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Caspian Summit Fails To Clarify Status, Resource Issues

Participants in the Caspian regional summit in Baku on November 18 included the Azerbaijani, Iranian, Kazakh, Russian, and Turkmen presidents (left to right).
The leaders of the five Caspian littoral states have once again failed in a bid to resolve the sea's legal status, a decision that would have helped determine how to divvy up oil and gas resources.

The November 18 summit in Baku, like two others in the past eight years, appeared to offer more evidence of differences than unity among the presidents of Azerbaijan, Kazakhstan, Iran, Russia, and Turkmenistan.

Only one important agreement was signed, and even that deal seems to serve some Caspian partners more than others.

Officials left Azerbaijan's capital with an agreement to continue discussing the legal status of the Caspian Sea, an identical objective to that expressed in an inaugural summit in Turkmenistan in 2002. Since then, a final agreement on demarcation has become less important.

"In theory, the lack of resolution should have had a dampening effect on exploration and development. But in practice it has not," Jennifer DeLay, editor of "FSU Oil and Gas Monitor," a weekly publication from Scotland-based Newsbase group, told RFE/RL. "The littoral states, all five of them, have come individually to the same conclusion that they have very little to lose if they treat the sea as if it were already divided up in some fashion. So they have all been active in the Caspian to some degree. All five of them have done at least some exploration work even if they haven't moved on to development and even Iran, which is the slowest to start work in the Caspian began drilling its first exploration well in the southern Caspian earlier this year."

Iranian President Mahmud Ahmadinejad brought the subject of the legal status up at the summit but essentially conceded the matter would not be resolved in Baku, proposing that a resolution on the Caspian's legal be concluded sometime in 2011.

If the Caspian is legally declared a sea, littoral countries will be obliged divide it into national sectors and each can claim the oil and gas in its respective sector as its own. If the Caspian is declared a lake, such resources and the resulting revenues must be divided equally among the five countries.

The status issue is particularly important for Iran. Divided into national sectors as a sea, Iran would only be able to lay claim to a 13-percent swath of the Caspian that estimates to date suggest has the least amount of hydrocarbons in it.

But Kazakhstan's President Nursultan Nazarbaev and Azerbaijan's President Ilham Aliev are reluctant to see the Caspian declared a lake, which would force them to share the immense revenues their countries are earning with their southern Caspian neighbor.

Turkmen President Gurbanguly Berdymukhammedov reportedly surprised the forum with an expression of confidence that a pipeline could be built to carry Caspian oil and gas resources on the basis of agreements among those countries traversed by such projects.

Azerbaijan observer Ilham Shaban called that suggestion an "interesting moment" that directly contradicted an understanding from the last such summit, in Tehran in 2007.

At the time, Shaban said, the five verbally agreed that there should be common consent for any major pipeline projects along the Caspian bed.

Turkmenistan has long been hoping to build a Trans-Caspian pipeline to bring its gas into the pipeline system in Azerbaijan. From there the gas would head further west to Europe and -- if the European Union had its way -- eventually travel via the Nabucco gas pipeline project which, according to current plans, would avoid transiting either Russia or Iran.

Shaban claimed there were signs that Azerbaijan and Turkmenistan, two countries that have often argued over hydrocarbon fields to which both lay claim, are in agreement on building this pipeline.

"There was a moment when Ilham Aliev welcomed the leaders to the summit," Shaban said. "I noticed that of the four heads of state who came to Baku, Ilham Aliev hugged and gave a friendly kiss only to the president of Turkmenistan."

Back in the Turkmen capital, Ashgabat, Deputy Prime Minister Baymurad Khojamukhamedov announced that Turkmenistan was prepared to make some 40 billion cubic meters of gas available to Nabucco, the strongest commitment Turkmenistan has made so far toward joining the project as a supplier.

As was expected, the five leaders signed an agreement on Caspian security that could mean a greater naval presence and that would favor the two countries that already have the largest naval forces of the littoral states: Russia and Iran. Those two are also the countries most stridently opposed to the Nabucco pipeline.

Despite the usual warms words and promises such summits generally produce, DeLay suggested that in the end the money that is at stake will preclude the possibility of a deal.

"I honestly wonder how much of an incentive there is for an agreement given that everyone is going quietly ahead with things anyway," DeLay said.