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Russia: Oil Companies Win Stakes In Caspian Sea

Caspian Sea negotiations ended Tuesday in Tehran with no sign of a breakthrough on border issues but also with suggestions that dangerous security tensions have been defused. So far, Iran has responded calmly to reports that Russian oil companies have taken interest in northern oil fields, while Russian naval maneuvers are set to start next week.

Boston, 31 July 2002 (RFE/RL) -- Russian oil companies won stakes in the rich northern section of the Caspian Sea while talks continued in Tehran this week in the search for a five-country border accord.

The announcement of the oil-field grants signed by Prime Minister Mikhail Kasyanov seemed to underscore Russia's resolve that work will go forward in the Caspian, whether the five shoreline states reach a legal division agreement or not.

On Friday, the Russian government awarded rights to two offshore oil fields that it agreed to share with Kazakhstan as part of a bilateral border pact in May. Iran has previously labeled such bilateral deals as illegal until a division treaty is concluded by all of the five littoral states, which also include Azerbaijan and Turkmenistan.

State-owned oil companies Rosneft and Zarubezhneft took the grand prize in capturing Russia's 50 percent interest in the Kurmangazy field, which has been estimated to hold up to 5 billion barrels of oil reserves. Its size ranks close behind Kazakhstan's Kashagan deposit, which has been billed as the world's biggest oil find in more than 20 years.

Rosneft was named the operator of the venture, although it may assign 25 percent to Zarubezhneft at a later date, the Reuters news agency reported.

Russia's largest oil company LUKoil came second in the sweepstakes, getting Russia's share in the smaller Khvalynskoe oil field. The decision is a blow to LUKoil as the government prepares to sell 6 percent of its shares in an uncertain market. The company had invested heavily in the northern Caspian, hoping to exploit Russia's claims, only to surrender them as part of the governmental bargain with Kazakhstan.

It is unclear how much LUKoil lost on the speculation. Some reports have put LUKoil's investment at $300 million. Dow Jones Newswires quoted a spokesman as saying that the company spent 2.6 billion rubles ($89.1 million) in the area last year alone. The official said, "To be precise, we are the only Russian company that has invested in production in the North Caspian."

The government's reason for putting LUKoil at a disadvantage is unclear. But its timing in publicizing the awards may be more notable.

Tehran has recently refrained from issuing its usual criticisms of Caspian deals that ignore the decade-old question of a legal division. Iran has been blocking Russia's plan for splitting the seabed into national sectors by insisting on either common control or an equal 20 percent of the Caspian, instead of the 13 percent covered by its coast. But there have been veiled hints of softening in the Iranian hard line.

On Monday, Foreign Minister Kamal Kharrazi used the word "illegal" to describe activities such as drug trafficking, terrorism, organized crime, and depletion of resources, the official IRNA news agency reported. Bilateral oil deals like the one for Kurmangazy were ignored.

In opening a two-day meeting of Caspian deputy foreign ministers, Kharrazi also referred to Iranian-Soviet treaties without the previous insistence that they are the only legal basis for a full-scale division. Instead he said, "Iran considers commitment of the five littoral states based on 1921 and 1940 agreements between Iran and the former Soviet Union as the most important factor to strengthen cooperation in the Caspian Sea."

Last week, the secretary of Iran's Supreme National Security Council, Hassan Rowhani, also stepped back from a rigid reliance on the treaties, saying only that they "would be helpful" in finding a Caspian solution. On Monday, Kharrazi called for continuing talks "in an atmosphere of understanding and flexibility."

The tone was a far cry from tough statements made in July 2001 after an Iranian gunboat chased two Azerbaijani research vessels out of disputed waters. Tehran has recently tried to calm the waters by signing security-cooperation agreements with Baku.

The Caspian talks concluded Tuesday with few signs of progress. Iranian Deputy Foreign Minister Mehdi Safari described them as "essential and positive." His Russian counterpart, Viktor Kalyuzhnyi, called them "normal," the official RIA-Novosti agency reported. The working group agreed to meet next in October in Baku.

But the tone of Iran's statements may be as crucial as the substance to peace and development in the Caspian. To the extent that the tone has changed, it seems to be the result of a strategy pursued by Russian President Vladimir Putin, who has recently stressed the broad benefits of cooperation with Moscow despite its own growing closeness to Washington.

After an initial outcry, Iran has said little this week about Russian naval exercises set for 8 August, which may be the biggest show of force in the Caspian to date. Tehran also seems to be silent about Kazakhstan's announcement this week that it will complement the display with maneuvers on the Caspian coast in its Mangistau region, according to Interfax.

A year ago, such reports and the awards of the Caspian oil fields were likely to prompt heated words from Iran. If the rhetoric is reduced, so is the tension as the diplomatic efforts in the Caspian drag on.