Russia Aims At Caspian Sea Settlement

By Sergei Blagov, IPS, 29 September 2000

MOSCOW, Sep 29 (IPS) - Russia is urging the Caspian littoral states - including Azerbaijan, Iran, Kazakhstan and Turkmenistan - to reach agreements to protect bio-resources without waiting until the Caspian Sea is divided formally among them.

Some Caspian states, however - notably Iran and Turkmenistan - want to define the sea's status first, a task which may take years to achieve.

The Caspian, the world's largest inland sea, is a focal point of an accelerating clash of interests among Russia, its newly independent neighbours and Iran - mainly because the 700 mile-long sea contains six separate hydrocarbon basins.

The Caspian Sea region is to become a zone of peace, says Viktor Kalyuzhny, Russia's deputy foreign minister. Russia has no plans to dominate the region, he argues Kalyuzhny.

The Caspian Sea region has been widely viewed as important to world markets because of its large oil and gas reserves. Proven oil reserves are estimated at 18-35 billion barrels, while the region's possible oil reserves could yield another 235 billion barrels.

However, it appears that Caspian riches are harder to come by than previously thought. Some oilfields have not been as lucrative as expected and uncertainty over the status of the sea has stymied oil development, although an 8 billion dollar international consortium led by a BP Amoco-Statoil alliance is already producing off the shores of Azerbaijan.

As an inland sea the Caspian has never been subject to international maritime laws. Its status was regulated by bilateral treaties in 1921 and 1940 between the former Soviet Union and Iran. In the wake of the Soviet collapse, Iran has suggested that the Caspian should be divided equally and the five littoral states should get 20 percent of the sea each.

According to the treaties of 1921 and 1940, Iran controls just 13 percent of the sea. Its equal division proposal would therefore benefit Iran greatly. But its post-Soviet neighbours are not keen on that plan.

Iran should neither lose nor gain from the division, argues Kalyuzhny.

Paradoxically, Russia had earlier supported Iran's opposition to attempts to divide the sea into national sectors according to the length of a country's shoreline. Russia currently controls 19 percent of the Caspian - according to the length of its shore - and was also to gain from equal division.

Not surprisingly, Kazakhstan (29 percent shoreline) and Azerbaijan (21 percent) were against the idea. Russia eventually changed its view and backed Azerbaijan and Kazakhstan, which argued for the delineation of the seabed but not the water itself.

The surface of the sea should remain shared, while the seabed needs to be divided on the principle of equal distance or median line according to the length of the shore, Kalyuzhny said.

Thus Russia is suggesting that the status quo be maintained, as the treaties of 1921 and 1940 also stipulated shared sea surface.

This is just the seabed, to be divided, while the sea itself is to be demilitarised and shared generally, Kalyuzhny said.

But Russia and Kazakhstan - despite their general consensus concerning the division of the sea - recently are now quarrelling now over oil deposits in the North Caspian. Russia has tendered it and area that Kazakhstan claims lays partly in its sector of the Caspian. LUKoil, which won that tender, is the most pro-active Russian company in exploring oil deposits in the Caspian Sea.

Last March LUKoil announced a discovery of an off-shore oil field with estimated reserves of 300 million metric tons. The area under dispute is estimated to contain up to 600 million tonnes of crude oil.

Nonetheless, last July LUKoil, Russian gas monopoly Gazprom and second largest oil company Yukos formed a joint company to tap off- shore oil and gas deposits in the North Caspian. The new unit, Russian-registered Caspian Oil Company, is based in Astrakhan, a Russian city on the Caspian.

The Caspian energy stakes are high as the production in the region is projected to increase substantially, led by major international projects in Azerbaijan and Kazakhstan. In 1993, Chevron concluded a 20 billion dollar, 50/50 joint venture deal with Kazakhstan to create the Tengizchevroil joint venture to develop the Tengiz oil field, estimated to contain recoverable oil reserves of 6-9 billion barrels.

A new pipeline is being built by Caspian Pipeline Consortium to meet the projected peak volumes from the Tengiz field - to be completed in June 2001.

The Azerbaijan International Oil Consortium signed an 8 billion dollar, 30-year contract in 1994 to develop three Caspian Sea fields - Azeri, Chirag, and Guneshli - with proven reserves estimated at 3-5 billion barrels. In 1998, support for the Baku- Ceyhan pipeline route was affirmed with the signing of the Ankara Declaration by the governments of Azerbaijan, Georgia, Kazakhstan, Turkey, and Uzbekistan, with Turkemenistan abstaining.

The Istanbul Declaration, signed by Azerbaijan, Georgia, Turkey, Turkmenistan, and the United States in 1999, reaffirmed the route.

Baku-Ceyhan pipeline is not economically viable, because significant flows are needed to justify the expense, and Azerbaijan is unable to supply the oil required, Kalyuzhny argues. Instead, the Caspian oil should be funnelled through the existing Russian oil export pipelines leading to the Russian Black Sea port of Novorosiisk, he said.

However, Kalyuzhny conceded that the status of the sea is unlikely to be determined soon, as that requires an agreement supported by all five littoral states. This is why Russia is suggesting an accord over joint measures for the preservation and use of the sea's bio-resources now, Kalyuzhny says.

The most pressing environmental problem is the Caspian sturgeon population, representing some two-thirds of the world's reserves. The official sturgeon and caviar catch is plummeting, while rampant poaching is estimated at five to 10 times the official catch. The tapping of off-shore oil and gas reserves also threatens the Caspian sturgeon.

In tsarist Russian, the sturgeons were protected. When the fish was spawning, a time of silence was observed along the Volga river not to disturb them, Kalyuzhny said. But now the sturgeon population is really hard pressed and multilateral measures by all the Caspian governments are needed if the species is to survive, he said.

To tackle the issue of the status of the Caspian sea, and ways to protect its viable bio-resources, Kalyuzhny suggests a summit of the littoral states, tentatively for next November or December. However, it remains to be seen whether Caspian nations could solve their differences that soon.