Speaking to reporters in Kuwait on Wednesday, Yıldız said he was not suspicious of the Iranians’ good intentions to resolve the matter bilaterally, yet Turkey remained with but one option after months-long discussions to that end proved futile. “The road to arbitration is being paved on March 16, and we will not wait for too long after that to file our complaint,” he was quoted as saying by the Anatolia news agency.

Yıldız met with Iranian Petroleum Minister Rostam Qasemi on the sidelines of the 13th International Energy Forum (IEF) held in Kuwait City on Tuesday and that marked the latest of official discussions over the price Iran charges Turkey for its natural gas. The preparations for an arbitration application were already under way, and it became clear at the two ministers’ meeting that, in Yıldız’s words, “There was nothing left to discuss.”

“They told us that they had a legal excuse [for not lowering the price] rather than talking about if the price was appropriate or not. Iran is our second biggest natural gas supplier after Russia, and there is a price difference [between the two suppliers],” Yıldız said.

Of the natural gas that Turkey buys, Iran charges the most, and this is the main cause of rising tensions between the two countries. Turkey currently buys a cubic meter of Azerbaijani gas for $330 and pays Russia $400 for the same amount. However, Iran sells its gas to Turkey for $505 for each cubic meter, which increases Turkey’s natural gas bill by an extra $800 million annually. The price of a cubic meter of natural gas is sold for $400 in international markets.

Although it has not been specified where Turkey is seeking arbitration, the International Chamber of Commerce in Switzerland, which awarded Turkey $800 million in compensation in 2009 in a previous dispute with Iran, is the most likely place where the arbitration will be held.

At the end of last year Turkey experienced a similar problem with another major gas provider, Russia. The Russian government agreed to lower the price of natural gas it sells after Turkey agreed to a key natural gas pipeline that will carry Russian gas to European markets via Turkey’s territorial waters in the Black Sea.

High gas prices aside, Turkey, a net energy importer, is also facing challenges due to a much discussed “take or pay” condition that requires the country to import predetermined amounts of natural gas in almost all of its natural gas import agreements. According to the natural gas purchase contract between Turkey and Iran, Turkey has to buy at least 6.8 billion cubic meters of natural gas from Iran annually. This means Turkey has to pay Iran a specified amount of money irrespective of whether it needs that amount of natural gas. A similar situation exists for the supply of natural gas from Russia. Although the payments can be used in lieu of natural gas acquired in the future, there is a five year limit after which the amount paid cannot be used to obtain natural gas. In a time of poor domestic natural gas consumption, the Turkish Pipeline Corporation (BOTAŞ) is wondering whether it will be able to consume the (unused) natural gas that it has paid for.

When asked if the dispute over the price of natural gas is likely to also have a negative impact on the two neighbors’ relations at large, Yıldız said business and friendship are two different things that should not be confused. “It is like the continuation of trade between two enlightened nations as they are also carrying out the arbitration process. This is pretty normal. We are good with them. Our business relations, trade are going on. Both the buyer and the seller are happy, but there is one problem. We are now trying to solve it without damaging the very business between us,” he said, adding: “Here actually I believe the Iranians acknowledge that reality [that a price arrangement to Turkey’s benefit is necessary], but they are unable to do so because of certain limitations. That is, I cannot say they are ill-intentioned. This is why our relations are not affected. I believe they have good intentions, as they believe we do.”

Turkey and Iran have a highly unbalanced trade. As of last year, the trade volume reached $16 billion, mostly from Iranian natural gas and oil proceeds. In addition to the one-third of natural gas it buys from overseas, Turkey imports some 30 percent of its oil needs from Iran, or 200,000 barrels per day, which represents over 7 percent of Iranian oil exports.