Caspian 2014: Cutting the Pie

The Caspian Sea undoubtedly boasts exceptional natural resources, chiefly oil and gas. The region has 18 billion tons of estimated reserves, and proven reserves of four billion tons in oil equivalent. In fact, this is the second largest hydrocarbon pool after the Persian Gulf.
Interview with Vladimir Sazhin, PhD in History, Senior Research Fellow at RAS Institute of Oriental Studies.

Interview with Vladimir Sazhin, PhD in History, Senior Research Fellow at RAS Institute of Oriental Studies.

The Caspian Sea undoubtedly boasts exceptional natural resources, chiefly oil and gas. The region has 18 billion tons of estimated reserves, and proven reserves of four billion tons in oil equivalent. In fact, this is the second largest hydrocarbon pool after the Persian Gulf. Then there is the Caspian region’s rich flora and fauna – almost 900 species of fish, including beluga, sturgeon, starred sturgeon, and starlet – making the basin the heartland of global caviar production. The Caspian is also a major waterway hub along the North-South and West-East routes. And then there is its military-political significance, as Caspian waters sweep the shores of Europe, the Caucasus and Central Asia.

The coastlines of littoral states vary in length, with that of Kazakhstan reaching 2,320 km, Turkmenistan – 1,200 km, Iran – 900 km, Azerbaijan – 85 km, and Russia – 700 km. But the Caspian coast is also uneven, with some sources putting the Russian part at 1,460 km and Iran’s at 720 km.

Dr. Sazhin, how would you describe the agreements reached by the foreign ministers of Caspian states last April 22 in Moscow? Did they tackle any of the outstanding issues?

As matter of fact, specific agreements are still to come. In Moscow the foreign ministers set out the basics and exchanged views on the agenda of next fall’s Caspian summit in Astrakhan and its final documents.

A lot of attention was given to implementation of the 2010 Baku summit decisions concerning the delimitation of maritime boundaries in the Caspian, and the establishment of a mechanism for preserving the unique sturgeon species. In recent decades sturgeon and beluga populations have diminished by several times. But those involved deserve due recognition for the fact that a year after the Baku summit they agreed that sturgeon would only be caught for scientific research and breeding purposes.

In addition, the participants covered improved interaction in security, ecosystem and bioresources protection, hydrometeorology, preventing and responding to emergencies, among other issues. Most of the problems faced are not particularly contentious, and the problems lie in the mechanisms for their resolution. Hence, Moscow saw no relevant documents approved.

Vladimir Sazhin

What are the key differences between the littoral states, hampering the completion of the current stage of preparation for the Convention on the Legal Status of the Caspian Sea, a task that was set back at the 2010 summit?

Defining the Caspian Sea’s legal status rose to prominence as an issue following the collapse of the USSR, when new states such as Azerbaijan, Kazakhstan, and Turkmenistan, emerged, because delimitation was to be executed among the five new states rather than between the two powers, the Soviet Union and Iran (Persia) that hitherto regulated its status under bilateral agreements dated 1921 and 1940.

Under the 1940 accords, Moscow and Tehran desisted from dividing the Caspian into inland waters, territorial sea and high seas, effectively ignoring national jurisdiction and instead considering the waters as the Soviet-Iranian (Persian) sea. Immediately after the Soviet Union collapsed, newly-sovereign Caspian states, except for Russia, dismissed the validity of these USSR-Iran agreements.

The Caspian is difficult to define legally, due its natural ambiguity. There is no consensus as to whether it is a lake or a sea, in part due to its dimensions, while the demarcation of lakes and seas are regulated by different international laws.

The Caspian is an inland body of water with no natural outlet to the World Ocean, which means it is not covered by the 1982 UN Convention on the Law of the Sea (UNCLOS). Hence, such terms as the territorial sea, exclusive economic zone, and continental shelf are not applicable to the Caspian.

There have been numerous attempts to revise the Caspian’s status since 1991. Azerbaijan suggested qualifying it as a boundary lake that would be divided along the median line, while Kazakhstan insisted it should be called an enclosed sea, in which case UNCLOS would apply.

Both proposals were rejected by the other members of the Caspian Five, and Russia suggested returning to the legal understanding set out in Soviet-Iranian agreements, indefinitely postponing the Caspian’s status issue and, in a sense defining the Caspian as a condominium. Although Iran supported the initiative, Azerbaijan, Turkmenistan and Kazakhstan would not accept it. When the “condominium” proposal was killed, Tehran proposed dividing the sea into five equal portions, each amounting to 20 percent, which would almost double the Iranian sector (from today’s 12-13 percent) at the expense of Azerbaijan and Turkmenistan. Understandably, the other states refused to play ball.

The Caspian case is complicated by its immense seabed oil resources. Negotiations on the legal status are ongoing, with most tension apparent between Iran and Azerbaijan, each of which claims privilege over the same oil-bearing zones. Azerbaijan is also at odds with Turkmenistan over oil-rich areas. All this significantly hinders a resolution being found to the Convention on the Legal Status of the Caspian Sea-Lake, making the dispute over its southern parts appear eternal.

However, demarcation of the northern segment essentially seems settled. Russia and Kazakhstan signed an agreement on its delimitation on July 6, 1998, and signed a relevant protocol on May 13, 2002. On September 23, 2002, Russia and Azerbaijan also concluded an accord on the delimitation of adjacent seabed blocks in the northern Caspian, and on May 14, 2003, the Russia-Azerbaijan-Kazakhstan agreement on where the demarcation lines of their adjacent seabed blocks meet was signed.

Iran rejects these agreements and refuses to recognize them. Hence, the Convention issue is not likely to be settled either at the Astrakhan summit or in the years to come, although it is known that about 60 to 85 percent of the text has been agreed. The point is that all countries are, to a certain extent, happy with the status quo. For example, Russia has already taken care of its delimitation interests through agreements with Azerbaijan and Kazakhstan, and does not seem to see any incentive to complete the process. Regrettably, due to the Caspian’s enormous hydrocarbon wealth, resolving the issue of its legal status involves not just political but also economic aspects, i.e. oil and gas production. This involves national interests and, potentially, billions of dollars for private corporations. The completion and signing of the document would need to be preceded by highly cautious steps affecting businesses in all five countries. The benchmarks outlined by Caspian states’ diplomats in Moscow seem sufficient for the five presidents to use the Astrakhan platform for a more complementary and substantive discussion, while adopting the Convention is hardly an issue that will become particularly pressing in the near future. A great deal remains to be done. But even if the basic issue is not resolved in the near future, the parties need to address attendant issues - and they seem ready to do this.

Wikipedia.org

In late May or early June this year, deputy foreign ministers and international lawyers from the Caspian states are expected to gather in Iran for a detailed review of the Caspian’s legal status. During the same period, representatives of relevant emergencies agencies, environmental preservation and fisheries organizations will also hold a series of meetings.

In a nutshell, a final agreement on the Caspian Convention is hardly in the offing. There is some progress toward an overall consensus, although certain issues including military activities, and cooperation in countering terrorism and drug trafficking, remain to be addressed. Everything seems to indicate that a final settlement of Caspian affairs is still a long way off.

During the Moscow meeting, Iranian Foreign Minister Mohammad-Javad Zarif stressed Tehran's deep interest in expanding Caspian cooperation to include defense issues. Is there an understanding between Russia and Iran on ways to attain this goal? What differences need to be addressed in order for expanded cooperation to become a reality?

Caspian cooperation rests on bilateral principles. As far as Russia and Iran are concerned, trade and economic relations are quite poor, which is understood both by Moscow and Tehran. Currently, the two sides are doing a great deal to intensify their bilateral economic relations and do not seem to clash on these issues. Cooperation between both countries Caspian territories is particularly helpful here. For example, the Astrakhan Region expects to quadruple its trade with Iran from the current USD 250 million to one billion USD (it was six million USD in 1995). Iran has become Astrakhan's main trading partner, while the port of Enzeli in Iran’s Gilyan province is seen as the main sea gate for Indian goods entering Russia. There are over 160 enterprises in the Astrakhan Region that involve Iranian capital, and a branch of Iran’s MIR Business Bank has opened recently. Bilateral cultural ties are also expanding.

Defense cooperation is a more complicated matter. The Convention on the Caspian’s status should definitely reflect military aspects, since all littoral countries possess navies whose activities require regulation. In the absence of a legally binding document, this sphere risks spawning fresh controversies. Currently, all five Caspian states are building up their military assets, fitting their ships with up-to-date weapons and carrying out regular exercises. Some states, namely Azerbaijan and Kazakhstan, maintain close military-technical ties with non-Caspian countries, primarily with the United States. Until recently, this cooperation did not involve the Caspian. But some time ago Kazakhstan’s President Nursultan Nazarbayev said he was ready to open the port of Aktau to NATO's Afghanistan cargo transit. In other words, for some time Aktau would become a military base for the United States and its allies. Their withdrawal from Afghanistan is certainly one of the most pressing issues, and Astana's decision seems tactically sound. At the same time, without an agreement on the Caspian’s status, foreign military presence not coordinated with all neighbors could become an additional irritant between the Caspian Five, serving to further delay the already long-awaited agreement.

There is also the issue of Azerbaijan-Israel defense cooperation, as Baku bought some of the latest Israeli weapons and equipment worth USD 1.2 billion. This clearly vexes Iran, Israel's key military-political rival, and further poisons relations between Iran and Azerbaijan.

All Caspian countries – except for Russia – cooperate on a large scale with non-Caspian states, including the United States, Israel, China, North Korea, Turkey, Germany, India, Pakistan, Ukraine and Poland.

In conclusion, I would say that both bilateral and multilateral cooperation between the Caspian Five could be expanded through a signed and ratified Convention on the Legal Status of the Caspian.

Iranian Foreign Minister Mohammad-Javad Zarif

During the meeting, Mr. Zarif is known to have mentioned the inadmissibility of foreign actors’ involvement in the Caspian. Who was he referring to? And how can the littoral states prevent this kind of encroachment?

The United States and Israel are the main suspects – they have recently been stepping up their ties, including on defense issues, with Azerbaijan, Kazakhstan, and Turkmenistan.

Regional pipeline projects are crucial. The European Union is believed to be extending the Southern Gas Corridor from Azerbaijan and its endpoint in Italy deep into the continent. Plans have been made for 2014-2020 to construct gas pipelines, including one between Spain and France, which will receive Caspian gas deliveries. With the 5.8 billion euro special fund already in place, Europe expects to get more gas from Azerbaijan and to start pumping it from Turkmenistan and Iran, provided the sanctions are lifted. Should that happen, Iran could easily offer Europe an alternative to Russian gas.

The EU has been in talks with Azerbaijan and Turkmenistan on gas supplies to Europe via the Caspian. The European Commission is willing to launch talks on construction of the trans-Caspian gas pipeline, which will join the Nabucco pipeline, thus freeing Europe from its dependence on Russian gas.

What could Russia and Iran do to expand bilateral cooperation in the Caspian?

This is a separate point of the relationship, but cooperation between the two countries’ Caspian regions could spark larger bilateral projects.

Have the Western sanctions imposed on Russia following the events in Ukraine affected the Caspian states’ cooperation, primarily in the energy sector?

Not yet, but the Ukraine crisis has boosted the EU's drive to slash its dependence on Russian gas. Brussels is looking forward to the settlement of the Iranian nuclear issue and the full lifting of sanctions so it can establish full-scale economic ties with Iran, chiefly in the hydrocarbons industry. The Caspian may also offer Europe a transportation route for incoming oil and gas. In turn, Iran would be able to meet the commercial needs that seem so crucial for its national economy.

Factsheet: Caspian Navies

Azerbaijan

Flagship – patrol ship Qusar (formerly Bakinets, Project 159А); retains two RBU-6000 rocket-assisted depth charges after lengthy refitting; fitted with improved artillery systems, i.e. two AK-726 76-mm twin gun mounts and two AK-230 30-mm twin machine guns. The P219 patrol boat (former Project 368U rescue boat) is equipped with an anti-submarine system, i.e. two RBU-1200 rocket-assisted depth charges in addition to a 2M3M twin antiaircraft mount and 14.5-mm machine gun.

Iran

Iran’s navy has three Caspian bases and about 90 ships, including some that are Chinese made and boast missiles with a 120 km range. Tehran also plans to deploy several helicopter carriers.

Along with Jamaran Class destroyers, Iran is building small Peykaap II Class missile boats, and plans to put into service as many as 75 boats that have a displacement of under 14 tons and a speed of 52 knots. They carry two FL 10 (С-701) anti-ship Chinese-made missiles with a range of 15-20 km and approximately 30 kg warheads. Experts expect to see mini-submarines mass-produced with North Korean assistance. One or two Ghadir Class mini-submarines are known to operate in Caspian waters, armed with torpedoes and fit to deploy frogmen.

Kazakhstan

With a navy base under construction in Aktau, Kazakhstan has sent small groups of students for training in the United States, Turkey, Russia, Germany, India and Pakistan. Possessing only coastguard boats before 2004, Astana has bought several Grif Class boats and four Kapkan patrol boats from Ukraine. In 2006, South Korea transferred three Sea Dolphin gunboats to Kazakhstan, and in 2010 the United States provided Kazakhstan, free of charge, with four amphibious boats under the five-year defense cooperation program. Two Super Bars Class missile boats were ordered from Russia, with construction launched in 2010 at the Zenit plant. An agreement was reached for Kazakhstan’s reconnaissance and sabotage groups to train at a special facility in Azerbaijan.

Turkmenistan

The navy base in the port of Turkmenbashi is planned for completion by 2015. In 2002, the Coast Guard was provided with Ukrainian Kapkan-M and Grif-T patrol boats. In 2003, seven coastguard boats and one destroyer were leased from Iran. Turkmenistan has received one Point Jackson Class patrol boat under the cooperation framework with the U.S. Department of Defense. In 2009, the Turkmen Navy is known to have received two Russian Sobol Class patrol boats. In 2008, Turkmenistan bought three patrol ships equipped with guided missiles from Russia. Two Molniya Class missile boats were ordered from Russia, each carrying 16 Uran-E anti-ship missiles with a 130 km range. Two Molniya Class missile boats, Project 12418, were also ordered from Russia. In 2011, Turkmenistan bought two high-speed patrol boats in Turkey, each costing 55 million euro.

Russia

The Caspian Flotilla consists of 14 combat ships, including two Rank-2 rocket ships, two small missile ships, two air-cushion landing ships, four missile boats, and three minesweepers. The Flotilla also lists the 847th Separate Coastal Missile Division in Astrakhan, the 77th Separate Guards Marines Brigade in Kaspiysk, a support ship division and a rescue ship division, as well as a helicopter squadron. The Caspian Flotilla is set to receive 16 more combat ships by 2020.