Business & Economics:
MOSCOW MANEUVERS AHEAD OF CASPIAN SUMMIT
Sergei Blagov: 4/22/02

As Azerbaijan, Iran, Kazakhstan and Turkmenistan join Russia for a littoral summit in Ashgabat on April 23 and 24, the Kremlin has officially warned observers not to expect a binding treaty to emerge from the summit - even as Moscow operatives in recent weeks have vocally urged the other four states to agree on a division of the sea. Moscow seems intent on preserving its power and options in case the summit does not produce a binding deal.

Signs of this strategy appeared on the RIA-Novosti news service on April 17, when a story quoted a nameless Kremlin official's prediction that the summit would produce a document - and then undercut that document. "It would be a great mistake to view this document as a final say on the status of the Caspian Sea," RIA quoted the source as saying. Russia has much to gain from a negotiation process that preserves or expands its share of the sea. The Russo-Iranian treaties dividing the sea are 62 and 81 years old and, because they do not recognize the other former Soviet republics' claims, cannot abide. But with between 18 and 35 billion barrels of oil and some five trillion cubic meters of natural gas in the region, Russia is loath to surrender any share.

The states can divide the sea into proportional or equal shares; the shares can reflect the length of a country's shoreline and either stop at the water or extend into sectors of the sea. Russia's shore now controls 19 percent of the sea. The country had advocated splitting the seabed into five equal stakes. Kazakhstan, which controls 29 percent of the sea by shoreline, opposed that plan; so did Azerbaijan, whose shore covers 21 percent of the sea.

Eventually, Russia supported these countries and proposed updating the 1940 treaty, which makes the sea surface common and divides the seabed along a "modified median line," basically according to the length of the shore, according to Russian officials. Iran objects to this plan, which would keep it a minority shareholder. (Under the 1940 treaty, Iran controls 13 percent of the seabed.) Turkmenistan's leader, Sapurmyrat Niyazov, has embraced Iran's view.

Iran may have some leverage in negotiations. Deputy Foreign Minister Mehdi Safari, a special envoy on Caspian matters, told a Moscow conference on February 27 that Iran expected all countries to leave Caspian resources alone until an agreement takes effect. Iran favors a "condominium" approach, in which all countries develop reserves jointly, Safari said. But Iran - which is straining to find work for its millions of young men - has said it will bar multinational energy firms from the area.

In July 2001, an Iranian gunboat forced a BP ship out of disputed waters. [See EurasiaNet's Business and Economics archive for more information]. The Azerbaijani government gave the BP ship the license to explore the Araz-Alov-Sharg concession, which Iran regards as its own. Hostilities flared between the countries' diplomats and then receded. On April 18, they resurfaced, when Azerbaijani daily Ekho reported that an Iranian warship entered Azerbaijani waters on April 16, hinting at an Iranian naval buildup. Though Azerbaijani border guards denied the incursion, the story highlighted the lack of trust between the two countries.

Russia-Iran relations have warmed in recent months, according to observers. [For more information see the Eurasia Insight archive]. In early April, President Vladimir Putin received Iranian Foreign Minister Kamal Kharrazi in Moscow. At an April 5 press conference with Kharrazi, Russian Foreign Minister Igor Ivanov declared that the sea, "in the opinion of both sides, must become an area of peace, stability, goodneighborliness and equal cooperation." In March 2001, Iranian President Mohammad Khatami signed a joint statement with Putin that said, among other things, that "the legal regime and methods of use of the Caspian Sea resources is the littoral states' business." Putin and Khatami both want to expand bilateral trade. Russia can therefore package its Caspian strategy in language Khatami will appreciate.

It can also woo Iran with silence. On April 17, Abdollah Naseri-Taheri, head of the official Islamic Republic News Agency, expressed hope in Moscow that the littoral states could reach an exploitation agreement "without interference" from other countries. RIA quoted Taheri two days earlier as accusing the United States and Israel of regularly meddling in Caspian affairs in order to gain control over Caspian oil riches. Russia would never issue such biting criticism of the United States, but it has not condemned Taheri's published remarks.

Russia also enjoys leverage over Kazakhstan and Azerbaijan. Russian pipelines carry much of Kazakhstan's oil, and Russian tycoons can provide capital to Azerbaijan's fossil-fuel industry. On April 15, Putin talked by phone with Kazakh President Nursultan Nazarbayev, who declared the next day that his country intends "to side with Russia forever." Incidentally, on April 11 President Putin met with Lukoil president Vagit Alekperov. Lukoil has sizable interests in Kazakhstan, Azerbaijan and the Caspian shelf. Putin and Alekperov reportedly discussed foreign projects. Moscow has also indicated that Kazakhstan and Azerbaijan could get more access to Russia's pipeline system. This could happen through the long-deferred Caspian Pipeline Consortium line to Novorossisk on Russia's Black Sea coast. Lukoil backed out of the Baku-Tbilisi-Ceyhan pipeline, which bypasses Russia entirely, on April 16.

Isolationist Turkmenistan, meanwhile, has proposed a formula for dividing the sea and has promised more proposals during the upcoming summit. The proposals would call on littoral states to make all decisions by consensus but would hold out recourse to international courts or arbitrators for the resolution of disputes. The fact that this proposal has gotten play in the regional press indicates that the actual settlement of the sea's status will not happen for some time.

So Russia appears to be hedging its bets. On April 10, Azerbaijan and Russia signed an agreement outlining the two points that mark the countries' share of the Caspian shelf. Deputy Prime Minister Viktor Khristenko hinted that Azerbaijani President Heydar Aliyev might sign a bilateral deal on the division when he visits St. Petersburg on June 9. Moscow may intend to clinch a series of bilateral deals with the littoral Caspian states instead of pushing for an overall solution. By warning publicly against optimism, the Kremlin may be maneuvering for the richest Caspian windfall possible.

Editor’s Note: Sergei Blagov is a Moscow-based specialist in CIS political affairs.