News ID: 264396
Published: 0422 GMT January 15, 2020

Official: Iran, Turkmenistan can quickly boost bilateral trade

Official: Iran, Turkmenistan can quickly boost bilateral trade

In view of their high trade and economic capacities, Iran and Turkmenistan are capable of raising the level of transactions with each other at a rapid pace if their governments agree on certain issues.

Speaking in an exclusive interview with Iran Daily, Majid Jalili, the vice president of the Iran-Turkmenistan Joint Chamber of Commerce, added that currently standing at $150 million, trade between the two countries can easily reach $3 billion in one year and $10 billion in five years.

However, he regretted, the current level of trade and economic transactions between the two countries fail to be satisfactory due to their dispute over the amount of Iran’s debt to Turkmenistan arising from the former’s payment for gas imports from the latter, which has resulted in the disruption of the gas supply.

Jalili noted that trade between Iran and Turkmenistan decreased from $5 billion in 2014 to $150 million in 2019, which further underlines the two sides’ inability to use their capacities and the opportunities with which they are provided to boost trade.

In January 2017, Türkmengaz, Turkmenistan’s national gas company, suddenly decided to stop exports to Iran in breach of the contract between the two countries.

Following the move, Turkmenistan’s Ministry of Foreign Affairs announced in a statement that “the reasons for gas supply disruption are economic ones,” as, since 2013, the National Iranian Gas Company (NIGC) has not taken the required measures to make the payments for the Islamic Republic’s previous imports from Türkmengaz. The Turkmen company was, in particular, demanding Iran to settle its $1.8-billion debt, arising from gas imports during 2007-08, with the company.

Iran had started importing gas from Turkmenistan due to its insufficient extraction from its own reserves at the time, which had caused the country to face problems such as supply disruption or lower pressure in the national network in northern parts of the country during the cold seasons, owing to increased consumption in the domestic household sector.

Iran imported five million cubic meters of gas from Turkmenistan per day.

In 2007, Türkmengaz stopped the supply to Iran during the peak cold season in winter, capitalizing on a severe cold from which 20 Iranian provinces were suffering at the time, demanding an unreasonable price of $360 per cubic meter, nine times higher than what it was then ($40 per cubic meter). Unfortunately, the request was inevitably accepted by the then Iranian administration, resulting in the resumption of exports and the accumulation of the $1.8-billion debt. Later, however, as a result of the decline in global gas prices, Iran paid less for imports from Turkmenistan.

After Turkmenistan stopped exporting gas to Iran for the second time in 2017, the NIGC announced in a statement that the Turkmen company had made a number of moves in breach of the contract between the two countries, citing the supply disruption in 2007 as the most important one.

It added that Iran had made the payments for gas imports from Turkmenistan entirely during the three-year period ending 2017, and had started negotiations for clearing previous debts, while preserving the right to be compensated for a number of qualitative and quantitative losses it had suffered.

Nevertheless, when Iran prepared to pay off the debt, the country’s banking transactions were suspended as a result of the intensification of US sanctions on Tehran. This came as, as confirmed by the NIGC, prior to the suspension of exports, Iran had agreed to pay its debt in the form of a loan with an interest rate of five percent and, thus, Turkmenistan should not have cut off its gas supply to Iran.

Commenting on the gas payment dispute case, currently pursued by the International Court of Justice (ICJ), Jalili said the court is not a suitable place for resolving disputes between two neighbors with friendly relations.

He described face-to-face negotiations between the two countries’ officials as the best solution for settling such disputes.

“The two sides have, of course, taken a number of steps to resolve the problem. Iran has even notified the Turkmen side of its decision to solve the issue in a friendly manner in a meeting attended by the members of the joint chamber of commerce, Turkmenistan Ambassador to Iran Ahmed Gurbanov and NIGC’s Managing Director Hassan Montazer-Torbati.”

Resolving the dispute while adopting a friendly approach is, under the present circumstances, in the interest of both countries, he stressed, adding that economic and trade cooperation between the two sides have numerous benefits for them, which necessitates finding an appropriate solution to the problem.

“In the aftermath of the decreased trade and economic relations between the two countries, Turkmenistan turned to countries such as China and Turkey for meeting its needs. This comes as, Iran is Turkmenistan’s neighbor. The distance between Ashgabat and the northeastern Iranian city of Mashhad is 250 kilometers, enabling Turkmenistan to meet its needs through Iran via land transportation, at a much lower price.”

In addition, he said, Turkmenistan is a developing country in need of speedy development of its infrastructure, adding that previously, Iran provided the country with substantial assistance in this regard by implementing projects in the fields of road construction, water transfer and electricity transmission.

Jalili noted that when trade between the two sides stood at $5 billion, Turkmenistan used to import techno-engineering services from Iran, worth $3.5 billion, in the fields of implementing water, electricity and road construction projects as well as building petrochemical complexes and power plants.

He listed Iran’s imports from Turkmenistan as cotton, press cake, animal feed, silk threads and petrochemicals.

Jalili added that in view of the length of their common border, the transaction of goods between Iran and Turkmenistan is not faced with much difficulty.

In addition, he said, despite Iran’s banking problems, the two countries’ traders are not faced with any serious obstacle in terms of money transfer.

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