Azerbaijan: Baku Strikes Gas Purchase Price Pact with Turkey

Ending what proved to be a protracted battle over gas fees, Azerbaijan and Turkey have agreed on a price of $300 per 1,000 cubic meters (tcm) of Caspian Sea natural gas.

Baku and Ankara have not sealed a formal deal yet, but both sides say the new fee is acceptable, Today's Zaman, a Turkish daily, reported on February 7. Azerbaijan said that the massive hike over Ankara's previous purchase price is still well under the world average of $400/tcm, Azerbaijan's state-run APA news agency reported.

Ankara plans to purchase Azerbaijani gas worth $1.8 billion this year. Turkey has also agreed to shell out an extra $1.7 billion for gas that it purchased last year. Turkey, a key political ally of Azerbaijan, was buying gas for a privileged $120/tcm throughout 2009, even though the agreement defining this fee had expired.

The agreement is likely to provide a boost to the proposed Nabucco gas export pipeline. The lack of agreement between Azerbaijan and Turkey contributed to a delayed start for the project, which was intended to help satisfy Europe's energy needs. [For background see the Eurasia Insight archive].