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Thursday 7 December 2017

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Azeris cool off in the Caspian Sea with offshore oil rigs in the background in Baku.

Russian Foreign Minister Sergei Lavrov said after a recent meeting of foreign ministers from the Caspian Sea littoral states that after more than 20 years of talks, an agreement on the legal status of the Caspian was "practically ready" for signing.

Lavrov met in Moscow with the foreign ministers of Azerbaijan, Iran, Kazakhstan, and Turkmenistan on December 4-5.

After the meeting ended, Lavrov told reporters: "I am pleased to tell you that we have found solutions to all outstanding key issues linked with this document. The text of the convention is practically ready."

Lavrov said the text of the draft agreement was being translated into the national languages of all the littoral states and added that "each of our countries will carry out domestic procedures to prepare for the signing of this convention by the leaders."

The fifth Caspian summit is expected to take place next year in Kazakhstan.

Lavrov did not provide any details about the draft agreement or comment on how the five parties were able to reach consensus after more than two decades of talks.

Lavrov's announcement is not a total surprise.

He met with Azerbaijani Foreign Minister Elmar Mammadyarov at the end of October in Baku. Mammadyarov said after that meeting that "Russia has made a very good proposal concerning the determination of the Caspian Sea status."

Back on August 9, during a visit by Turkmenistan's president to Baku, Gurbanguly Berdymukhammedov said joint work on the convention on the legal status of the Caspian Sea was almost complete, and he added that "the convention is expected to be signed at the next high-level meeting of littoral states."

A Sea Or A Lake?

The Caspian Sea's legal status has been a contentious issue between the five countries. The issue is whether the Caspian is a sea or a lake. If the Caspian is designated a lake, it would mean the littoral states would adopt a "condominium" approach that would divide up the wealth equally among the five countries.

Such a designation would be detrimental to Kazakhstan, which has the largest sector of the Caspian and, so far as is known currently, the largest amount of oil and natural gas.

Iran would benefit from the Caspian being designated a lake since its sector of the Caspian is the smallest (about 13 percent). Iran is still exploring its section of the Caspian, but so far it seems to have the least amount of oil and gas and is also the part of the Caspian with the highest salt content in the water, meaning Iran would need more expensive equipment to extract hydrocarbons from the seabed of its sector.

If the Caspian is designated a sea, it frees up all five states to exploit the resources in the maritime sectors as they wish.

Such an arrangement is de facto already in effect since Kazakhstan has been working on its Kashaghan oil and gas field for years (production finally started in earnest last year).

For more than a decade, Azerbaijan has also pressed ahead with development of some of its offshore Caspian fields, notably the Shah Deniz fields.

Looking For A Pipeline

However, the lack of an agreed legal status has been one of the factors that has prevented construction of the Trans-Caspian Pipeline (TCP) to carry some 30 billion cubic meters (bcm) of Turkmen gas across the Caspian seabed to Azerbaijan, where it could be loaded into pipeline networks leading to Europe.

In the short time since Lavrov's comments on December 5, there has already been talk the impending agreement clears the way for the TCP.

But Russia may have already headed off the realization of the pipeline.

When Turkmen Foreign Minister Rashid Meredov was in Moscow at the start of October, Russian Energy Minister Aleksandr Novak said Russia and Turkmenistan were discussing cooperation in the "production and sale of Turkmen gas."

Myrat Archaev, the head of state gas company Turkmengaz, said on November 2 that Turkmenistan was looking into the possibility of shipping gas via Russian pipelines to countries in the CIS and Eastern Europe. Such a possibility had not been mentioned for more than a decade, so it was not clear what prompted Archaev to raise the topic.

So it is possible Russia has already been talking to Turkmenistan about a deal that might avoid the need for construction of TCP.

The cash-strapped Turkmen government needs new sources of revenue quickly and might be willing to trade use of Russian pipelines for gas exports now in exchange for a promise not to build the TCP later.

In any case, the TCP could not be constructed and start pumping gas for several years and there are questions about extra capacity in the pipeline networks from Azerbaijan through Turkey to Europe. Currently, those pipelines could not accommodate 30 bcm of Turkmen gas, meaning other new pipelines would need to be built.

And with Nord Stream-1 built, and Nord Stream-2 and Turkish Stream under construction, Russia is already looking at the ability to ship up to 141.5 bcm to Europe. Turkmenistan's 30 bcm would be appreciated in Europe but could not displace Russian gas exports.

The views expressed in this blog post do not necessarily reflect those of RFE/RL

About This Blog

Qishloq Ovozi is a blog by RFE/RL Central Asia specialist Bruce Pannier that aims to look at the events that are shaping Central Asia and its respective countries, connect some of the dots to shed light on why those processes are occurring, and identify the agents of change. Content will draw on the extensive knowledge and contacts of RFE/RL's Central Asian services but also allow scholars in the West, particularly younger scholars who will be tomorrow’s experts on the region, opportunities to share their views on the evolving situation at this Eurasian crossroad. The name means "Village Voice" in Uzbek. But don't be fooled, Qishloq Ovozi is about all of Central Asia.

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