Amid sanctions row, Turkey unable to give up Iranian gas

“There's no way out of this trade for Ankara,” said World Energy Council Turkish National Committee board member Oğuz Türkyılmaz. “The focus in the US is on getting Iran to capitulate, but for the foreseeable future, it's not going to be possible for Ankara to replace its Iranian energy trade, especially in natural gas.”

According to a 2012 report by the Turkish Energy Ministry, in 2011 Tehran supplied 51 percent of Turkish oil and 18 percent of its natural gas, numbers which make the country Turkey's second biggest energy supplier behind Russia. As international sanctions have tightened around Iran, that trade has gained international attention, with Reuters reporting earlier this week that the US Senate was preparing a law that would sanction the trade.

Turkey's energy minister nonetheless said on Thursday that he sees no conflict between Ankara and Washington over US plans to widen trade sanctions against Iran, including Turkish-Iranian “gold for gas” trade. That trade, which has seen nearly $6 billion in Turkish gold exported for Iranian natural gas, comes as Iran faces a blacklisting by international banking transactor Swift.

Though Reuters quoted a senior US aide as stating that the US would end Turkey's “game of gold for natural gas,” Turkey's Energy Minister Taner Yıldız said on Thursday that he was "not of the view that there will be a negative situation, [such as] a clash with the US, regarding natural gas, oil and mining. We are talking with the US."

Turkey is likely to have little option but to continue the trade against Washington's wishes, however, as Iranian gas makes up an irreplaceable part of Turkey's energy mix. “Remember, this is a country where 93 percent of fossil fuels are imported,” said Necdet Pamir, an energy policy expert and also a World Energy Council Turkish National Committee board member. “It's mainly a problem of infrastructure. You can shift away from oil with tankers, but there's no way liquefied natural gas [LNG] tankers and other pipelines could transport the 8.2 billion cubic meters of natural gas Turkey bought. So Turkey is stuck.”

Pamir in turn voiced a similar opinion to that of Economy Minister Zafer Çağlayan, who said on Wednesday that Turkey would uphold international sanctions mandated by the UN but would not adhere to calls by the EU or US to end the gold-for-energy deal.

Iran sells oil and gas to Turkey, with payments made to Iranian state institutions. US and European banking sanctions ban payments in US dollars or euros, so Iran is paid in Turkish lira -- of limited value for buying goods on international markets, but ideal for buying gold in Turkey.

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from İstanbul to Dubai, where the gold is shipped to Iran, industry sources with knowledge of the business told Reuters last month. Turkey's Deputy Prime Minister Ali Babacan admitted to the trade last week when he stated that the lira Iran received from Turkey for its gas was being converted into gold because sanctions meant that it could not transfer the cash to Iran.

Official Turkish trade data suggests that nearly $2 billion in gold was sent to Dubai on behalf of Iranian buyers in August. The shipments help Tehran to manage its finances in the face of Western financial sanctions.

Turkey's gold exports as a whole jumped more than fourfold to $11.2 billion in the first eight months of 2012.