Gas prices dispute may drive Turkey to cancel contract with Russia

Energy and Natural Resources Minister Taner Yıldız has said that if Russia does not respond to Turkey’s demands to reduce natural gas prices, Turkey plans to terminate the contract it has with its northeastern neighbor.

Energy and Natural Resources Minister Taner Yıldız

Energy and Natural Resources Minister Taner Yıldız

Speaking to reporters in Ankara on Thursday, Yıldız, in response to a question regarding natural gas prices, which have increased by 39 percent in the last two-and-a-half years, said: “We are going to take a close look at the contracts on the purchase of all raw essentials that are soon to expire. The agreement for the Russia-Turkey Western Pipeline is one of those contracts that need to be looked over again, and if we do not receive the discount we are expecting, it will be terminated.”

Yıldız previously spoke on the issue in March when he said: “We definitely understand the conditions the producer countries are in. However, it is normal for us to expect a reduction in natural gas prices,” noting that Turkey wanted to discuss the oil-indexed natural gas price to find other solutions to determine the cost. He also said the two countries should move towards coming up with a structure that gives priority to strategic cooperation and trade.

Turkey has been persistent in its demands since Gazprom, Russia’s biggest natural gas company, which meets 67 percent of Turkey’s requirements, reduced the price of the natural gas it was selling to the Italian Edison Company, which filed a lawsuit last November at the Court of Arbitration in Stockholm against Promgas, a company jointly owned by Gazprom and Italy’s Eni. The suit called for a reduction in the price of Russian gas in a long-term contract, and Gazprom agreed to cut its gas prices for Italy’s Edison in July.

Gazprom confirmed that the dispute had been resolved since it would not be a major loss for Gazprom as Edison does not buy more than 2 billion cubic meters from the Russian company.

The agreement between Turkey and Russia on the transfer of natural gas via the Russia-Turkey Western Pipeline will expire at the end of 2011, and Gazprom’s deal with Edison seems to have complicated its negotiations with larger gas consumers like Turkey.

 

 

29 September 2011, Thursday / TODAY’S ZAMAN, İSTANBUL