Turkmenistan announced plans on December 5 to take a dispute with Iran over $1.8bn Tehran supposedly owes for Turkmen natural gas deliveries to international arbitration.

Tehran says the figure is somewhat less. The Turkmen foreign ministry said Iran's debts stemmed from the National Iranian Gas Company's failure to abide by the "take or pay" provision of the gas supply contract. At the time, Turkmenistan demanded a nine-fold gas price hike raising the prices of its gas exports to $360 from $40 for every 1,000 cubic metres.

The National Iranian Gas Company (NIGC) has noted that “Turkmengaz has committed numerous violations of the terms of the contract, including in the quality and quantity of deliveries, which are subject to penalties provided in the contract”.

NIGC has long relied on a gas swap deal with Turkmenistan to supply gas to northern Iranian provinces during the cold winter months.

Analysts were left puzzled by the decision to stop gas exports to Iran as it left Turkmenistan with China as its only viable gas export customer. Iran has throughout this year stressed that it is prepared to take Turkmenistan before international arbitrators. Ashgabat has responded with similar threats, but has also claimed that it plans to maintain supplies to Iran at 7bcm in 2017, unchanged from 2016. This did not stop Iran from rejecting Turkmenistan’s proposed gas-swap deal to get Turkmen gas to Turkey and Iraq, although it has relented enough to allow gas swap arrangements involving supplies for Azerbaijan and Armenia.