A delegation from Turkey's state pipeline concern Botas is in Tehran to discuss damages claimed by Iran because of a delay in laying the Turkish section of the pipeline to carry the gas.

Iran says it has completed its part of the pipeline agreed in the $23-billion accord signed in 1996 and was ready to deliver gas since the beginning of 2000.

Previous reports said Iran might claim a $120 million penalty from Turkey for delays in gas purchases under a "take-or-pay" clause in the accord. "We did not raise it as a penalty, but in other forms, "Hamdollah Mohammad-Nejad, head of the National Iranian Gas Company, told a news conference.

"We have asked them how they would compensate us for the investment we have made and which remains useless. They are trying to find a solution," he said, adding that Iran had spent $200 million on itssection of the pipeline. "The main thing is that the Turkish side has accepted that we are not making use of big investments we have made. This is very important to us...We have to live with them for 22 years."

Botas General Manager Gokhan Yardim attributed the delay in financing problems.

"Because of the global economic crisis...we could not close financing for the 1,200 km (750 miles) pipeline. That is why the project was delayed," he told reporters after a brief meeting with Iranian Oil Minister Bijan Zanganeh. He said the financing problems had been resolved and his company would be ready to take delivery of the gas starting September 2001.

Turkey signed the gas agreement with its eastern neighbour in 1996, when an Islamist-led government was ruling in Ankara. The pipeline is to extend from Tabriz in Iran to the Turkish capital Ankara. The accord envisaged Turkey completing construction of pipelines on its soil by early 1999 for the initial gas delivery of three billion cubic metres.