NICOSIA, Cyprus -- The presidents of Iran and Turkmenistan launched a $7 billion project Wednesday to carry Turkmen gas via Iran and Turkey to Europe in what was billed by Tehran as one of the world's biggest energy transfer deals.


Tehran radio said Iran's Akbar Hashemi Rafsanjani and Saparmurat Niyazov of Turkmenistan attended a ceremony south of Tehran where the first hole was dug in the ground.


Both men hailed the project as as a symbol of cooperation in the strategic region stretching from Central Asia to the Gulf and Europe.


"This is one of the biggest energy transfer projects in the world," Tehran Radio quoted Iranian Oil Minister Gholamreza Aqazadeh as saying at the ceremony.


Rafsanjani and Niyazov signed the agreement Tuesday to build the pipeline, which is by far Iran's biggest joint project with Moslem former Soviet republics.


It would take six to eight years to build and cost $7 billion; the section in Iran would cost $3.5 billion, half of which would be financed by Iran, according to Aqazadeh.


"This great project will lead to extensive cooperation in the region -- and this is what world arrogance cannot bear," he said, referring to expressed U.S. concern about the perceived threat of Iran expanding its influence in the newly independent republics of the former Soviet Union.


"I share the (Iranian) president's belief that this project is very important for solidarity and unity of nations and security and stability of the region," the radio quoted Niyazov as saying.


The pipeline is crucial for Turkmenistan whose traditional gas export routes through Russia have been disrupted since the Soviet Union disintegrated in 1991.


If and when completed, it will provide a new source of income for Iran in transit fees to supplement oil revenue which has been hit by weak crude oil prices in recent years.


Rafsanjani said Iran had the technology to build pipes of up to three meters in diameter for the line.


Aqazadeh said Tuesday that the pipeline would have an initial annual capacity of 15 billion cubic meters and would be expanded to 28 billion cubic meters in a second phase.


The transit fees and some other details of the deal would be decided in meetings over the next few months of a committee of Turkmen, Iranian, Turkish, Russian and Kazakh officials who will oversee the building of the pipeline, he said.


"The pipeline agreement is for 25 years and the understanding is that the ownership of the section in Iran would be transferred to us after that period," Aqazadeh said.


That section would be 1,450 kilometers long, he said, out of a total length of 4,000 kilometers.


Tehran Radio said the pipeline would enter Iran east of the Caspian Sea, pass through the cities of Shahrud and Semnan and bend south of Tehran towards Tabriz and the Turkish border.