"I want to emphasize this: none of our businesses, none of our banks have made any move to break the embargo," State Minister Zafer Caglayan said on NTV television, referring to UN sanctions adopted against Iran in June.

The minister, who is responsible for foreign trade, insisted that forfeiting trade with the Islamic republic, Turkey's eastern neighbour, was out of the question.

"Turkey must absolutely do business with its nearest neighbour Iran.... The Turkish banking system must absolutely support our trade with Iran," he said, adding that his call excluded interactions "designated as having a terrorist purpose."

Ankara, which has mediated for a diplomatic solution to tensions over Iran's nuclear programme, has said it will abide by UN sanctions on Iran but not by tougher restrictions imposed by the United States or the European Union.

During a Turkish-Iranian business gathering in Istanbul last week, Caglayan had complained that some Turkish banks intended to comply with non-UN sanctions and pull out from projects involving Iran.

The government, he said, cannot "stay indifferent" on the issue -- a statement that some obervers interpreted as a warning to banks.

Caglayan said Tuesday he met with representatives of the banking sector Monday "to review the situation."

Prime Minister Recep Tayyip Erdogan last week called for closer economic ties with Iran, stressing that a preferential trade agreement should be completed "as soon as possible."

Turkey's improving ties with Iran, coupled by a deep crisis in relations with one-time ally Israel, have sparked concern that Erdogan's Islamist-rooted government is taking NATO's sole majority Muslim member away from the West.

In May, Turkey -- together with Brazil -- hammered out a nuclear fuel swap deal with Tehran in a bid to help end the nuclear standoff.

In a move that irked Washington, the country voted "no" to a fresh round of sanctions against Iran, adopted by the UN Security Council in June, insisting the swap deal should be given a chance.

earlier related report
Situation has changed in Iran fuel deal: US
Vienna (AFP) Sept 21, 2010 - Iran has altered the paramaters for a nuclear fuel swap and so any further talks on a possible deal must take those changed conditions into account, the United States said Tuesday.

Responding to a call by Iran's nuclear chief Ali Akbar Salehi for a resumption of the fuel swap talks "without further delay," US Energy Secretary Steven Chu and his deputy Dan Poneman insisted the ball was in Iran's court.

A year ago, the US, Russia and France -- under the auspices of the International Atomic Energy Agency -- offered to turn 1,200 kilogrammes of Iran's stockpile of low-enriched uranium (LEU) into the fuel rods for a research reactor in Tehran that mades radioisotopes for medical purposes.

But the Islamic republic did not respond to the offer and eventually hammered out an alternative proposal with Turkey and Brazil instead.

"They did not accept (our) offer (and) much has happened since that time to alter the facts on the ground," Poneman told reporters on the sidelines of the IAEA's general conference here.

In fact, Iran has pressed ahead with uranium enrichment, expanding its stockpile of LEU and also starting to enrich at higher levels of purification.

"We need to make sure that any engagement is in the context of that changed reality," Poneman said.

"We believe it is very important that they should engage on the wider suite of issues ... the wider security requirements that were discussed at the P5+1" talks in Geneva, Poneman said, referring to the five permanent members of the UN Security Council (the US, Britain, France, China and Russia) plus Germany.

Asked whether Washington was effectively ruling out the fuel swap deal in its original terms, Poneman replied: "I am not ruling anything in or out. I'm just telling you that they had an offer before them.

"They did not respond favourably to the offer. The facts on the ground have changed. They need to do something," he added.

In an address to the IAEA's general conference on Monday, Iranian nuclear chief Salehi had complained that no progress has been made on the fuel swap deal since it was first tabled in October last year.

"Despite repeated efforts by Iran for mutual confidence building, merely as a sign of good intention, no encouraging results has yet been achieved," Salehi said.

Iran's alternative proposal for a fuel swap with Turkey and Brazil was "a positive gesture ... for the realisation of a solution as well as sustaining the ongoing dialogue and talks," he insisted.

Russia, France and the US, for their part, have expressed reservations about Iran's own proposal and asked Tehran to clear up a number of questions they had about the deal.

US Energy Secretary Steven Chu said Tuesday that Washington was "always interested in re-engaging Iran. But we want to make that iran is sincere about these talks."

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