"Today we witnessed the signing of a gas contract between the two countries," Foreign Minister Manouchehr Mottaki announced at a joint news conference with his Swiss counterpart Micheline Calmy-Rey.

Financial details were not disclosed but the contract between Iran's state gas firm and Switzerland's Elektrizitaets-Gesellschaft (EGL) Laufenburg reportedly envisages Iran supplying 5.5 billion cubic metres (194 trillion cubic feet) of gas annually from 2011.

Calmy-Rey said the deal was in full compliance with UN Security Council resolutions imposed against Iran for its failure to suspend uranium enrichment, a potential nuclear weapons-making process.

"I am happy that the gas exports agreement has been signed between the two companies," she said. "It is in full compliance with international law and the UN resolution."

The gas will be pumped to one of EGL's power stations in Italy.

Switzerland is a country with few energy resources of its own and has also said Europe needs to diversify its energy imports away from Russia towards other exporters like Iran.

The deal, which was signed just ahead of the news conference, comes despite US pressure on European countries to cut their business ties with Tehran as a means to pressure it to give ground in the nuclear crisis.

"I congratulate this Swiss company for being so far-sighted. We hope this will be a new chapter for long-term economic cooperation between Iran and Switzerland," said Mottaki.

However, the execution of the deal depends on the construction of the planned Trans Adriatic Pipeline (TAP) which will connect Greece with Italy and provide better access for Europe to gas fields in the Caspian Sea and the Middle East.

The final investment decision on building the pipeline is not expected until 2009.

Another major condition will be the ability of Iran, still a a net importer of gas, to supply the gas to Europe.

Iran, which sits on the second largest gas reserves in the world after Russia, has major hopes for exporting gas to regional countries like Armenia, Pakistan, Syria and as well as Europe.

But progress is being stymied by a lack of foreign investment in developing gas fields, a problem exacerbated by the reluctance of many Western businesses to deal with the Islamic republic under current political conditions.

This winter, many cities in northern Iran suffered days of gas cuts owing to domestic shortages and a cut in imports from Turkmenistan.

In order to meet part of the shortfalls, Iran was forced to cut gas supplies to neighbouring Turkey -- currently its only significant export customer -- for three weeks.

In the absence of a US mission after diplomatic ties were cut almost three decades ago, Switzerland's embassy looks after the interests in Tehran of Iran's arch enemy and any consular issues involving US nationals.

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