Analysis: Still No Decision On Caspian Sea

Wednesday, 02 February 2005

By Liz Fuller

More than 13 years after the collapse of the Soviet Union, the five countries bordering the Caspian Sea have still not reached agreement on dividing the sea and its resources among themselves.

In July 2001, Iran sent gunboats into Azerbaijani territorial waters to intimidate a survey vessel chartered by an international oil company. More recently, Turkmenistan has engaged in talks with a Canadian oil company on developing an oil field to which Azerbaijan lays claim, and has suggested, not for the first time, referring the dispute over that field's ownership to the UN.

The demise of the Soviet Union in late 1991 increased the number of independent states bordering the Caspian Sea from two (the USSR and Iran) to five (Azerbaijan, Kazakhstan, Russia, Turkmenistan, and Iran) and thus called into question the international treaties signed between the Russian Soviet Federated Socialist Republic and Iran in 1921, and the USSR and Iran in 1940, on the use of the sea. Despite numerous rounds of talks over the past 13 years, the five littoral states have still not reached agreement on a draft convention defining the legal status of the sea and how its resources should be divided.

Some of the five have, however, forged bilateral agreements on the demarcation of their respective sectors of the sea. Russia signed such an agreement with Kazakhstan in July 1998, and Azerbaijan did likewise with Kazakhstan in November 2001 and with Russia in September 2002. And those three countries then signed a trilateral agreement in May 2003 fixing the point at which their respective sectors meet. Those agreements were based on the principle of dividing the sea bed into national sectors, while allowing all five states the use of the waters and surface of the sea, an approach that theoretically enables each country to proceed with the extraction of hydrocarbon resources beneath the sea bed.

Azerbaijan has not, however, concluded comparable bilateral agreements with either Iran or Turkmenistan. While Azerbaijan, Kazakhstan, and Russia advocate dividing the sea along the so-called median line, Iran rejects this approach, arguing that the sea should be divide equitably among the five littoral states to give each an approximately 20 percent share. The proposed median line division would give Iran the smallest share, some 14 percent. Turkmenistan, for its part, disagrees with Azerbaijan's criteria for determining the median line.

Exploitation On Hold

The failure of Baku and Ashgabat to agree on the demarcation of the respective sectors of the Caspian has effectively prevented exploitation of the oil field known in Turkmen as Serdar and in Azeri as Kyapaz. That field is believed to contain between 150 million-200 million tons of oil. In July 1997, Baku signed a memorandum of intent with Rosneft and LUKoil to develop Serdar/Kyapaz, but the two Russian companies went back on that agreement within weeks after Ashgabat protested. Then in September 1997, Turkmenistan launched a rival tender for Serdar/Kyapaz, which then Azerbaijani President Heidar Aliyev denounced as illegal. Mobil was named the winner of that tender in June 1998, but assured Baku that it would not begin work on the field until the ownership dispute was resolved.

Meanwhile, in late 1997 Turkmen President Saparmurat Niyazov appealed to the UN to intervene, and then in the summer of 1999 the U.S government presented to both sides a plan for resolving the disagreement, which apparently went nowhere. In March 2000, then Turkmen Foreign Minister Boris Shikhmuradov announced that Ashgabat had invited unnamed Iranian companies to participate in the development of Serdar/Kyapaz; Shikhmuradov's Azerbaijani counterpart Vilayat Guliev countered that any such development cannot begin before final agreement is reached on the status of the Caspian. And in April 2002, at the long-awaited Caspian summit, which failed to resolve any outstanding issues, Niyazov again proposed to his Azerbaijani counterpart Heidar Aliyev that they should jointly ask international organizations to rule on whether development of Serdar/Kyapaz is permissible, a suggestion that Aliyev declined.

Stalling Talks

Since then, Azerbaijan and Turkmenistan have held two rounds of bilateral talks at deputy foreign minister level, in May 2001 and January 2004, in an attempt to reach agreement on the demarcation of the seabed between their respective sectors. Officials from both countries characterized the 2004 talks as having taken place in "an atmosphere of friendship and mutual understanding," adding that there "was a significant rapprochement of positions between the two sides on the principle of dividing the Caspian seabed," Turan reported on 31 January 2004. But despite that reported progress, a third round of talks scheduled for December 2004 was postponed indefinitely, and in January 2005 Niyazov held talks with a Canadian oil company interested in developing Serdar/Kyapaz, after which the Turkmen Foreign Ministry resurrected Niyazov's earlier proposal to refer the ownership issue to international arbitration, possibly to the UN. Azerbaijan rejected that proposal as inappropriate.

But Azerbaijan's deputy foreign minister responsible for Caspian affairs, Khalaf Khalafov, nonetheless traveled to Ashgabat last week to attend the 16th meeting of the Caspian working group, and met separately on the sidelines of that session with senior Turkmen officials to discuss the delimitation of the two countries' sectors of the sea, ITAR-TASS reported. No details of those talks were divulged, however.

Meanwhile, it is unclear precisely how much progress, if any, was made in Ashgabat in the multilateral talks on the draft convention defining the legal status of the sea. In October 2004, Russian Foreign Minister Sergei Lavrov told Interfax that eight of the 33 provisions of the draft convention on the legal status of the Caspian Sea have been agreed upon and another eight provisions and preambles have been partially agreed upon. And the second Caspian summit, tentatively scheduled first for December 2004 and then for January 2005 in Tehran, has again been postponed. Iranian Ambassador to Moscow Gholam Reza Shafei told journalists on 1 February that the postponement was due to the position adopted by one of the leaders of the littoral states, but failed to say which one, Interfax reported. He said the summit will now not take place before the Iranian presidential election scheduled for 17 June.