Tehran conference fails again to demarcate the Caspian sea

6/29/07

A EurasiaNet Commentary by Stephen Blank

In the aftermath of a May agreement among Russia, Kazakhstan, Turkmenistan and Uzbekistan to expand and upgrade Central Asia's natural gas pipeline network, many regional experts expected the deal would reinvigorate the long-stalled negotiations on a Caspian Sea treaty. While the five Caspian littoral states indeed made yet another push to break the deadlock, their efforts failed to make much headway.

Foreign Ministers of the five Caspian littoral states – Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan – gathered in Tehran June 20-22 for talks aimed at overcoming their differences. Iran, along with all the other states involved, appeared to come to the table harboring a genuine desire to seek solutions. During his opening speech, Iranian Foreign Minister Manucher Mottaki, adopted a pragmatic tone, and called on participants to keep the big picture in view. "Iran believes that the Caspian Sea's great potential for expanding the littoral states' political, economic and cultural ties has not been properly utilized," Mottaki pointed out.

He went on to adopt an optimistic view on the five states' ability to quickly come to agreement. "We believe this conference can produce great results," the Fars news Agency quoted him as saying. The hopeful rhetoric failed to produce a positive result, however.

A comprehensive Caspian Sea pact remains elusive due to several factors. For one, Iran and Turkmenistan remain discontent with their share of the Caspian that they would receive under the discussed framework. In addition, Russia remains wary that a pact would make it easier for US and European energy companies to make inroads into the region. [For background see the Eurasia Insight archive]. The absence of a new pact means the Caspian's legal regime remains based on two Iranian-Soviet treaties – one concluded in 1921 and the other in 1940. It is clear to all involved that the pacts don't cover current realities.

As has been widely documented, Russia has previously accepted the principle of apportioning shares based on the length of each country's coastline. Under Russia's proposal, Kazakhstan would end up with 29 percent, while Iran would receive about 13 percent. Russia would secure about 19 percent of the sea's area. Although dividing the sea into national sectors – as opposed to sharing resources equally – would mean Russia wouldn't profit from the larger deposits off the coast of Azerbaijan or Kazakhstan, it still has its own deposits in the northern Caspian. At the same time, Russia counts on profiting by transporting and processing oil from other states. Thus Azerbaijan, Kazakhstan and Russia have bilaterally settled their maritime boundaries, implying that the northern Caspian is basically demarcated and the principle of division of the seabed of the Caspian into national sectors is basically accepted.

Although Russia has started exploring, like Azerbaijan and Kazakhstan, in its inland waters, it has otherwise refrained from taking the next step and forcing the demarcation issue. It has done so largely because the other states' programs might lead them to bring in Western energy and military assistance to counter Russia's ideas for dominating the sea with a Russian-sponsored Caspian force (CASFOR). [For background see the Eurasia Insight archive]. Some regional analysts see CASFOR as a vehicle for continued Russian domination of the Caspian Basin, as well as a means for the Kremlin for hindering Western interests from expanding their activities in the area. Baku and Astana do not support the CASFOR initiative, and Kazakhstan has even proposed leveling off regional armed forces, a notion that would force Russia to reduce its deployments in the region.

Despite the professed desire to achieve a breakthrough in the negotiations, Iranian participants at the conference were reluctant to compromise. Iran stuck doggedly to it opposition to the existing formula for the sea's territorial division, saying that under no circumstances would it accept only a 13 percent share. Tehran's position is that all five states take an equal 20 percent share. Iran also insists that until a Caspian territorial pact is in place, none of the littoral states should be allowed to develop sea-based energy reserves without the consent of all five countries. In connection with this, Iran currently opposes plans to construct a trans-Caspian pipeline (TCP) that would connect Turkmenistan and Kazakhstan to Azerbaijan. [For background see the Eurasia Insight archive].

Moscow sees advantages and disadvantages to the Iranian position. On the positive side, the Kremlin can count on an ally in the ongoing effort to prevent TCP from becoming a reality. [For background see the Eurasia Insight archive]. On the downside, Iranian opposition to energy development hampers exploration and development efforts in the Caspian.

Kazakhstan is the country most irked by Iranian recalcitrance, as Astana is more than ready to begin projects in and around the Caspian, including ideas of a canal to the Black Sea, and energy exploration in its littoral. Kazakhstan is prepared to meet potential environmental objections from both Moscow and Tehran to a trans-Caspian pipeline and other projects in the sea.

Turkmenistan, under its new leader Gurbanguly Berdymukhammedov, is apparently inclined to improve ties with Azerbaijan and Russia. [For background see the Eurasia Insight archive]. Thus, the resumption of bilateral Azeri-Turkmen talks over demarcation of the sea, and the possible exploitation of it by a pipeline, or by joint explorations with Baku, is an encouraging sign. But for now it remains no more than a possibility.

While the combination of Kazakhstan's challenge and a joint Azeri-Turkmen agreement might eventually break the Caspian impasse, for now Iran's and Russia's objections to the presence of a "national solution" – i.e. the demarcation of the entire Caspian Sea based on the Azeri-Kazakh-Russian agreements – not only holds up exploration in the Caspian, it impedes Central Asian progress towards constructing pipelines that would free those states from the incubus of Russian domination.

Undoubtedly, this issue will grow in importance given the rising European and Asian demand for Central Asian oil and gas. Another factor is the growing desire of Central Asian states to act as energy suppliers without the "crutch" of Russian intercession. Some analysts suspect that the issues of Caspian demarcation and of pipelines may well be a part of the bilateral discussions between President Bush and President Putin in Maine at their July 1-2 summit. If that issue makes it to the summit agenda, it shows just how important the future of Central Asia and of the Caspian has now become to both the global economy and to world politics.

Editor's Note: Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.

Posted June 29, 2007 © Eurasianet