REUTERS,
5, March 2008

Azerbaijan and Turkmenistan settled an old gas debt dispute on March 5, removing a major obstacle to relations between the two energy-rich Caspian nations.

Europe, seeking alternative energy supply routes to ease its reliance on Russian gas, wants Turkmenistan and Azerbaijan to cooperate on the planned Nabucco pipeline, designed to give Europe direct access to Caspian gas.

As part of the deal, Azerbaijan agreed to pay Turkmenistan a $44.8 million debt for gas supplies delivered in the early 1990s, an Azerbaijani government official said.

A Turkmen delegation led by Vice-Premier Hidyr Saparliyev was in Azerbaijan's capital of Baku last week to sign the deal, the official said.

Relations between Azerbaijan and Turkmenistan turned sour in the 1990s due to ownership disputes over several offshore oil and gas fields in the Caspian Sea, in addition to Azerbaijan's debts for Turkmen gas supplies.

Turkmen President Kurbanguly Berdymukhamedov, who came to power in late 2006, has vowed to end his nation's reclusiveness and improve relations with neighboring countries.

The long-delayed Nabucco pipeline, backed by Brussels and Washington, aims to transport gas from the Caspian region to Europe across Turkey while bypassing Russia.