UPDATE: EU Member States Give Commission Mandate To Negotiate Caspian Pipeline

European Union member states agreed Monday to give the European Commission, the EU's executive arm, a mandate to hold gas talks with Azerbaijan and Turkmenistan, probably starting this month.

It's the first time the Commission has been mandated to undertake energy negotiations on member states' behalf.

"The European Union has adopted a mandate to negotiate a legally binding treaty between the EU, Azerbaijan and Turkmenistan to build a Trans-Caspian Pipeline System," the Commission said in a statement.

"This is very significant in terms of strengthening our leverage vis-a-vis key suppliers and partners in energy," said Polish secretary for European affairs Mikolaj Dowgielewicz. "I hope that negotiations would start in September. That is currently the plan," he added.

Poland currently holds the presidency of the Council of the European Union.

The mandate is part of the EU's priority of diversifying its gas supplies, with the 27-nation bloc currently heavily dependent on gas imports from Russia.

Turkmenistan, which has the fourth-largest gas reserves in the world, and Azerbaijan could play a key role in diversifying Europe's supplies.

Both country's could become major gas suppliers through the proposed Nabucco pipeline, which would receive gas from feeder lines in eastern Turkey and transport it to the EU.

Nabucco Gas Pipeline International, the company behind the proposal whose shareholders are six large energy companies including German RWE (RWE.XE) and Hungarian MOL group, welcomed the EU move.

"This groundbreaking initiative taken by the European Commission matches the aim of the Nabucco project to enable the transportation of a broad diversified gas portfolio," said managing director Reinhard Mitschek.

-By James Fidler and Frances Robinson, Dow Jones Newswires; 32-(0)2 741-1324; [e-mail]