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Turkey to fund $3.5 bln Iran gas deal alone

ANKARA - Turkey will finance a $3.5 billion investment in Iranian gas production entirely from a state company of its own as US opposition has put off foreign investors, Energy Ministry officials said on Wednesday.

The United States has objected to a gas agreement between its NATO ally Turkey and the Islamic republic, and is urging countries to cut business ties with Iran over its failure to suspend its nuclear energy programme.

Washington, as well as France and Britain, are seeking UN Security Council backing to toughen sanctions against Teheran.

The senior Turkish officials, who declined to be named, told Reuters the Turkish Petroleum Corporation (TPAO) would start investing in Iran’s South Pars gas field project as soon as a comprehensive agreement was signed in the second half of October.

Ankara and Teheran signed a memorandum of understanding in July.

‘Turkey can completely cover the necessary amount for the investment,’ one of the officials told Reuters. The official said TPAO had not sought credit from foreign institutions, given their unwillingness to finance projects linked to Iran.

Turkish Prime Minister Tayyip Erdogan has defended his government’s deal with Iran, saying no country can ask Ankara to give up the relationships it has with energy suppliers.

Washington has suggested Turkey, which is almost entirely dependent on energy imports, seek alternatives to Iran.

Iran is Turkey’s second largest natural gas supplier after Russia.

Turkey, which is seeking European Union membership, is one of the few countries in Europe increasing energy cooperation with Iran during the heightened tensions.

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.

Iran rejects Western accusations it is seeking to develop nuclear weapons, saying its atomic programme is solely aimed at generating electricity so it can export more oil and gas.

The US Iran Sanctions Act of 1999 says that if any foreign company invests more than $20 million in Iran’s gas and oil sector it is subject to US sanctions.

Turkish energy ministry sources told Reuters TPAO was also interested in investing in Iran’s oil sector after the October agreement was signed.

Every year TPAO invests some $1 billion in projects abroad, one official said.