ANKARA, June 27: Turkey said Friday that negotiations over the price of natural gas imported from Russia have broken down and both sides are to seek international arbitration.

Turkey cut imports of Russian gas through an undersea pipeline between the two countries in March, shortly after the conduit was inaugurated, after the two sides fell out over the formula to be used in the calculation of payments.

“A pause has been given in the talks because time is needed to examine mutual offers and find a point of compromise,” the Turkish energy ministry said.

Russian energy officials had resumed talks with Turkish counterparts in Ankara on Wednesday, following a first round of negotiations last week.

The statement said that “in parallel to the talks,” Turkey’s state-run gas company BOTAS had started procedures for international arbitration in response to a similar move by its Russian counterpart, Gazexport.

Turkey this year was supposed to buy two billion cubic meters of gas from Russia through the so-called Blue Stream pipeline, which runs from the southern Russian gas plant of Izobilnoy under the Black Sea to the Turkish port of Samsun.

The amount was to be increased to 16 billion cubic meters per year over several years.

“Gazexport has been informed that its demand regarding the price formula it maintains cannot be met since it will lead to an increase in the price of the gas imported via the Blue Stream conduit,” the statement said.

Turkey faces financial penalties if it does not resume imports next month. The Blue Stream deal has long been entangled in controversy in Turkey and is currently being investigated by a parliamentary commission that is looking into allegations of large-scale corruption in major public work projects that have reportedly cost the country billions of dollars.

Newspapers here have suggested that Turkey did not require such a major project, but the government of the then Prime Minister Mesut Yilmaz — eager to distribute favours to cronies — went ahead with it anyway.

Ankara also reportedly agreed to buy the gas at an inflated price, more than double that at which Russia is buying it from Turkmenistan.—AFP