The Turkish-EU Angle.

Turkey and the EU want to see Iran having a deal with the US, not only because of Iran's vast gas reserves which are the second largest in the world next to those of Russia, but also for the sake of peace in the GME. A US-Iran deal would go a long way for the American-led Arab-Israeli peace process.

Yildiz said: "Any agreement on this [Nabucco] issue would be the one that would be debated between Turkey and the European Union". Responding to a question over a planned participation of Iran in the Nabucco pipeline, Morningstar said the US had been imposing a number of sanctions on Iran, adding: "At present, we do not support Iran's participation in the project".

Turkish PM Recep Tayyip Erdoan and his new Foreign Minister Ahmet Davutolu are particularly keen on Nabucco. For years a key aide to Erdoan and a Middle East professor, he had shifted Turkish foreign policy towards greater focus on the GME, having previously served as a foreign policy adviser to the PM and being behind the recent peace process with Armenia which pleases both Russia and the US.

At first Ankara had backed the Baghdad idea of Akkas becoming the source of gas for Nabucco. But the Obama administration did not like that project because it saw it as part of a Tehran-Damascus strategy to create a free trade partnership area consisting of Iran, Iraq, Syria and Turkey. That was perceived to be enhancing the Iran-led axis of anti-US/anti-Israel forces in the GME.

Speaking after his talks with Morningstar, Yildiz said negotiations were under way over Turkey's demand for natural gas at a 15% discount from the Nabucco project, a 3,300-km pipeline proposed to transit gas mainly from Azerbaijan's Shah Deniz fields to EU. Shah Deniz's Phase-2 by 2015 will have raised the field's output from 8 BCM to 24 BCM/y. The gas from Kurdistan, or from Akkas if Washington switches to the Baghdad project, would be more than sufficient to fill the gap for Nabucco. Gas from Iran would more than double Nabucco's capacity. Additional gas, from Qatar to pass through Kuwait if Saudi Arabia stops vetoing a marine pipeline, could bring Nabucco's capacity to more than 100 BCM/y. Kuwait is in dire need of gas and is particularly keen on having a pipeline from Qatar (see gmt24KwtGasTradeJun15-09).

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