The Conflict

The Caspian Sea seabed contains many unexplored and undeveloped oil and gas reserves. These reserves are potentially worth billions of dollars to the nations and companies that develop them. Although some development is underway, legal wrangling by the five Caspian Sea border nations over who owns the reserves has held up production and led to intense negotiations over the sea's future.

Political

High-level leaders and negotiators from the five nations bordering the Caspian Sea have met numerous times throughout the decades, but they have been unsuccessful in resolving the claims and territorial issues.

Economic

Multi-billion dollar commitments are on the line as investors wait for the bordering nations to resolve the dispute.

Territorial

Each nation brings different, and often shifting, views and opinions regarding how to mark the boundaries of the Caspian Sea.


The boundary-markings of the Caspian Sea--and thus ownership of the resources in the Sea--have long been debated by the five countries lining its coast: Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan. In May 2001 a meeting was held between the deputy foreign ministers of Azerbaijan and Turkmenistan to set out the Caspian Sea's delimitation (boundary-marking) between their two countries. The meeting ended with mutual recriminations, illustrating the unresolved tensions that continue to stymie a solution. At the conclusion of the two-day talks in Turkmenistan's capital of Ashkhabad, the Turkmen Foreign Ministry denounced Azerbaijan for an alleged lack of good faith bargaining. According to the Foreign Broadcast Information Service (FBIS, Document No. CEP-261, May 3, 2001), Turkmenistan asserted that Azerbaijan's insistence on drawing a sectoral line closer to the coast of Turkmenistan than to its own "contradicts the principle of justice and equality." Turkmenistan demanded, pending the settlement of the dispute, that Azerbaijan and foreign energy firms "stop all projects connected with the exploration and extraction of hydrocarbons, including seismologic surveys ... in zones of the Caspian Sea arguably between Turkmenistan and Azerbaijan." The Turkmen Foreign Ministry stated that it would appeal to international bodies for help in drawing the line and would protest Azerbaijan's alleged encroachment on Turkmen territory to the International Arbitration Court.

On the same day, Iran's Supreme Leader Ayatollah Ali Khamenei condemned the very holding of the Azerbaijani-Turkmen talks, stating the legal status of the Caspian Sea should be determined by each of the five coastal, or littoral, states surrounding the Sea. He underscored Iran's stance that "on the basis of international law, the Caspian Sea should be shared by all the five littoral states and no foreign power can interfere in affairs related to the sea." (FBIS, Document No. IAP-40, May 3, 2001)

The unresolved legal status of the Caspian Sea both contributes to and reflects wrangles over who owns major oil, natural gas, and other resources in the Sea, over fishing and navigation rights, and over responsibilities for environmental protection. Western private investors have made multi-billion dollar commitments to develop Caspian Sea oil and natural gas resources, but the uncertain legal ownership of oil and gas fields has held back some investment and has raised the costs of development. Increasing Caspian Sea pollution also remains an issue to be addressed. Pollution problems are highlighted by the 95 percent reduction in sturgeon catches in the Sea (the fish is the source of the famous Beluga caviar), by over-fishing and the destruction of spawning grounds, and by a recent major kill-off of seals.


Sea or Lake, What's at Stake?

In the popular mind the dispute over the legal status of the Caspian Sea has revolved around whether it is regarded as a sea or as a lake in international legal parlance. If it is a sea, these observers have supposed, then by international law and practice it should be divided among the littoral states. If it is a lake then its use could be jointly overseen by the littoral states in what is termed a condominium arrangement (joint sovereignty and joint rule). Neither of these suppositions is accurate. Those who support regarding the Caspian as an enclosed sea under the 1982 Law of the Sea convention point to general provisions that such a sea will be divided using equidistant lines, to include seabed resources. Legal scholars, however, point out that the Caspian is not really considered an enclosed sea as defined in the convention because it has no direct outlet to another sea or ocean, and because freedom of navigation by outsiders is not at issue. Iran is among those who have argued that the Caspian is a lake and should be ruled by a condominium arrangement. There are, however, no historical instances of common ownership of lakes or inland seas. Lakes shared by two or more countries have always been delimited using equidistant lines. This includes the delimitation of the Great Lakes in North America, Lake Tanganyika in Africa, and Lake Constance in Europe. Partial alterations from this principle have primarily been allowed only for historical or special circumstances, such as to include or exclude a claimed island. In the case of the Caspian Sea, Iranian and Soviet claims that the Sea was a jointly shared "common sea" are not born out by the historical record.

Instead of arguing about whether the Caspian is legally a sea or a lake under international law, it is better to examine the resource or use of the Sea, according to lawyer Bernard Oxman. The states bordering the Caspian all agree that in the respect of its navigation and use the Caspian is a lake, and so only the bordering states should have say-so over these aspects. Regarding mineral resources, whether the Caspian is considered a lake or sea, an exclusive economic zone that will extend for 200 miles (320 kilometers) from the coastal lands is hoped to be established under international law. Both Azerbaijan and Kazakhstan have declared these 200-mile zones in a sea that is only 150 miles (240 kilometers) wide between them, clearly demonstrating the need for negotiations. The final status of the Caspian must be worked out by the littoral states, perhaps drawing from some Law of the Sea precedents for semi-enclosed marine seas or those worked out by countries sharing lake borders, and may involve a mix of partition and condominium features.


Historical Background

During most of the 1990s Iran and Russia claimed that the Caspian was a "common sea" or lake under shared rule, as per provisions of 1921 and 1940 bilateral treaties. These treaties, however, were silent on seabed boundaries or energy rights. The 1921 Russia-Iran Treaty formalized Iran's border with the Soviet Union, which took control over Georgia, Armenia, and Azerbaijian, thus granting Russia access to ports on the Caspian Sea. The 1921 treaty referred to the Caspian Sea only in terms of where the land boundaries between the two countries began and ended. The 1940 Soviet-Iran Treaty granted each nation bordering the Sea exclusive fishing rights up to 10 miles (16 kilometers) from their coasts. Like the 1921 treaty before it, the 1940 agreement also did not address resources under the seabed, including oil and natural gas.

In 1994 Russia argued before the United Nations (UN) General Assembly that the Caspian Sea was a lake. As a body of water that is land-locked and not connected to a sea or ocean, Russia argued, it was therefore not subject to international navigation rights or to the delimitation of economic zones based on a continental shelf approach. It further insisted that the Caspian be subject to joint-use agreements among the littoral states, as set forth in Soviet-Iranian treaties, which remain binding on the new states as successors to the treaties. (Armenia, Georgia, and Azerbaijan became independent nations after the collapse of the Soviet Union.) Legal scholars point out that Iran never challenged Soviet oil drilling in the Caspian Sea or other exploitation, nor did it claim a share of proceeds, although the Soviet-Iranian Treaty of 1940 spoke of the Caspian as belonging to the Soviet Union and Iran (beyond 10-mile fishing rights). Under this treaty Iran was entitled to a share of the proceeds. The lack of consultation between the two countries on this matter implies that Iran and the Soviet Union did not actually treat the Sea resources as shared. Legal scholar Scott Horton points out that Soviet-Iranian treaties dictating the status of the Caspian Sea have no validity under the Vienna Convention on the Law of Treaties, since those treaties cannot be binding on the new Caspian states, including Azerbaijan, unless they formally accept the treaties.

Among early efforts to resolve the legal status of the Caspian Sea after the Soviet collapse in 1991, Russia floated a draft treaty in late 1994 calling for a condominium of the Caspian Sea beyond a 20-mile (32 kilometers) coastal "zone of influence" by each littoral state, with a joint board to control the use of the rest of the Sea. In December 1996 Russia modified this proposal by enlarging the zone to 45 miles (72 kilometers) of exclusive control.

Azerbaijan in late 1996 reportedly rejected draft proposals prepared by Russia that called for the Caspian Sea to be held in common. At a November 1996 foreign ministerial meeting of the littoral states in Ashkhabad, the sides agreed to form a working group composed of deputy foreign ministers to draw up a convention on the Sea's legal status. The working group faced delays, but finally held its first meeting in Almaty in May 1997. It was, however, unsuccessful in drawing up anything but the preamble. Subsequent meetings held in December 1998 and February 2001 also failed to complete a draft convention. Azerbaijan and Turkmenistan clashed at the meetings over ownership of some oilfields, leading Turkmen President Saparamurad Niyazov to issue a decree unilaterally claiming the fields for Turkmenistan and ordering an international tender, or bid, to be held on developing these and other Turkmen fields.


Conflicting Positions

Beginning in the late 1990s halting forward movement was made toward agreement on delimiting the Caspian Sea. Of the states bordering the Caspian--Russia, Azerbaijan, Iran, Turkmenistan, and Kazakhstan--all except Iran appeared in 2001 to be ready to divide seabed resources, using a modified median line (equidistant or middle line) approach. Iran has been the slowest in developing its Caspian Sea resources and appears most interested in using the unresolved legal status of the Sea to discourage Western companies, particularly those of the United States, from assisting in energy development. Russia, during most of the 1990s, appeared to support Iran in calling for the basic retention of the legal status the Caspian possessed under Soviet-era treaties. In 1998, however, Russia embraced a modified median line approach to delimiting its own seabed borders with its bordering Caspian neighbor Kazakhstan, and in January 2001 it adopted the same approach with its other bordering neighbor, Azerbaijan.

The United States, an interested party in the resolution of the dispute due to the region's vast expanse of natural resources, has taken the position that Caspian Sea delimitation should be agreed upon by the littoral states, but that delimitation should permit the development of energy resources in line with existing contracts. Then-U.S. Caspian Envoy Richard Morningstar stated in early 1999 that, in practice, the division of the Sea into sectors would probably be the best method. In May 1999 he delivered suggestions to Azeri President Heydar Aliyev and Turkmen President Suparmurat Niyazov for delimitating Caspian Sea borders between Azerbaijan and Turkmenistan. U.S. consultants to the Azerbaijani-Turkmen border commission developed the suggestions. On April 20, 2001, Russian Premier Mikhail Kasyanov rejected U.S. interest in the Caspian Sea and appealed to the 1921 and 1940 Soviet-Iranian treaties in asserting that non-littoral states have no role regarding the Sea. What role the United States could have had in the Caspian matter has thus been marginalized under these treaties.

Azerbaijan, as a nation bordering the Sea, has a vested interest in resolving the boundary and resource disputes. Since the early 1990s it has consistently called for all the Caspian--surface, water, and seabed--to be divided into national sectors. Azerbaijan maintains that the delimitation of the Caspian Sea worked out by the Soviet Ministry of Oil and Gas Industry in 1970 provides the legal basis to sectoral claims. Under this delimitation, Kyapaz (Azerbaijan's name for an oilfield; Turkmenistan calls it the Serder field) belongs to Azerbaijan. Azerbaijan has also claimed that, as the discoverer and developer of the Azeri and Chiraq fields, these oilfields should also belong to Azerbaijan.

Kazakhstan's stance in recent years has generally mirrored that of Azerbaijan. Kazakh President Nursultan Nazarbayev visited Baku, Azerbaijan's capitol, in September 1996. There, the two presidents issued a joint statement on the Caspian Sea, agreeing to work together to resolve legal issues, and supporting open navigation and the division of the seabed and waters into national sectors. Reporters asked Azeri President Aliyev if the joint statement was aimed against the stance taken by Russia and Iran on the Caspian Sea, which was that a coastal zone should be established and that the Sea's resources should be overseen jointly by the littoral states. Aliyev replied that the statement reflected the rights of coastal states to exploit Caspian resources.

Russia at first called the Caspian a "closed sea," a Soviet-era concept not recognized in international law. It also referred to the Caspian as a lake, not subject to the Law of the Sea, and stated that the 1921 and 1940 treaties remained in effect despite the dissolution of the Soviet Union and the independence of Azerbaijian, Armenia, and Georgia. Russia's position shifted slightly between 1994 and 1996, when it proposed a 20-mile (32 kilometers), and later a 45-mile (72 kilometers), coastal zone for each littoral state, outside of which there would be joint navigation rights, joint management of fishing and environmental protection, and joint resource exploitation. Despite a hard line by the Russian Foreign Ministry and presidential administration Russia's energy firms and its Fuel and Energy Ministry proceeded with energy development in the Caspian Sea. These internal clashes became more apparent after the Russian oil firm Lukoil was included in the Azerbaijan International Operating Company (AIOC), a consortium of major international oil companies. Lukoil joined the AIOC in early 1994, at the same time that the Russian Foreign Ministry was condemning the consortium for illegally seeking to exploit the Azeri, Chiraq, and Gunashli oilfields.

Russia's stance on the Caspian Sea shifted in 1997-98 once it became more apparent that it would gain substantial revenues from transporting Caspian Sea oil and gas through its pipelines. Turkmenistan's July 1997 protest that delimitation should be drawn according to equidistant, or median, lines, and not by joint arrangement, brought these internal tensions in Russia to a head. In July 1998 Russia signed an interim agreement with Kazakhstan to divide the north Caspian seabed using the median line principle, although Russia still maintained that the Soviet-Iran treaties governed the rest of the Sea under common agreement until a new system was agreed upon by the five littoral states. While Russia agreed with Kazakhstan and Azerbaijan on delimiting seabed borders for energy development--joint use of the central regions of the Sea--Russia and Iran continued to oppose the building of oil and gas pipelines on the Caspian seabed until the legal status of the Sea is settled. Critics view this stance as mainly designed to block energy development by Western firms and the construction of pipelines that would circumvent Iranian or Russian control. When the U.S. consortium PSG signed an accord in early 1999 with Turkmen President Niyazov on constructing a trans-Caspian gas pipeline, Russia warned that all the littoral states had to agree to such an ecologically dangerous project, especially given that the proposed pipeline would run through an earthquake zone. Iran called the contract "unacceptable" because all the states had not agreed to it and because the United States was involved.

While Russia's government has moved to embrace some aspects of sectoral delimitation, its legislature has been more reluctant. Russia's lower legislative chamber, the State Duma, held hearings on Caspian Sea delimitation in 1999 and concluded that the treaties of 1921 and 1940 should remain binding. The legislators stated that a system that held most of the Sea in common would permit Russia to exercise the most influence and gain more revenues from shared energy exploitation. One Russian energy expert who testified in the Duma implied that a final resolution of the Caspian Sea's status is not the top Russian concern, since Russia will probably not be a major offshore energy producer for the next few years. Instead, Russia's main concern will be helping to transport Caspian energy through its pipelines. Critics of this stance would point out, however, that Russia would have a stake in assuring the flow of oil by backing a stable Sea regime.

In agreement with Russia regarding continued adherence to the strictures set out in the 1921 and 1940 Soviet-Iran Treaties, Iran supported the treaties throughout the 1990s as a basis for settling legal disputes regarding the Caspian. Iran called for all littoral states to jointly agree on seabed exploitation of resources and to share in revenues. In 1993 it called in vain for the establishment of an organization of Caspian Sea littoral states to carry out joint decision-making on use issues. Due to a lack of consensus, however, such an organization did not emerge.

In September 1998 Iran was faced with opposition from Azerbaijan and Kazakhstan concerning Iran's support for a condominium arrangement, as well as a 1998 Russia-Kazakh understanding on dividing their seabed resources. Iran proposed as a replacement regime to the 1921 and 1940 treaties that the littoral states agree on dividing coastal zones equally into national sectors. In this way each state would receive 20 percent of the sea floor and surface. Division of the seabed by equidistant lines would give Iran only about 13-14 percent of the seabed, and at times it seemed that Iran was claiming 20 percent of offshore oil and gas reserves, contrary to the lines that would be drawn for its boundaries. Since Iran would get only 13-14 percent of the Sea under a modified median-line demarcation, its demand for 20 percent appears particularly threatening to neighboring Azerbaijan and Turkmenistan, rather than to the more distant Russia and Kazakhstan.

Unlike Iran, which has held fairly stable in its position regarding the Caspian, Turkmenistan has frequently and inconsistently changed positions on the Caspian Sea. At a November 1996 ministerial meeting in Ashkhabad, Turkmenistan agreed with Russia's proposal for a 45-mile (72 kilometers) coastal zone. It also joined with Iran and Russia in signing an accord to set up a joint-stock company to share profits from developing energy resources in the national zones of the three states. The accord, however, was never successfully implemented. A few months later, in February 1997, Turkmenistan's views appeared to shift when it agreed to divide its neighboring sectors with Kazakhstan on an interim basis until a final regime was determined. Then, one year later, in February 1998, tensions between Azerbaijan and Turkmenistan eased for a bit when the two states issued a statement calling for the division of resources under the equidistant line principle. This policy seemed to contradict the 1996 accord signed with Russia and Iran regarding the joint development and sharing of energy resources and profits. A 1998 statement by Turkmenistan and Azerbaijan declared that the two sides would set up a Turkmen-Azerbaijan Bilateral Commission on Defining the Coordinates of the Medial Line. The mediators, however, could not agree on where to draw a border regarding the Kyapaz/Serder oilfield, so a presidential meeting planned for November 1998 to formalize borders was called off. Reacting to the Russia-Kazakh Caspian delimitation agreement of July 1998, Turkmenistan again appeared to change its stance, agreeing with Iran's call to divide the sea and seabed equally, rather than equidistantly, and opposing bilateral agreements on the Sea, which it had just entered into a few months ago with Azerbaijan. At the deputy foreign ministerial meeting in Moscow in December 1998, however, Turkmenistan joined Azerbaijan in calling for the Caspian seabed and waters to be divided into national sectors.


Neighbors as Allies and Antagonists

Turkmenistan maintains that a Soviet-Iranian agreement of 1970, "On Median Lines in the Caspian Sea," calls for joint use of the central regions of the Caspian Sea, ostensibly including seabed resource exploitation. Turkmenistan also claims that the status of the Caspian Sea, including boundaries and resource use, is to be determined by negotiations by the littoral states and not by unilateral decisions. The matter of unilateral decisions appears aimed particularly at Azerbaijan, with whom Turkmenistan has unresolved disputes regarding ownership of oilfields, particularly the Kyapaz/Serder field. Turkmenistan demands a share of revenues Azerbaijan gains from exploiting the disputed fields. Analysts suggest that about one-fourth to one-third of the Kyapaz/Serder field may be in Turkmenistan's sector of the Caspian Sea, as determined by an equidistant line principle. Turkmenistan tried to include Serder in an international bidding process in September 1998, but received no bids for the disputed field. Turkmen President Niyazov has threatened to pursue Turkmenistan's claims to Kyapaz/Serder in international tribunals.

Meanwhile, Azerbaijan and Russia are aligned in dispute against Turkmenistan. Turkmenistan had been claiming the Azeri and part of the Chiraq oilfields, being developed by international consortia, and had notified energy firms in the consortia that it might take legal action against them. However, after Azeri President Aliyev visited Moscow in early July 1997, Turkmenistan reacted strongly to Azeri and Russian efforts to develop the Kyapaz/Serder field. At that time Azerbaijan's state-owned oil company, SOCAR, and Russia's Lukoil and Rosneft firms signed a contract on the main commercial principles of a production sharing arrangement to develop the Kyapaz/Serder field. Turkmenistan objected to this development, claiming that Serder fell under Turkmen control. It now also protested international development plans for the Azeri and Chiraq oilfields.

Turkmenistan immediately lodged a diplomatic protest with Moscow, demanding that the contract for the Chiraq fields be declared null and void. The Turkmen Ministry of Foreign Affairs released supporting materials, including maps, claiming complete ownership of not only the Kyapaz/Serder field but also of the Azeri field and partial ownership of the Chiraq field, which is also claimed by Azerbaijan. It asserted that all three fields were closer to Turkmenistan's shore than to Azerbaijan's, particularly the Kyapaz/Serder, which it insisted was about 100 km (about 63 miles) from Turkmenistan's shore and nearly double that (184 km, or about 116 miles) from Azerbaijan's shore. According to the FBIS (July 31, 1997) Turkmen Foreign Minister Boris Shikhmuradov argued that "the process of seeking agreement on the Caspian based on elaboration of its new legal status has been driven into a dead end by the so-called commercial agreement between Russia and Azerbaijan." Raising the stakes of its protest, Turkmenistan raised the issue of Russia's action at a mid-July 1997 meeting of the Organization for Security and Cooperation in Europe (OSCE), and Turkmen officials also complained that Russia's actions show that it did not play the role of "equal partner" in the Commonwealth of Independent States (CIS).

Besides the Turkmen Foreign Ministry protests, Turkmen President Saparmurat Niyazov sent a letter to Azeri President Heydar Aliyev asserting Turkmenistan's claims through a sectoral division of the Sea, including a "single definition of the status of both the sea floor and the sea itself. We believe that...a single national jurisdiction will be a more flexible tool for later agreements on shipping, fishing, and other human activities." (Yagmur Kochumov, Caspian Crossroads, Winter 1999) The letter was telling in that Niyazov pressed Turkmenistan's claims to Kyapaz/Serder, while clearly rejecting Iran's view that all the littoral states should share in exploiting resources.

Reacting to the Turkmen diplomatic protest, Russia dispatched a high-level delegation led by Vice Premier Valeriy Serov to Ashkhabad at the end of July 1997. Serov claimed that the Russian government had not been fully informed of the details of the commercial agreement drawn up by the Russian energy companies, but, according to some reports, he also initially tried to defend the merits of the deal. Turkmenistan, however, was adamant that Russia admit that the deal was illegal, and Niyazov rejected Vice Premier Serov's argument that the Russian government had not been closely involved in the deal making. Niyazov stated that Turkmenistan would not participate in negotiations on the legal status of the Caspian Sea until the deal was canceled. He also stated that Turkmenistan intended within a few days to offer a counter tender for the development of the disputed Kyapaz/Serder field. In the end Serov stated that Russia would soon make a public announcement about the Kyapaz/Serder oilfield deal. Niyazov quickly insisted on visiting Russia, where he met with then-Russian President Boris Yeltsin on August 7, 1997. At this meeting, the presidents issued a joint communiqué wherein Yeltsin repudiated the Russian contract.

At about the same time that Russia and Turkmenistan were switching from antagonists into allies, Russia and Kazakhstan went from allies to antagonists. Yeltsin had visited Kazakhstan in April 1996 and, with Kazakh President Nursultan Nazarbayev, signed an accord on the Caspian Sea calling for cooperation among the littoral states on use, pending the signing of a convention on the Caspian's status and use by the littoral states. A major disagreement developed between the two countries in late 1997, however. After the Russian Ministry of Natural Resources held an open bid for the exploration of fields in the northern Caspian, which were claimed by Kazakhstan, and awarded the proposal to the Russian firm Lukoil, Kazakhstan demanded that the bid be cancelled. This heightened tensions between the two countries. In early 1998 Russia and Kazakhstan focused on reaching an accord on sectoral delimitation that would permit uncontested exploitation of the fields.

The Russian-Kazakh agreement of July 1998, "On the Delimitation of the Seabed of the Northern Part of the Caspian for the Purpose of Compliance with Sovereign Rights to the Exploitation of Minerals," called for dividing the north Caspian seabed along a "modified midpoint line" into national sectors, with the sides otherwise calling for cooperation on environmental, fishing, and navigation issues. The two sides agreed to open talks on exactly where to draw the line, based on points equidistant from the opposite shores closest to each of the countries and taking into account historical claims to some islands and "previously incurred geological expenditures." The two parties hailed the agreement as a basis for a general legal regime among the five states. Some contentious issues, however, have stymied final agreement on the modified midpoint line, including conflicting claims to islands and fields.

Despite these lingering issues, Russian President Vladimir Putin marked the two countries' continued cooperation in a mid-October 2000 visit to Kazakhstan. Although the two sides had agreed to a median line principle for dividing the seabed, they had not agreed on where to draw the line. In the meantime, Russia, in 2000, discovered an apparent large oilfield called Khvalynskoye in the north Caspian Sea. Seeking to avoid conflict, the two sides issued a declaration of cooperation in the Caspian which reiterated the principles of the July 1998 agreement, though many issues between Russia and Kazakhstan, indeed between all five littoral states, remain unresolved.

A sticking point in resolving some of these issues, Russia claims, is Iran. In November 2000, Viktor Kaluzhny, Putin's special envoy on Caspian Sea affairs, stated that Iran had become an impediment to the resolution of the problem of the Caspian Sea's status by its non-compromising stance. He noted that Russia had proposed holding a meeting of deputy foreign ministers from the five littoral states in August 2000, which had been turned down by Iran. Another meeting was scheduled in Moscow for December 2000. The newly appointed Iranian Caspian emissary visited Moscow and other capitals of the Caspian littoral states in December 2000. While repeating Iran's long-held position on delimitation, he announced that Iran would host a meeting of the deputy foreign ministers to discuss Caspian legal status in early 2001. This meeting took place in February 2001 in Tehran, and was mainly devoted to preparations for the planned March summit of heads of state.


Recent History and the Future

Azerbaijan and Kazakhstan have swung Russia around to their thinking on delimiting seabed resources into national sectors. Turkmenistan has also appeared to accept this position, resulting in Iran's isolation in calling for either joint rule or a delimitation giving it 20 percent of the Caspian Sea. Some analysts think that this recent agreement soon may pave the way to a convention among the littoral states on the legal status of the Caspian Sea, but other analysts note that various pronouncements of near settlement have been made by the states in the past to no avail. These analysts also point out that many issues dealing with exceptions to drawing an equidistant line remain contentious, including benchmarks, disputed oilfields, and islands, which stymie a comprehensive settlement of status. More likely than a grand, comprehensive settlement, these analysts suggest, piecemeal bilateral and other agreements dealing with seabed use and particular fields may gradually build a consensus among the littoral states. Iran's insistence on using equidistant lines to delimit seabed resources also remains an impediment to a multilateral settlement. The shaky ground of its position seems apparent to Iran, which itself has signed contracts with international energy companies to develop offshore resources.

Delimitation and use questions have slowed but not stopped energy development in the Caspian Sea. Some analysts warn that as the monetary stakes in the development of oil and gas fields grow higher and more obvious, the hopes of settling contentious ownership and use questions may lessen, and the chances of military conflict may grow.


Struggling to Reach Agreement

At the conclusion of Russian President Putin's visit to Azerbaijan on January 9, 2001, the two countries signed the Baku Declaration of their bilateral relations, terming their ties a "strategic partnership." On the status of the Caspian Sea the Declaration states that the two sides have come closer together on their thinking and that they would continue their consultations. A separate Joint Statement on the Principles for Cooperation on the Caspian Sea calls for drawing a median line, with each state having exclusive rights to develop its seabed resources. Iran responded harshly to the accord, harking back to the agreements it signed with the Russian Federation regarding the Caspian Sea in 1921, and with the Soviet Union in 1940, as still providing the only basis for dividing the Sea. The Azeri-Russian agreement effectively ended an almost seven-year dispute on Caspian Sea delimitation that emerged when Azerbaijan formed the first international oil consortium in 1994.

Trying to eliminate increasing Russo-Iranian tensions over Caspian Sea delimitation, Viktor Kaluzhny, Russian special envoy on Caspian Sea affairs, traveled to Iran in mid-January 2001. He described the talks with Iran as "difficult," but was optimistic that Iran would drop its demand that it receive 20 percent of the Sea if it is divided. He termed the 20 percent stance as unrealistic since Azerbaijan and Turkmenistan would be unlikely to relinquish parts of the Sea they would be allocated under an equidistant line delimitation. Iranian officials told Kaluzhny that they could not agree to bilateral agreements on Caspian delimitation that did not take Iran's interests into account.

All five countries did agree with Turkmen President Niyazov's proposal to hold a summit of the presidents of the littoral states in the port city of Turkmenbashi, Turkmenistan, to work out Caspian Sea demarcation and a comprehensive legal regime for shipping, fishing, and the environment. Trying to get Iran on board before the proposed March 8-9, 2001, Turkmenbashi summit, deputy foreign ministers from the littoral states traveled to Tehran in February to work out common positions on Caspian demarcation. At this meeting Iran continued to call for a condominium arrangement for the Sea, or for equal division of its resources (20 percent for each littoral state), and repeated its harsh call for all energy development to halt in the Sea pending the settlement of its status. Prior to the Tehran meeting Niyazov had stated that Turkmenistan now opposed common use of the waters and instead supported a comprehensive and complete settlement of Caspian Sea status, including the delimitation of both seabed and surface waters, the demilitarization of the Caspian, and agreement on environmental issues. Niyazov indicated that he would support Iran at the planned summit in criticizing Russia's agreements with Kazakhstan and Azerbaijan on delimitation. Turkmenistan's opposition to Russia's agreements with Kazakhstan and Azerbaijan appealed to Iran, as did the call for demilitarizing the Sea. However, Turkmenistan's call for comprehensive delimitation isolated Iran and may have contributed to Iran's request that Turkmenistan delay the March meeting until April. The summit was postponed again until October 2001, this time by Russia, when it became apparent that Iran would probably boycott a meeting in which it felt isolated.

In preparation for the planned March 8-9 summit Iranian President Kamal Kharrazi met with Vladimir Putin in Moscow in early March 2001. The two sides were to work on the Caspian Sea delimitation issue, but a statement issued at the meeting noted little progress. Among other Caspian issues, Moscow rebuffed Iran's call for the demilitarization of the Caspian Sea. The issued statement, however, appeared to mark agreement between the two sides that the question of the legal status of the Sea must be resolved by the littoral states before trans-Caspian pipelines are built. In keeping with the history of contradictory agreements, however, Russia's position regarding the pipelines appeared to waiver when Kaluzhny traveled to Kazakhstan in mid-March 2001 and endorsed the idea that "economically beneficial" undersea pipelines should be built, seemingly overlooking the previous statement that the Sea's legal status must first be determined.

After its meeting in Moscow, Iran announced that it would not be able to attend the planned Caspian summit later in March, ostensibly because of a scheduling conflict, but it could attend a meeting in mid-April. Kaluzhny then visited Kazakhstan, Turkmenistan, Iran, and Azerbaijan to discuss a 20- to 30-point Russian draft delimitation document that could be signed at the rescheduled summit. According to rumors the draft called for settling the status of the Sea in stages, with the first stage involving dividing the seabed along equidistant lines, and later devising rules for fishing and navigation. After it appeared that Iran had rejected this draft, Putin requested that summit-host Viktor Niyazov again postpone the summit until October 2001. On April 20, 2001, Russian Premier Mikhail Kasyanov voiced optimism that the legal status of the Caspian could be settled by the end of the year.


Chronology


late-1860s Oil is formally extracted from on-shore wells near present-day Baku, Azerbaijan.
1921 The Russia-Iran Treaty of 1921 is signed between the Russian Federation and Iran. It formalizes the border between the two countries and gives control of Armenia, Georgia, and Azerbaijan to Russia.
1940 The Soviet-Iran Treaty of 1940 gives each nation bordering the sea exclusive fishing rights of up to ten miles from its coast. The treaty does not address resources found under the seabed.
1945 The first extraction of oil from the Caspian Sea takes place.
1991 Azerbaijan, Kazakhstan, and Turkmenistan declare independence from the Soviet Union.
July 1998 Russia and Kazakhstan agree to a median line approach to delimiting Russia's seabed borders.
September 1998 Iran proposes that the littoral states divide the coastal zones into national sectors so that each state receives 20 percent of the sea floor and surface.
November 2000 Russian envoy Viktor Kaluzhny states that Iran has become an impediment to the resolution of the Caspian Sea's status.
January 9, 2001 Russia and Azerbaijan agree to a modified median line approach to delimiting Russia's seabed borders. Iran responds harshly to the agreement.
February 2001 Deputy foreign ministers of the five littoral states meet in Tehran, Iran, in preparation for a March 2001 summit.
April 2001 The summit planned for March 2001 and to be attended by heads of the littoral states is rescheduled for April, and then postponed until October 2001.
May 2001 A meeting between the presidents of Azerbaijan and Turkmenistan ends with no resolution. The supreme leader of Iran condemns the meeting, voicing the opinion that all five littoral states need to be involved to discuss the legal status of the Caspian Sea.


The Sea and its Neighbors

The Caspian Sea lies at the eastern end of the Caucasian Mountains and marks what many regard as the southernmost edge of continental Europe. It is the world's largest inland body of water, covering an area of about 149,200 square miles (386,428 square kilometers). It is about 750 miles long (1,207 kilometers) and 270 miles wide (434.5 kilometers). It is saline, but is not connected directly to other seas, as is the Mediterranean. Geological evidence shows that the Caspian Sea was once much larger and was connected to the Sea of Azov, and thence to the Black and Mediterranean Seas. Its surface is about 90 feet (27 kilometers) below the level of the world's oceans, though water levels have been rising in recent years. The northern part of the Sea is shallow, averaging about 17 feet (5 meters), and freezes over in the winter. The southern part has a maximum depth of 3,200 feet (975 meters). The Sea is bordered by five states: Azerbaijan, Kazakhstan, Turkmenistan, Russia, and Iran. In Russia the Sea is bordered by the multi-ethnic Dagestan, historically Buddhist Kalmykia, and Muslim Astrakhan regions. Major ports include Makhachkala, Astrakhan, Aktau, Turkmenbashi, and Baku. During the Soviet period, treaties signed between Iran and the Soviet Union broadly governed rights in the sea. There was little political need to delimit the borders of the sea among the Soviet republics during the Soviet period, but some regulations were promulgated.

The 1921 Russia-Iran Treaty formalized the border between the Russian Federation and Iran and gave control of Armenia, Azerbaijan, and Georgia to Russia. It did not address resources in the Caspian Sea. In 1940 the Soviet-Iran Treaty was signed between what had become the Soviet Union (formerly the Russian Federation) and Iran. This treaty gave each nation bordering the Caspian Sea exclusive fishing rights up to 10 miles (16 kilometers) from the coast. Again, resources under the seabed, such as oil and natural gas, were not addressed. To support their positions regarding the Caspian Sea boundaries and resources, Russia and Iran have often referred to these treaties and maintained that they remain binding on the five littoral, or coastal, countries.

Just who has a right to what in the Caspian Sea is an important matter, as the Sea is rich in natural resources. Most oil and gas reserves in the Sea are undeveloped. The resources, however, provide energy for neighboring countries and could be a lucrative source of revenue on the international market. Proven oil reserves for the region are estimated at 18 to 35 billion barrels, while possible reserves may number 235 billion barrels or more. The region is also rich in natural gas.

The countries bordering the Caspian Sea have been embroiled in a merry-go-round of changing allegiances and contradictory policies. As of 2001, however, most had come to agree on at least a few points. Azerbaijan, Kazakhstan, and Turkmenistan are allied in their support for the division of the Caspian's surface, water, and seabed into national sectors, with open navigation of the Sea. Russia maintains its support for a 20 to 45 mile (6 to 14 kilometer) coastal zone. Beyond that point, it suggests joint navigation and management of fishing and environmental protection, and joint resource exploitation of the Sea between all five littoral states. The fifth littoral state, Iran, holds to a position different from both the Russian and the Azeri, Kazakh, and Turkmen stances. Iran proposes a condominium agreement, or joint rule, over the Caspian Sea, with a coastal zone divided into equal national sectors of 20 percent, to include the sea floor and surface. The finer points of these positions, and the various agreements between the littoral states, make determining the Caspian Sea's legal status and establishing clear standards for its use a difficult task.


Oil and Gas Reserves

Many parts of the Caspian Sea are not fully explored and most oil and gas reserves remain undeveloped. Most of Azerbaijan's oil resources, both proven and possible reserves, are located offshore, as are perhaps 30-40 percent of the total oil resources of Kazakhstan and Turkmenistan. Proven oil reserves for the entire Caspian Sea region (total country reserves, not just for the Caspian Sea itself) are estimated at 18-35 billion barrels (bbl), comparable to those in the United States (22 bbl) and the North Sea (17 bbl). Possible oil reserves are estimated at 235 bbl or higher. Preliminary drilling in Kazakhstan's Kashagan Field has indicated possible reserves of 40 bbl for this field, with 10 bbl recoverable. Natural gas reserves are large, accounting for almost two-thirds of the hydrocarbon reserves (proved, in addition to possible reserves) in the Caspian Sea region. Based upon proven reserves, Kazakhstan, Turkmenistan, and Uzbekistan each rank among the world's 20 largest natural gas countries. Proven gas reserves in the Caspian region are estimated at 236-337 trillion cubic feet (Tcf), comparable to North American reserves of 300 Tcf.


-- Jim Nichol


FURTHER READINGS


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