Turkey's pro-Islamic prime minister, Necmettin Erbakan, and Iranian Vice President Hassan Habibi presided over the signing of the deal by senior ministers from both sides at a ceremony held at Tehran's Saadabad Palace. Erbakan had finalized the deal in several meetings with Iranian President Hashemi Rafsanjani, who sees the agreement as a major triumph over U.S. efforts to isolate his country.
The administration of U.S. President Bill Clinton had sought to deter Turkey, a U.S. ally and member of NATO, from going ahead with the gas deal, which is expected to be a test of Washington's willingness to impose punitive measures.
Clinton signed a law Aug. 5 authorizing the United States to penalize American and foreign companies that invest more than $40 million a year in the oil and gas sectors in Iran and Libya. The United States accuses the two countries of sponsoring terrorism.
Iran's 22-year deal with Turkey provides for construction of pipelines to carry up to 10 billion cubic meters of natural gas a year to Turkey. The gas sales will earn cash-starved Iran an estimated $1 billion per year.
Turkish officials insist that the deal does not violate the new U.S. sanctions, which aim to block badly needed foreign investment in Iran's vital oil and gas sectors.
"The sanctions ban investments in Iran. We're not going to invest in Iran. This is only a trade agreement," Abdullah Gul, the Turkish government spokesman, told reporters. "The two countries will build their own sides of the gas pipeline."
Mustafa Murathan, director of Turkey's state-owned oil and gas company, said Sunday in Tehran that his country could help finance the Iranian side of the project.
"But that's still not violating the U.S. embargo," Murathan said. "We'll just help them with materials, if they need such help, in a barter deal. We don't want to violate U.S. sanctions, and we won't."
There have been conflicting reports from Iranian and Turkish officials about whether the exports will begin in 1998 or 1999.
The U.S. sanctions law, condemned by Washington's allies in Europe and elsewhere, does not require the automatic imposition of penalties.
It gives the U.S. president the flexibility to choose from measures ranging from a stern warning to blocking international loans and, in Turkey's case, the support of the International Monetary Fund.
Washington values Turkey's geopolitical position at the crossroads of the Middle East, Europe and Asia. It also values Turkey's secular tradition, which is now being challenged by Erbakan's pro-Islamic coalition government.
Erbakan, who came to power in June, heads a coalition that is the first Islamic-leaning government in Turkey since the modern secular state was founded after World War I.
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