SOFIA Iran could make more of its vast resources if relations with the west improve enough to allow more investment in its energy sector, the United States' new Special Envoy for Eurasian Energy, Richard Morningstar, said on Saturday.
The world's fourth-largest crude producer also sits on the world's second-largest gas reserves but U.S. sanctions imposed by the Bush administration have hindered gas export growth.
New U.S. President Obama has ended the policy of isolation and attempted to engage Iran over its disputed nuclear program, but tensions between the two countries remain strained.
"We want to engage with Iran but it also takes two to go to the dance and we are hoping that there will be positive responses from Iran and that we will be able to resolve some of our outstanding issues," Morningstar told journalists at an energy security conference in the Bulgarian capital Sofia.
"One of the advantages to Iran of that is that it will open up the energy sector. So we see that as a potential carrot that would help in whatever negotiations need to take place."
Many western energy companies with the technology to fully exploit Iran's huge gas reserves have been warned away from Iran by their governments and U.S. companies are still prohibited from investing there.
Morningstar, who was appointed to the role of supporting U.S. energy goals in the Eurasian region on April 20 and was special advisor to the Clinton administration on Caspian energy, said his meeting with Russian energy minister Sergei Shmatko at the conference had also been constructive.
"I think we have formed the basis to have further discussions which I think is going to lead to a more constructive dialog, relationship and cooperation on energy issues."
Shmatko said earlier at the conference that the two had discussed further meetings on energy issues, with Morningstar possibly visiting Moscow before Obama's planned visit in July.
A row between Russia, the world's biggest gas producer and supplier of a fifth of Europe's gas, and Ukraine led Moscow to cut off supplies via its ex-Soviet neighbor for two weeks in January.
Some Balkan countries are almost entirely reliant on Russian gas and were hit hard by the mid-winter freeze in heating gas supplies.
Better relations with Russia and more diversified supplies lines like the Nabucco pipeline project to bring gas to Europe from central Asia should help avoid repeated winter supply crises.
"We hope that we all will have a constructive enough relationship with Russia that that kind of event would be a very remote if not impossible eventuality," Morningstar told Reuters.
(Reporting by Daniel Fineren)