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BUSINESS & ECONOMICS

IRAN’S DIPLOMATIC SUCCESS IN CASPIAN BAD NEWS FOR WESTERN BUSINESS INTERESTS

Afshin Molavi 3/22/01

Iran has reason to be hopeful and Western business interests have cause for concern as the five Caspian Basin states gear up for a critical conference that aims to create a framework for the division of the sea’s natural resources.

The Caspian equation appeared to be turned on its head following Iranian President Mohammad Khatami’s mid-March visit to Russia. Khatami’s summit with Russian leader Vladimir Putin, a meeting that one Iranian diplomat billed as "critical to the future of Central Asia and the Caspian region," opened the door for a substantial revision of the Caspian’s division � one that is much more favorable to Iran.

When Khatami arrived in Moscow, Caspian delimitation seemed the most contentious subject that the Iranian and Russian leaders would face. Iran staunchly opposes the current thinking on territorial division. Under the current draft framework, Iran would gain about a 14 percent share of the sea’s territory. Tehran has argued for the littoral states to divide the resources equally, 20 percent per country, an arrangement that, prior to the summit, Russia, along with Azerbaijan and Kazakhstan, had opposed. Turkmenistan, a large natural gas supplier to Iran, has staked out a more ambiguous position, expressing verbal support for Tehran but not backing its words with much action.

Iran sought and won a postponement of the Caspian Basin meeting of the five Caspian Basin states - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan - that was originally planned for March 8-9 in the Turkmen capital Ashgabat, until it could talk to Russia. The delay proved fruitful for Iran.

The joint declaration issued by Khatami and Putin said simply: "Until the legal regime of the Caspian Sea is finalized, the parties do not officially acknowledge any boundaries on this sea." The two leaders also said that no pipeline should be allowed to run along the seabed and that non-littoral states would be forbidden from deploying naval forces in the Caspian. The statement is viewed as a diplomatic victory in Tehran, especially since it rankled Caspian rivals Azerbaijan and Kazakhstan. Though Russia did not agree with Tehran’s point of view, it did not choose to openly confront Iran either, an important point not missed among Iranian foreign policy-makers.

Western oil companies operating in nearby Caspian states have reason for concern. An Iranian-Russian alliance on Caspian energy issues could be sufficient to dash thoughts of a Turkmen gas pipeline to Azerbaijan, Georgia, and Turkey. The Khatami-Putin declaration also injects an air of uncertainty into legal ownership of Caspian oil fields, making foreign investors nervous.

Foreign investors are not the only ones showing signs of nerves. Western governments, especially top US officials, lashed out at Russia for its arms talks with Iran, spawning a Cold War style war of words between the Pentagon and Russian officials. US Secretary of Defense Donald Rumsfeld said in an interview with the Sunday Telegraph that Russia has become a "chief distributor of weapons of mass destruction" to so-called "rogue states." Deputy Defense Secretary Paul Wolfowitz wondered aloud why Russia routinely sought to counter U.S interests, especially since the U.S has offered so much aid and assistance to Russia in the past. He hinted that past assistance has not been used adequately as leverage against Russia. US Secretary of State Colin Powel also objected vigorously to the Russia-Iran talks.

Russian Security Council secretary Sergei Ivanov dismissed American objections, noting that his country would not accept ultimatums from anyone. He also took a jab right back at the United States, noting that "we are concerned with U.S military technical contacts with Pakistan�possessing of nuclear weapons. We are also concerned about U.S large weapons supplies to Saudi Arabia." Russian President Vladimir Putin added fuel to the fire by saying that Russia plans to speed up the construction of Iran’s nuclear power reactor in the south, a
reactor that Washington feels could be an important stepping stone toward Iran acquiring nuclear technology to be used in weapons.

An estimated $300 million in arms sales was discussed during Khatami’s March visit. With oil prices high, Iran could become an important customer for Russia’s new generation of T-72 and T-90 tanks. Iran also needs SU-27 and MIG-29 aircraft and small arms and radar equipment. An Iranian military delegation was treated to a demonstration of the Tor-M1 and Osa ground-to-air missile system while on a visit to a missile factory in Izhvesk. Talks on missile sales will continue over the next few months, Iranian diplomats said.

Overall, Iran and Russia have much to agree on: both object to the US influence in the region; both are equally alarmed by Turkish efforts to play a significant role in regional commercial and political affairs; both want to continue nuclear cooperation for the construction of power plants in southern Iran; both share frustration with what they view as American attempts to dictate policies to them; both support the anti-Taliban alliance headed by Ahmad Shah Massoud; and both are generally supportive of Armenia in the ongoing Nagorno-Karabakh peace process. And now, both insist that no division of the Caspian is legitimate without unanimous consent of all five littoral states.

The US factor will be critical in determining the future fate of Iran-Russia ties. Eugene Rumer, a specialist on Russia’s Middle East policy, described the 1990’s as "the decade of Iran" in Russian-US relations. He says; "no issue on the bilateral U.S-Russian agenda has potential to cause more harm to the relationship."

Left alone, Russia and Iran would probably act more as regional rivals than regional partners. However, given an outside force seeking to impose its will, the two states have formed a reactive alliance of mutual interests. With the United States unlikely to retreat from its position in the Caspian and Central Asia, or to back down from its hard-line position on Iranian acquisition of weapons of mass destruction, it is likely that Iran and Russia will continue to cooperate.

Editor�s Note: Afshin Molavi is a journalist based in Tehran, Iran. His work has appeared in the Washington Post.

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