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Turkey's Erdogan visits Iran to improve ties after split over Syria

Source: Reuters - Wed, 29 Jan 2014 15:45 GMT
Author: Reuters
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(Adds meetings with Khamenei, Rouhani, gas price issue)

* Turk PM signs three trade pacts, meets Khamenei, Rouhani

* Turkey seeks lower price for imported Iran natural gas

* Focus on energy deals but political rapprochement in air

* Turkey capitalises on opening from moderate Iran president

* Tensions over support for opposing sides in Syrian war

By Parisa Hafezi

ANKARA, Jan 29 (Reuters) - Turkish Prime Minister Tayyip Erdogan visited Iran on Wednesday to bolster trade and energy ties, state TV said, in what also looked like a bid to defuse tensions over Syria by capitalising on Tehran's diplomatic opening to regional rivals and the West.

Iran has been a strong strategic ally of Syrian President Bashar al-Assad since the start of the uprising against him, while Turkey has been one of his fiercest critics, supporting his opponents and giving refuge to rebel fighters.

But Iran's election last June of President Hassan Rouhani, a relative moderate who says he wants to thaw its ties with the West, and shared concern over the rise of al Qaeda in Syria, have spurred hopes of a Turkish-Iranian rapprochement.

While deep divisions remain between Ankara and Tehran over the conflict in Syria, diplomats and government officials say both sides want to mend a relationship that could be pivotal to the fast-changing political map of the Middle East.

The United States believes detente between Turkey and Iran is important to wider stability in the Middle East, a strategic breakthrough Washington hopes to achieve from talks that world powers are pursuing with Tehran to curb its nuclear programme.

Erdogan met Iranian Supreme Leader Ayatollah Ali Khamenei as well as Rouhani, whose foreign policy of "prudence and moderation" has eased Tehran's international isolation and revived contact with longtime arch-enemy Washington.

"Our relations with Turkey have entered a new phase and we hope this trend continues. Besides serving the interests of the two countries, we hope our dialogue (with Turkey) serve regional interests as well," Iranian Foreign Ministry spokeswoman Marzieh Afkham told reporters in Tehran.

"As two neighbours and Muslim countries, Iran and Turkey enjoy many commonalities and many cooperation opportunities."

Analysts said the main focus of Erdogan's visit was expanding economic cooperation, finessing any political disputes for now. "Considering that the economy and energy ministers are accompanying Erdogan, we can say this trip is business-targeted," said Tehran-based analyst Hossein Foroughi.

Erdogan signed three trade deals on Wednesday before leaving Tehran to fly home, Iranian state television said.

"Today we had a good chance to review bilateral ties," Erdogan said in remarks translated into Farsi by Iranian television as it showed him meeting Vice President Eshaq Jahangiri.

"I would like to mention specifically, and to express my satisfaction with, the agreement we signed in the preferential trade field," he said. "It is obvious that we import from Iran crude oil and gas, which are strategic energy sources, and we (will be) able to increase the volume of these imports."

No details were immediately released about the three trade pacts or Erdogan's meetings with Khamenei and Rouhani, who plans to visit Turkey within the next few months, according to Iranian and Turkish media.

SEEKING NATURAL GAS DISCOUNT

Erdogan's delegation repeated Turkey's demand for a discount on the price of natural gas from Iran, a senior Turkish official said. A senior Iranian official then told Reuters: "This issue was discussed but further talks will take place on the issue of discount. No decision has been made yet."

Turkey depends on imports for almost all of its natural gas needs and the $60 billion energy bill Ankara must foot annually has been the biggest driver of its ballooning current account deficit, regarded as the main weakness of its economy.

Ankara deems Iranian gas too expensive compared with other suppliers like Russia and Azerbaijan, an assertion rejected by Tehran. Turkey's Petroleum Pipeline Corporation applied to an international court of arbitration in 2012 for a ruling on Iran's gas pricing. The case is still pending.

Turkey is keen to increase oil and gas imports from Tehran in anticipation of sanctions against Iran's huge energy sector being dismantled in the wake of the Nov. 24 deal between Tehran and six big powers under which the Islamic Republic committed to scaling back some of its controversial nuclear activities.

Some sanctions that were imposed over suspicions that Iran is covertly trying to develop a nuclear weapons capability, something it denies, were relaxed starting on Jan. 20.

But most sanctions, including a severe squeeze on Iran's access to the international financial system, remain in force pending a long-term agreement on the scope of Iran's nuclear programme, which is to be negotiated over the next six months.

POTENTIAL MARKET BONANZA IN IRAN

But the potential of a market of 76 million people in Iran with some of the world's biggest oil and gas reserves is a magnet for foreign investors, including Turkish companies.

"We hope the process will be finalised with an agreement that will ensure the removal of all sanctions on Iran. Turkey has so far done its best in that regard and will continue to do so," Erdogan told reporters in Ankara before he flew to Tehran.

Iranian officials say trade between the countries stood at $22 billion (16.2 billion euros) in 2012, before dipping to $20 billion in 2013, and that it should reach $30 billion in 2015.

Iran was Turkey's third largest export market in 2012. In fact, Iranian media said, Turkey exports more than 20,000 products to Iran, among them gold and silver.

The United States has been unhappy over continued trade with Iran by its Turkish ally sidestepping the sanctions regime, and has blacklisted some Turkish firms involved.

U.S. Treasury Under Secretary David Cohen, who visited Turkey just before Erdogan's Iran trip, warned the Turkish government against any rapid improvement of trade and economic links with the Islamic Republic before a final nuclear agreement is struck, according to Turkish media.

"Businesses interested in engaging in Iran really should hold off. The day may come when Iran is open for business, but the day is not today," Zaman newspaper quoted Cohen as saying. (Additional reporting by Orhan Coskun and Humeyra Pamuk, Editing by Mark Heinrich)

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