Azerbaijan on Wednesday agreed a five-year deal to supply gas to neighbouring Iran, officials at the ex-Soviet republic's State Oil Company said. The agreement stipulates annual supply of at least one billion cubic metres.
"At the beginning of every year, the parties will agree the volumes of gas to be supplied during the year ahead but it will be a minimum of one billion cubic metres," said the president of Azerbaijan's State Oil Company, Rovnag Abdullayev. Abdullayev said that supplies would start in February.
Iran holds the world's second largest natural gas reserves after Russia but lack of foreign investment in its massive fields, energy inefficiency and colossal domestic demand means it still needs to import gas. Rich in both gas and oil and strategically located between Iran and Russia, Azerbaijan has been courted by Moscow and the West since it became independent following the collapse of the Soviet Union.
Backed by Western governments, companies such as Britain's BP have invested heavily in its energy sector, building a corridor of oil and gas pipelines from Azerbaijan through Georgia and Turkey to Europe. The president of the European Commission, Jose Manuel Barroso, is to visit Baku on Thursday.