INTERVIEW-US still opposes Iran as Nabucco gas supplier

MOSCOW, June 5 Thu Jun 5, 2008 5:22pm BST

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MOSCOW, June 5 (Reuters) - The United States opposes the planned Nabucco pipeline to Europe being supplied with Iranian gas, Washingon's diplomatic envoy to the Caspian Sea region, where the route would start, told Reuters on Thursday.

The new route will not displace the Russian energy giant Gazprom (GAZP.MM), but force it to compete for an increase in consumers, the U.S. Deputy Assistant Secretary of State Matthew Bryza said in an interview.

Although some supporters for the U.S. and EU-backed pipeline that would bypass Russia by crossing countries on its southern borders such as Turkey have suggested sourcing supplies from Iran, Bryza spoke out against it.

"The U.S. supports the Nabucco pipeline as a way for Europe to help diversify supplies of natural gas, this means, new sources - but not from Iran," he told Reuters in an interview.

Backers of the project on May 29 revealed a massive increase in the estimated cost to build and operate the project to 7.9 billion euros ($12.19 billion) from 4.6 billion.

In a recent expression of concern about supplying Nabucco, Huseyin Saltuk, the chairman of Botas, Turkey's state-controlled pipeline company, told Reuters in April of the difficulties in finding enough gas to fill the pipeline to capacity.

He suggested Iran, Iraq and Turkmenistan could join the project. The first construction work is due to start next year.

At present, only Azerbaijan is a committed supplier to the pipeline, which by 2013 is due to travel across Georgia, Turkey and the Balkans towards Western Europe with 31 billion cubic metres of gas annually.

But although the U.S. backs European efforts to wean itself off a dependence on Russian supplies, Bryza was adamant that until Iran ceased its nuclear enrichment programme, Washington would object to any energy co-operation with its allies.

"Nabucco, to move Iranian gas, would not be something we could support," he said.

Russia is pressing ahead with its competing South Stream project to develop a gas pipeline to Europe, although Brussels and Washington want to offer European consumers an alternative to their dependency on Russian gas monopoly Gazprom (GAZP.MM).

"We don't have any illusion that we could ever displace Gazprom, that's impossible," he said.

"On energy in general, there is a lot of progress in developing Nabucco. The Turkey-Greece-Italy gas pipeline is to provide a complement, not a substitute, for the massive volume of gas that Gazprom brings into Europe now," said Bryza.

"We believe it will become more of a partner, if it is compelled to operate on the basis of market, rather than monopolist principles, by virtue of increasing competition." (Editing by James Jukwey)

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