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Turkmenistan: Iran, Russia Vie For New Alignment On Caspian

As Iran and Russia continue their dispute over dividing Caspian resources, the two countries may also be competing for Turkmenistan's oil and gas. A Russian offer for Turkmenistan's oil comes just as Iran is preparing to open a pipeline for Caspian swaps. At the same time, Tehran's new agreement to buy more Turkmen gas could reduce supplies for Moscow.

Boston, 7 December 2000 (RFE/RL) -- As the conflict heats up over a legal division of the Caspian Sea, Russia and Iran appear to be opening up a new competition for the region's resources and export routes.

The two sides have been preparing for a new alignment on the Caspian question, which is expected next month when Russian President Vladimir Putin visits Azerbaijan to sign a bilateral Caspian pact.

If Baku signs the agreement, as it has promised, the alignment would essentially be three against two, with Russia, Kazakhstan, and Azerbaijan on one side of the Caspian issue, and Iran and Turkmenistan on the other.

The Putin government has been working for months to persuade the four other shoreline states to adopt its formula for dividing the Caspian, splitting only the seabed into national sectors, while allowing the water and its surface to be shared. Kazakhstan has already accepted Moscow's position. This week, Azerbaijani President Heidar Aliyev confirmed that he will sign the agreement with Putin during the visit that starts January 9.

The exact terms remain a mystery, in light of the fact that Aliev's son Ilham, the vice president of the state oil company, vowed last Friday that his country "won't make concessions" on its position that the water must also be divided along a Caspian center line.

Moscow has been vague about its reasons for the hybrid solution, but suspicion has grown that the sharing of the water could allow free passage not only for fishing boats but also military craft. Iran has opposed the formula for its own reasons, insisting on an equal 20 percent share of the Caspian. Analysts have estimated that a territorial boundary might give it only 13 percent.

Turkmenistan has sided with Iran for still other reasons. The Russian formula calls for sharing disputed oilfields. That approach would compromise Ashgabat's claim to a major deposit in the center of the Caspian, which is also sought by Azerbaijan. At the same time, Turkmenistan is hoping that its support will lead to greater gas sales and exports through Iran.

But signs are growing that the competition between Russia and Iran could break out on related energy issues as a result of the frictions.

Last week, for example, the head of Russia's second-largest oil company, Yukos, met with Turkmen President Saparmurat Niyazov and offered to buy an undisclosed amount of the country's oil for a refinery in Russia.

Mikhail Khodorkovsky, who is one of Russia's richest oligarchs, told the Neutralny Turkmenistan newspaper, "We need this raw material for the Samara oil refining complex."

Yukos wants to ship the Turkmen oil by tanker across the Caspian and up the Volga River to Samara by barge, a distance of some 1,600 kilometers. Turkmenistan, which is primarily a gas producer, exports only about 32,000 barrels of oil per day. The Russian offer may compete directly with Iran for that oil.

One-third of Turkmenistan's oil exports are believed to be moving now through Iran in exchanges, known as swaps. The trade allows Iran to use Turkmen oil for local refining while exporting an equivalent amount of crude through the Persian Gulf. The arrangement is key to Iran's bid to serve as a route for Caspian oil. Tehran has invested heavily in a pipeline from the Caspian to its refineries to handle 50,000 barrels of crude per day by the end of this year.

But the Yukos bid could deprive the Iranian pipeline of oil just as it is about to open. The Samara refinery may need oil, but curiously, Yukos oil production was up by more than 10 percent in the first 10 months of the year, the company said last week.

It remains to be seen whether Yukos is acting on behalf of the Russian government to pressure Iran on the Caspian. But the company has been vocal in seeking relief from a Russian government crackdown on its transfer pricing practices to avoid higher taxes. So far, Turkmenistan has not responded to the Yukos offer for its oil.

Instead, Turkmenistan has pursued closer ties to Tehran during the Caspian controversy. Last Saturday, Ashgabat was rewarded with a new agreement to greatly increase its gas sales to Iran. While details are still sketchy and the terms have yet to be disclosed, the higher export target of 15 billion cubic meters by 2002 suggests that Iran could use the Turkmen gas to supply Turkey, competing with Russia. Moscow has yet to negotiate its own agreement on gas supplies from Turkmenistan for next year.

Niyazov's higher commitment to Iran may also mean that Turkmenistan will have to tap new gas fields or open new pipeline connections. The only link between the two countries, opened in 1997, has a reported capacity of only 8 billion cubic meters per year.

The larger agreement may be a signal that Iran is ready to compete with Russia for Turkmenistan's gas, just as Russia seems to be competing with Iran for Ashgabat's oil.

If that is the case, the dispute over Caspian division may be leading to a wider split between Russia and Iran over energy routes and national interests, forcing each of the Caspian neighbors to choose and take sides.