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Caspian: Iran Seeks To Improve Its Interests

Iran appears to be playing a more active role in defending its Caspian Sea interests. In addition to cutting its charges for oil swaps to neighboring countries, Tehran has launched a diplomatic initiative to make its case for a legal division of the Caspian on its own terms. Our correspondent Michael Lelyveld reports.

Boston, 18 December 2000 (RFE/RL) -- Faced with competition and diplomatic pressure, Iran has taken two significant steps to advance its interests in the Caspian Sea in the past week.

On Wednesday last week, Deputy Oil Minister Hossein Kazempour Ardebili announced that Iran sharply reduced its charge for exporting oil from its Caspian neighbors, Turkmenistan and Kazakhstan.

Starting in January, Iran will reduce the fee known as the netback charge by up to 38 percent for processing Caspian oil swaps. The swaps are exchanges that allow landlocked Caspian countries to export their oil to northern Iran, where it is refined for local use. Iran then ships equal amounts of its own crude through the Persian Gulf in exchange, adding the netback charge for handling the oil.

In this case, Iran is trying to make its swaps more competitive with exports through both Russia and the Caucasus by offering a substantial price cut. The swaps compete directly with pipeline and rail charges for exporting Caspian oil.

For Turkmenistan's oil, the fee will drop from $21 to $16 per ton. For Kazakhstan, the charge will go as low as $13. Kazempour Ardebili said the rate was "due to lower transportation costs" from Kazakhstan, a difference he did not explain. Iran will extend additional discounts of up to 10 percent if the two countries swap greater volumes of oil, the official news agency IRNA reported.

So far, nearly all of Iran's oil swaps have come from Turkmenistan. Although Kazakhstan has had an agreement to swap oil with Iran for several years, very little has moved because of pricing issues and the problems of processing Kazakh oil, which has a high sulfur content.

But Iran has invested $450 million in a new oil line from the Caspian to its Tehran refinery and facilities to deal with the sulfur. The lower rate for Kazakhstan may be aimed at ensuring that those facilities are used.

The price cut is the second for Iran, which lowered the tariff by 30 percent last January. But that reduction did little to increase Iran's Caspian business. With this latest decrease, Iranian swaps may be cheaper than both Russian transport and the tariff for the planned Baku-Ceyhan pipeline, which is backed by the United States.

There is no telling how long the Iranian rates will stay in effect. But the latest reduction is a sign that Tehran is determined to be competitive, despite the high investment in its Caspian route. The Russian oil company Yukos recently voiced interest in buying Turkmenistan's oil for its refinery in Samara. Russia is also expected to increase its pipeline quota for Kazakh oil next year. Iran must keep oil flowing into its system for swaps to make its investment pay off.

In the past week, Iran also took a step toward protecting its position on the legal division of the Caspian. Tehran has been increasingly in conflict with Moscow over the formula for drawing borders and shares in the waterway.

But on Thursday, Iran's envoy on the Caspian, Deputy Foreign Minister Ali Ahani, met in Moscow with his Russian counterpart, Viktor Kalyuzhny, to discuss the division issue. The two countries have reportedly agreed on a meeting of deputy foreign ministers from the five Caspian shoreline states by early February in Tehran.

Kalyuzhny had previously accused Iran of delaying a meeting to consider Russia's proposal for dividing only the seabed into national sectors, while keeping the water and its surface in common. Iran has insisted on an equal 20 percent share of the entire Caspian.

Although the disagreement continues, the two sides may be trying to establish common principles. Kalyuzhny said Iran had supported Russia's proposal to "tie regulation of the Caspian Sea to shipping and the support of bio-resources," IRNA reported. The language may suggest that Moscow has agreed that its plan for common use is not meant to include passage for military vessels.

The visit to Moscow may also be a sign that Iran has decided to take a more active stance in Caspian diplomacy, rather than simply continuing to reject the Russian formula. Having already traveled to Azerbaijan and Turkmenistan, Ahani is scheduled to stop in Kazakhstan, completing his tour.

Notably, Ahani also met in Moscow with Andrei Nikolaev, chairman of the State Duma's Defense Committee, to discuss military cooperation. The meeting may be a sign that the Caspian issue will not be viewed in isolation but rather as part of the broader Russian-Iranian relationship.

In the past week, Iran has repeatedly publicized the visit of a Chinese military official. Beijing's minister of the state commission of science, technology and industry for national defense, Liu Jibin, has been holding talks with army officials at the invitation of Iranian Defense Minister Rear Admiral Ali Shamkhani.

The message to Moscow may be that Iran can pursue its security relationships with other countries if it feels that Russia is not treating its interests equitably.