Iran president cancels Turkey visit amid Syria rift

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* Turkey reliant on Iranian oil and gas

ISTANBUL Dec 16 (Reuters) - Iran's president has cancelled a trip to Turkey a day after his military chief warned the deployment of NATO missiles along its border with Syria could lead to a "world war", Turkey's state-run Anatolian news agency said on Sunday.

President Mahmoud Ahmadinejad had been invited by Turkish Prime Minister Tayyip Erdogan to the central city of Konya on Monday for an annual ceremony marking the death of Rumi, the 13th century Sufi mystic.

The two leaders had been expected to discuss issues including the conflict in Syria as well as the impact of U.S. sanctions, imposed over Tehran's disputed nuclear programme, on Turkey's imports of oil and gas from Iran.

Anatolian quoted diplomatic sources as saying Ahmadinejad had cancelled his trip because of a conflict in his schedule.

Tensions between Turkey and Iran have risen over Syria.

Iran has been a staunch ally of Syrian President Bashar al-Assad throughout the 21-month uprising against his rule, while Turkey has been one of his fiercest critics and has supported the opposition and given refuge to military defectors.

Iranian armed forces chief General Hassan Firouzabadi said on Saturday that the planned deployment of NATO Patriot missiles along Turkey's border with Syria could lead to a "world war" that would threaten Europe as well.

Turkey asked NATO for the Patriot system, designed to intercept aircraft or missiles, in November to help bolster its border security after repeated episodes of gunfire and shells from Syria spilling into Turkish territory.

Despite the tensions, Turkey, which is heavily dependent on imported energy, relies on oil and gas imports from Iran and trade has continued largely unhindered.

Turkey has won waivers from U.S. sanctions by trimming its Iranian oil purchases while Tehran, frozen out of the global banking system, has sharply increased its purchases of gold bullion from Turkey, raising Washington's concern.

Payments for gas imports to Turkey are made to Iranian state institutions. U.S. and European banking sanctions ban payments in dollars or euros so Iran gets paid in Turkish lira.

"sanctions by trimming its Iranian oil purchases while Tehran, frozen out of the global banking system, has sharply increased its purchases of gold bullion from Turkey, raising Washington's concern.Payments for gas imports to Turkey are made to Iranian state institutions"Lira are of limited value on international markets but ideal for buying gold in Turkey.

Couriers have been carrying the gold to Dubai and from there it is shipped to Iran.

In the first ten months of the year, Turkey exported $11.9 billion of gold, of which 60 percent was sold to Iran, 30 percent to the United Arab Emirates and the rest to European countries including Switzerland, Economy Minister Zafer Caglayan told a parliamentary budget hearing on Friday.

Turkish officials have repeatedly said there is nothing illegal about the gold sales, which they say are carried out by private companies and therefore not subject to sanctions.

"Turkey will continue to export any kind of product on the basis of legal means, within the framework of international agreements," Caglayan said.

The U.S. State Department has said it is in talks with Ankara over its gold exports to Tehran.

(Reporting by Nick Tattersall; Editing by Stephen Powell)

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