltic from Russia to Germany,” according to Kent Moors, director of the Energy Policy Research Group at Duquesne University and an expert on Russian and Caspian energy policy.

The European natural gas market is important to Russia. Russian state-run natural gas monopoly Gazprom provides 25 percent of the country’s tax revenues and exports a quarter of its natural gas to Europe.

Europe, in turn, receives about a quarter of the gas it consumes from Russia.

But Europe is wary of relying too much on Russia after Moscow shut off supplies to Ukraine in the winter of 2006 over a price dispute, disrupting supplies to the West. Europe is actively looking for other sources of natural gas, notably from North Africa and increasingly from Iran. Major French, Dutch and Spanish energy companies are already involved in developing the Iranian South Pars natural gas field.

However, this interest is tempered by U.S. efforts to curtail investment in Iran.

The United States has been trying to isolate Iran from the international community for years. It says Iran's bid to master the complete nuclear fuel cycle is a clandestine attempt to acquire nuclear weapons. Iran says the program is for nuclear energy and denies it wants weapons. It says its activities are legal under its international treaty obligations.

Western opposition to Iran’s nuclear ambitions has led to U.N. sanctions, as well as U.S. restrictions on investment in the Iranian gas and oil industry.

These efforts have been effective. Iran holds the second-largest natural gas reserves in the world, with about 28 trillion cubic meters, according to the BP annual statistical review. By comparison, this is a little more than half of Russia’s 47 trillion cubic meters, but Russian production, at 612 billion cubic meters in 2006, is about six times Iran’s 105 billion cubic meters.

Although Iran and Europe hold a mutual attraction over their natural gas interests, the United States is still opposed to the trans-Turkey gas sales.

“It's going to be up to the Turkish Government, Turkish entities to decide whether or not they want to do business with Iran at this point in time. If you ask our opinion, do we think it is the right moment to be making investments in the Iranian oil and gas sector? No, we don't think so,” U.S. State Department spokesman Sean McCormack said after the memorandum was announced in July.

“And our laws quite clearly state where our views are. And we, as a matter of policy, have stated quite clearly that we don't think that now is the time to be making such investments in that particular sector. Iran hasn't necessarily proved itself to be the most reliable partner in this regard. But again, it's a preliminary agreement and we'll see if it goes anywhere,” McCormack said.

The other big issue this deal leaves open is how much Turkmenistan could contribute to the pipeline, according to Moors.

“The real question … is whether Turkmenistan has sufficient natural gas to fill all of its pipeline commitments, following the recent agreement to build a line as well east to China,” he said.

In addition, the Turkmen government has agreed to supply Russia through a new pipeline.

“Ashgabat took everybody by surprise recently by agreeing to form with Russia and Kazakhstan what is called the Near-Caspian gas pipeline,” Moors said.

Despite all of these commitments, Turkmenistan still hopes to supply Europe directly.

“The Turkmen president, however, still supports the Trans-Caspian gas pipeline across the Caspian Sea to Turkey. This pipeline is also strongly supported by Washington as a way of lessening European reliance on Russia,” Moors said.

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(e-mail: energy@upi.com)