#13 - JRL 7266
Asia Times
July 25, 2003
Caspian: Agreeing not to agree
By Sergei Blagov

MOSCOW - Hopes of progress towards a final solution of the decade-long dispute over how to divide the Caspian Sea remain over the horizon although all the states surrounding the sea have pledged readiness to work out a settlement.

There had been expectations that a settlement might be reached in meetings of the five littoral states - the states that surround the sea - during a three-day meeting in Moscow this week. But the Caspian envoys didn't manage to agree on anything more than an environmental convention. A new Caspian summit was hardly mentioned as Russian Foreign Minister Igor Ivanov conceded that arranging such a summit would require "a huge work."

The Caspian issue has simmered, blowing hot and cold, since 1828 when the Russian empire took full control over the Caspian according to the Turkmanchaisk treaty. However, following the demise of imperial Russia in 1917, the Soviet states granted Iran limited control over a small part. Treaties in 1921 and 1940 granted Iran control of just 13 percent of the sea. The issue has grown in importance since 1991 with the collapse of the Soviet Union, which created a series of new states - and thus legal claims - surrounding the oil-rich seabed.

Following the meetings this week, Kazakh deputy foreign minister Kairat Abuseidov said a foreign ministers' conference is unlikely before late this year or early 2004. Russia has offered Iran a sort of economic carrot, presumably to soften Tehran's opposition against Moscow plans to divide the seabed but not the waters. Of the five states, Turkmenistan and Iran have not agreed on dividing the seabed.

Kalyuzhny indicated that Russia might offer Iran half of a US$1 billion project to develop offshore oil and natural gas fields in an area claimed by both Iran and Turkmenistan. Turkmenistan would own the other half of the four fields, which contain an estimated 3 billion barrels of crude and 300 billion cubic meters of natural gas. In 2002, the Russian state-owned companies Rosneft and Zarubezhneft, as well as private natural gas producer Itera, launched a joint venture, Zarit, to operate Turkmenistan's four offshore gas fields.

Moscow also came up with a new initiative, designed to divide the sea's lucrative bio-resources. Foreign Minister Ivanov told the meeting on July 22 that Russia suggested creation of 15-mile exclusive fishing zones. However, the idea didn't fly. Abuseidov told the journalists on Thursday that the Russian plan for the 15-mile exclusive zones was not supported by all littoral states. Although those who objected were not named, Iran has a history of disagreeing with Russian plans.

Subsequently, Iranian officials were keen to demonstrate goodwill - at least verbally. "Iran is ready for a compromise solution," Iranian special envoy Mehdi Safari told the journalists in Moscow. He claimed that the Iranian position remains "flexible" but conceded that the final solution remains a "long time off."

Russia is ready to sign the Caspian Convention today, Kalyuzhny told journalists. However, he conceded that some issues such as the 15-mile exclusive zone, demilitarization and international arbitration remain unresolved. Nonetheless, Kalyuzhny pledged to finalize and sign the Convention blueprint by September 8-9, when the next round of talks is due in Ashgabat, capital of Turkmenistan.

Nonetheless, this timetable is still rosy. Earlier this year Russian officials pledged to reach consensus on the legal status of the inland sea by early 2004. Despite earlier official pronouncements that the draft convention on the legal status of the Caspian was being viewed positively by all, Kalyuzhny conceded that roughly only a third of the plan's provisions had been agreed so far.

The issue has been contentious since the collapse of the Soviet Union in 1991. Until then, the sea's status was regulated by treaties between the Soviet Union and Iran. But the break-up of the Soviet Union led to the creation of three new independent states bordering the Caspian Sea: Azerbaijan, Kazakhstan and Turkmenistan. All of those countries now seek a share of its wealth.

Controlling just 13 percent of the sea, Iran would be poised to benefit greatly from equal division. After 1991, Iran suggested that the Caspian be divided equally, with the five littoral states each taking 20 percent. Russia, Kazakhstan and Azerbaijan support the so-called middle lines division principle, which would leave Iran with the smallest part.

In the wake of a series of bilateral Caspian deals between Russia, Azerbaijan and Kazakhstan, widely seen as an alternative to an overall agreement of all five states, last October Kazakhstan floated an idea for a trilateral agreement in the oil-rich region, backing the Russian plan of "median line" division plan as a "just solution".

Kazakhstan is set to become a major beneficiary of the so-called median lines division principle, which would leave it with the largest part of the sea. Iran and Turkmenistan would be the losers. In recent years, there have been repeated moves to resolve the disputes. In May 2002, Russian President Vladimir Putin and his Kazakh counterpart Nursultan Nazarbayev signed a bilateral agreement on how to divide the northern portion. The deal implies that three hydrocarbon fields divided by the median line - Kurmangazy, Central and Khvalynskoye - would be exploited on parity basis. Last October, Putin and Azerbaijani President Geidar Aliyev signed a border agreement on defining the sea border between their respective Caspian sections.

Following ratification of bilateral treaties between Russia, Azerbaijan and Kazakhstan, "the Northern Caspian is now open for business and investment as it has legal protection," Kalyuzhny told the journalists in Moscow on July 18. "From the point of view and energy resources, these three states did solve the Caspian issue," he said.

Russian media outlets have speculated that Iran could skip its claims to control 20 percent of the Caspian and accept Russian median line proposal, because now Tehran is under heavy American pressure.

On the other hand, Iranian officials have reportedly indicated they intend to start oil drilling inside "its part of the Caspian," the 20 percent it would get under an equal division, according to Tehran. "It would be a casus belli," - pretext for war, Russian Gazeta SNG daily commented, adding that the Russian Caspian Flotilla still remains the strongest naval force in the inland sea.