Turkey says will not end gas links with Iran

ANKARA Thu Sep 20, 2007 1:18pm EDT

ANKARA (Reuters) - Turkey cannot end its natural gas cooperation with Iran, Prime Minister Tayyip Erdogan said on Thursday after a senior U.S. official urged Ankara to sacrifice its business ties with Tehran.

"Turkey is generating 52 percent of its electricity from natural gas and it is out of the question for us to say we are cutting our relations with these countries (chief suppliers Iran and Russia)," Erdogan told a news conference.

"No country can make such a demand of us. And the United States did not make such a demand," said Erdogan before flying to the United States for the annual gathering of the U.N. General Assembly.

Washington is concerned by NATO ally Turkey's recent announcement that it planned to sharply boost energy cooperation with neighbor Iran and invest $3.5 billion in its South Pars gas field starting next year.

Iran -- with the world's biggest gas reserves after Russia -- is already Turkey's second biggest supplier of natural gas after Moscow. It provides gas through a pipeline between the two countries.

Turkey, experiencing fast economic growth, is almost entirely dependent on imports for its energy. But it is trying to diversify energy supplies and become a regional hub.

U.S. Undersecretary of State Nicholas Burns called on Turkey and other countries during a visit to Ankara on Wednesday to "sacrifice" their business ties with Iran to help prevent Tehran from possibly obtaining nuclear weapons.

Iran has defied diplomatic pressure led by the U.S. and European allies to halt uranium enrichment. Major powers are due to meet in Washington on Friday to discuss a third U.N. Security Council resolution to toughen sanctions on Tehran.

"What if Iran changes its position (on its nuclear program) in three months' time? Turkey doesn't want to be seen ignoring a close neighbor," a Turkish diplomatic source told Reuters.

Turkey's ruling AK Party has sought to boost its influence in the volatile region and is one of the few countries with ties to Israel and Syria, Iran and Iraq. Ankara is concerned by Tehran's nuclear program, but is taking a more cautious approach given its proximity to Iran, analysts say.

"Its (Turkey-Iran gas expansion deal) is only a memorandum of understanding. We're not doing this because we want to increase cooperation with Iran today. It's not something that will materialize in the next one, two or three years but in the longer term," the Turkish official said.

BUSINESSES PRESSURED

But Burns told reporters that now was not the time for longer-term agreements either.

"We do not think it makes sense to announce long-term oil and gas deals at a time when Iran is going ahead with nuclear weapons research," Burns said.

"It is not as if Iran is the only country which produces energy. It's not, and the issue of Iran becoming possibly a nuclear weapons power is so important that each country has to make sacrifices," he said.

Pressure is increasing on European countries and companies to reduce business ties with Iran. Turkey, which is seeking European Union membership, is one of the few countries in Europe increasing energy cooperation.

European officials say new EU investment in the Islamic republic is already dwindling because of the political risk and lack of finance for major projects, while exports to Iran are falling as governments and banks cut back trade credits.

The U.S. Iran Sanctions Act of 1999 says that if any foreign company invests more than $20 million in Iran's gas and oil sector they are subject to U.S. sanctions, Burns said when asked whether Turkish firms could be liable for sanctions if they invested in Iran.

Burns said Congress was currently studying plans to tighten the law.

(Additional reporting by Evren Mesci in Ankara)

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