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Kazakhstan/Russia: Caspian Oil Disputes Linger

Moscow, 13 May 1998 (RFE/RL) -- Russia's President Boris Yeltsin and Kazakhstan's President Nursultan Nazarbayev failed late last month to resolve lingering disputes between the two states over the Caspian Sea. These disputes are stalling investment spending by several major American and European oil companies. They want to end the uncertainty surrounding the legal status of offshore Caspian oil deposits. They also want to secure their access to international oil markets through expensive new pipelines.

The undertaking in January between Yeltsin and Nazarbayev to sign a treaty between the two states by March has been postponed again - until July, when Yeltsin is to visit Kazakhstan. But officials on both sides do not express much confidence disputes will be resolved by then. When these are probed, it is clear why.

Kazakh officials were unable to detail what the obstacle to agreement actually is. Nazarbayev's ambassador to Moscow, Tair Mansurov, was not available for comment. His deputy for trade and economics, Bulat Shubakov, refused to respond to questions, referring to his Embassy's press office. The Kazakhstan legation's press secretary, Rafik Rakhimbekov, confessed that he finds it "hard to say what was the reason for non-signing of the agreement."

At a summit meeting of Central and South Asian states this week, including Iran and Turkey, Kazakh officials spoke against Russia's Caspian Sea position in private. Publically, though, they buried their differences.

Their Russian counterparts, unrepresented at the Almaty meeting of the Economic Cooperation Organization (ECO), are barely more communicative. The Foreign Ministry's special envoy for Caspian Sea affairs, Felix Kovalev, has retired, and he has not been replaced. The legal department of the Ministry says it is no longer in charge of Caspian Sea issues. Valery Kalugin, deputy head of the Ministry's department for Kazakh affairs, claims he is unaware of the reason for the non-signing of the treaty "since the meeting between Yeltsin and Nazarbayev was confidential." Kalugin adds, "the official communiqu stated 'readiness to continue work on realization of a common approach' towards the legal status of Caspian sea."

Yury Merzlyakov, now the head of the Caspian Sea working group at Russia's Foreign Ministry, said the dispute with Kazakhstan is over Russia's proposal to divide the sea-floor into national territorial zones, but retain collective control by all five Caspian littoral states to the sea water.

This is viewed by the Kazakhs as a major stumbling block to their attempts, backed by international oil companies, to build a sub-surface oil pipeline across the Caspian to link up with the Azerbaijan and Georgian routes to Turkey.

"We have prepared for the signing of the treaty," Merzlyakov said in an RFE/RL interview. "But it has been decided to sign it later."

Kazakhstan's original position was in accordance with the United Nations convention on sea law, although Moscow claimed that the Caspian Sea had a special status, and the convention couldn't be applied. The current legal status of the sea does not prevent the construction of sub-surface pipelines, Merzlyakov concedes, "although it is ecologically dangerous. We have sent the results of research on seismic activity in the Caspian Sea to the Kazakh side."

Merzlyakov noted that, not only have the Kazakhs failed to make up their minds on the principle of distinguishing between seabed and seawater; they also haven't agreed to the precise delineation of the territorial lines. "It is to be a modified median line," Merzlyakov says, "which will take into account the islands. After the signing of the (presidential) agreement, a special commission will be established which will negotiate the line. The protocol on actual coordinates of the line is to be adopted later, but it will be part of the agreement."

He predicts that the final outcome will "probably be a variant that is different from the one originally proposed by Kazakhstan, and is more favorable to the Kazakh side now."

Russia is opposed to sub-surface pipelines under the Caspian Sea, as well as to the cross-Azerbaijan land pipeline to Ceyhan. The official Russian position is that pipeline routes should be based on cost effectiveness. That also implies that the lowest-cost alternatives, routing oil across Russia to Novorossiysk, and then across the Black Sea, should be selected.

Azerbaijan is backing - with American support - the non-Russian alternative across Turkey, despite the fact that the 2,500-million-dollar cost of that project is many times higher than the Russian route. But the Azerbaijanis have also told the Georgians and the Ukrainians that they support oil transit across their territories.

Georgia expresses as many views on the routing of oil as there are pressures or incentives. The Georgians say publically they have accepted Azerbaijan's proposal to despatch oil to Poti, or to other Georgian ports on the Black Sea. In private, they have told the Greek government they prefer to ship that oil the shorter distance across the sea to Bourgas, Bulgaria, and on to Greece; rather than the longer routes to Trabizond, Turkey, or to Odessa, in Ukraine.

The U.S. government has recently told Turkmenistan it will help finance a feasibility study of an oil and gas pipeline route, also under the Caspian, to link up with the Azerbaijani-Turkish proposals.