ICA Rules in Favor of Turkey in Gas Price Dispute

ICA Rules in Favor of Turkey in Gas Price DisputeICA Rules in Favor of Turkey in Gas Price Dispute

The International Court of Arbitration has ruled that Iran supplied gas to Turkey at a higher price compared to other producers in the region and must cut its exported gas price by approximately 13%.

According to Oil Minister Bijan Namdar Zanganeh, the verdict over the lingering gas dispute was announced on November 8 based on which Iran should repay Turkey 13% of the bills it collected in gas exports since 2011 as compensation, Mehr News Agency reported.

"Negotiations are underway with Turkey’s state-owned natural gas company Botas on how to pay," the minister said, adding that the two sides are working on a timetable to start supplying gas to the neighbor at the new price.

Reportedly, ICA had given the two sides a three-month period to settle the dispute, yet Tehran and Ankara failed to come to an understanding on the issue.

"On February 3, ICA ruled against Iran," Hamidreza Araqi, managing director of National Iranian Gas Company added, noting that the verdict was not finalized at the time. According to Araqi the amount of compensation Iran has to pay will be close to $1 billion.

Iran signed a contract in 1996 to export up to 10 billion cubic meters of gas per year to Turkey over 25 years. But Botas appealed in March 2012 to ICA saying that Tehran had overcharged.

Iran, which started selling gas to Turkey in 2001, is the second largest gas supplier to the  country after Russia, delivering 10 billion cubic meters annually. The price of Iranian gas was  not officially disclosed, but according to media reports, it is higher than the price of Russia and Azerbaijani gas.

"We purchase 90-95% of Iran’s exported natural gas which is the most expensive gas we buy. Should Iran lower the price, we will increase imports," Turkish President Recep Tayyip Erdogan said in a statement last year.

"We need to get gas at low prices so that we can provide it to our citizens at a minimal price. The two friendly countries need to show each other solidarity,” he further added.

Iran holds 17% of the world's proved natural gas reserves, which is the second biggest after Russia. However, it is a relatively minor and strictly regional exporter of natural gas via pipelines to three neighboring countries – namely Turkey, Armenia, and Azerbaijan.

There are plans to expand gas exports to Iraq, Pakistan, and Oman, and to Europe in the long term.


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