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Central Asia: Uncertain Currents In Caspian Oil Game

Moscow, 1 October 1997 (RFE/RL) -- There has been no progress in negotiations to settle legal and territorial claims in the Caspian Sea, Moscow officials report, and they see little likelihood of this in the foreseeable future.

Instead, they say Russian policy is increasingly to be one of creating facts on the ground -- that is to say, on the seashelf, under the Caspian Sea -- and limiting the extent to which Azerbaijan and Kazakhstan can do the same.

Amoco, Exxon, Mobil, Chevron, Unocal and other American oil companies have sizeable stakes in several Caspian Sea oilfields, based on agreements with the Azerbaijan government and its state oil company, Socar. Many of these interests are indirectly affected, some directly affected, by the legal uncertainties surrounding the territorial division of the Caspian shelf.

Felix Kovalev, Russia's special envoy for the maritime dispute, recalled that the last session of the five-state working group on the Caspian Sea was held May 22-23 in Almaty. Kasymzhomart Tokayev, the foreign minister of Kazakhstan, claimed afterwards the talks had reached a "promising" stage. In fact, the Almaty session did no more than "discuss approaches that have been raised before", Kovalev said there were no new proposals and no new agreement. The next session of the group has been put off until November. The working group consists of Russia, Iran, Kazakhstan, Turkmenistan and Azerbaijan.

Last November, Russia's Foreign Minister Yevgeny Primakov told foreign ministers from the Caspian Sea group that Moscow was ready to accept a territorial waters limit of 45 miles. A zone of collective control, he proposed, would be drawn in the middle of the Caspian Sea. Beyond that, he also said the Russian government might concede the right of states like Azerbaijan to full ownership of oilfields already in production. This was understood at the time to be a big concession for Moscow, backing away from the earlier position that the Caspian Sea was not an international body of water, and should not be divided into territorial zones. Iran and Turkmenistan appeared to back this Russian view.

Kazakhstan and Azerbaijan were opposed, the latter more adamantly. The Baku government insists on the full carve-up of the Caspian Sea, applying the "median line" approach to dividing the water at the midpoint between the shores, and lines extending from current borders. This would give Azerbaijan clear title to the Azeri-Guneshli-Chirag offshore fields, first output of which will start moving to market this month. Amoco, Exxon, Unocal, and Pennzoil are the American stakeholders in this project.

Since last year, however, the practical pressure on the littoral states to commence development of the oilfields they claim has overridden the legal niceties. In June, Russia's Ministry of Natural Resources issued a tender call for offshore territory which Kazakhstan claims lies in its Caspian Sea zone. Although American oil companies expressed interest in bidding, the tender was restricted to Russian companies. Lukoil and Yukos are tendering, and the results are expected to be announced this month.

Because the tenements are located on the northern shelf of the Caspian, the Kazakhstan Ministry of Foreign Ministry issued a statement claiming the property was partly on Kazakh sea shelf, according to the line drawn in Almaty. Russian officials ignored the demarche.

Turkmenistan has also come into dispute with Azerbaijan over the right to develop another seabed field in the eastern sector of the sea shelf. The field is known as Serdar to the Turkmens; Kyapaz to the Azeris. An agreement in July by the Azerbaijan state oil company, Socar, assigned a 30 percent stake in the property to Lukoil and 20 percent to Rosneft. Lukoil was to be operator. Neither Kovalev, nor the maritime expert at the Foreign Ministry's Legal Department, Alexei Bogodin, were aware of the deal until after the signing. The Ministry reacted furiously, calling Russian participation in the contract illegal. Moscow was acutely acutely embarrassed, because Turkmenistan claims the property, a claim Russian experts believe to be the more valid one.

On August 7 and 8, during the visit to Moscow of Turkmen President Saparmurat Niyazov, President Boris Yeltsin acknowledged that Serdar (Kyapaz) belonged to Turkmenistan. Rosneft had withdrawn from the contract a week earlier. Lukoil also cancelled its agreement. The Russian press speculated that Niyazov offered the Russian companies better terms than they had signed for with the Azeris.

Early in September, Lukoil president, Vagit Alikperov, announced his company is planning to participate in Caspian Sea tenders announced by Turkmenistan, but only those involving territories not in dispute with anyone else. Alikperov said Lukoil wouldn't start any work in the disputed fields until the Azeri and Turkmen governments resolve their status. Turkmenistan has also announced it disputes the legal right of Azerbaijan to develop parts of the Azeri and Chirag deposits. Their claim directly affects U.S. investments. So far, neither the Russian government nor the Russian oil companies have taken sides on the issue. At present, Lukoil officials said this week, the company has signed agreements with Azerbaijan for a 10 percent stake in the Azeri-Chirag-Guneshli field; 35 percent in Karabakh; and 10 percent in Shakh-Deniz.

Azerbaijan President Gaidar Aliyev has also sought to sway Moscow policy on the territorial issue by holding out special concessions to Lukoil. One of these is a 60 percent stake in D-222, a property known as Yalama located at what might be the sea territorial line between Azerbaijan and Russian Dagestan. The deposit is believed to hold between $70 million and 100 million metric tons of crude. Lukoil officials say they have promised to spend $70 million on exploration and development of the deposit. The 60 percent control of the project is unusual, because the Azeris have previously said they won't grant foreign concessionaires majority stakes in their deposits