Bigtime Problems
No. 1 2016 January/March
Stanislav Pritchin

PhD in History; he is a research fellow at the Center for Central Asia and Caucasus Studies, Institute of Oriental Studies, Russian Academy of Sciences.

The Caspian Sea in Global Limelight

The Caspian Sea has suddenly come into focus, drawing the attention of not only the five littoral states and oil and gas producers, but also the political and military actors involved in the Syrian conflict. On October 7, 2017, Russia’s Caspian Flotilla fired Kalibr cruise missiles at Islamic State targets, demonstrating the high efficiency of its precision weapons, and ability to deliver strikes in remote areas using a limited task force that the West had not taken seriously before. The redeployment of troops to Syria and the use of Caspian Flotilla ships clearly showed that Russia could promptly come to consensus with its neighbors in the region—Azerbaijan, Iran, and Iraq.

Russia’s active involvement in the Syrian conflict has changed the balance of power in the Caspian region significantly, strengthening the rapport between Russia and Iran as the main allies of Bashar al-Assad and principal external opponents of the Islamic State. This will most likely help the two countries harmonize their positions or at least understand each other better in the Caspian region. However, Russia’s use of the sea and the airspace above it for strikes on Syrian territory has frightened other littoral states. Furthermore, the conflict between Moscow and Ankara over the downed Russian military aircraft has put Kazakhstan, Azerbaijan, and Turkmenistan, which have close ties with Turkey, in a plight.

The Caspian region has unexpectedly been drawn into one of the most acute international crises and highlighted the need to re-examine its legal status and security. Over the past eighteen years, the five littoral states—Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan—have been conducting negotiations on the Caspian Sea’s legal status at two levels: deputy foreign ministers within the Special Working Group, and heads of state. The five countries have adopted a number of important agreements and declarations, and coordinated 90 percent of the future convention on the international legal status of the Caspian Sea. The Tehran Summit in 2007 gave a new impetus to negotiations and helped the parties agree on the key principles of security in the region, and ways to jointly respond to regional non-military threats and address environmental problems. The official statements made at the Astrakhan meeting held last fall indicate that the negotiators have come to grips with signing a Caspian Sea Convention.

Divided riches and an undivided sea

The Caspian Sea is the world’s largest inland body of water not connected with any ocean. It is rich in bioresources containing about 90 percent of the world’s sturgeon population, and an important Eurasian logistics hub with a broad network of navigable waterways. It is not surprising that the sea could not be quickly divided after the breakup of the Soviet Union. In similar instances a section of a sea rich in oil and gas was divided between two and more international entities, or inland bodies of water were divided between several countries, but there has never been a case as complex as this one when five states are to find a mutually acceptable solution. The situation is also complicated by the fact that the UN Convention on the Law of the Sea cannot be applied to the Caspian Sea as it is not part of the world ocean and not big enough for each of its five coastal states to have 200 miles of the littoral zone because the sea is only 300 miles wide.

There is no universal mechanism for dividing disputable sea areas, and the main principle is to look for a compromise and a mutually acceptable formula. So far no such formula for the Caspian Sea has been found.

The first several years after the disintegration of the Soviet Union were the hardest as the parties often put forth extreme and opposing options. Russia and Iran, as the legal successors to the bilateral Soviet-era agreements, sought to retain their status of leading countries in the region and insisted on the shared use of the sea similarly to a condominium. They suggested establishing a joint company for its development, with each country having an equal share in it. However, newly independent states – Azerbaijan, Kazakhstan, and Turkmenistan – actually pursued the opposite goal: they sought to ensure their sovereignty, including by obtaining the right to develop energy resources in their respective coastal areas.

Azerbaijan was the most active of all and focused on attracting foreign investors and providing a legal framework for their operation in the country. Baku’s activity, as diplomats privately admit, had a dramatic impact on the talks concerning the sea’s status. The negotiations were less affected by Azerbaijan’s “contract of the century” signed in September 1994 with a consortium of Western companies to develop the Azeri, Chirag and Gunashli oil fields, than by the adoption of a new constitution in November 1995. Clause 2 of its Article 11 says: “Internal waters of the Azerbaijan Republic, the sector of the Caspian Sea (lake) belonging to the Azerbaijan Republic, and the airspace over the Azerbaijan Republic are integral parts of the territory of the Azerbaijan Republic.” As a result, any attempt to find an alternative format for shared use of the sea was stalled by the need to amend Azerbaijan’s constitution, which seriously complicated the search for a compromise on the principles proposed by Moscow and Tehran.

Russia’s interests and approaches

Initially, Russia sought to preserve the “closed” status of the Caspian Sea and joint development of its resources as envisioned by the Soviet-Iranian agreements of 1921 and 1940. But geopolitical changes in the region and the commencement of oil and gas projects by leading Western companies forced Moscow to revise its position and propose in 1996 that a 45-mile coastal zone be declared an exclusive economic zone, with the rest of the sea, except for the hydrocarbon fields in production, remaining in common use. But the initiative was supported only by Iran and rejected by all others. As a result, the countries came up with a new option: to divide the seabed while leaving the surface waters for common use. On June 6, 1998, Russia and Kazakhstan signed the Agreement “On the Delimitation of the Seabed of the Northern Part of the Caspian Sea for the Purpose of Exercising Their Sovereign Rights to Subsoil Management.” The document uses the term ‘modified median line’ meaning that the seabed of the northern part of the Caspian Sea should be divided along the line equidistant from the two countries’ coasts. It also provides for the joint use of the Khvalynskoye, Tsentralnoye, and Kurmangazy oil fields. The agreement did not divide the Caspian Sea into sectors de jure but delimited its seabed in order to determine the parties’ rights to subsoil resources and their management.  

On September 23, 2002, Russia and Azerbaijan signed a similar agreement. On May 14, 2003, Russia, Azerbaijan, and Kazakhstan concluded an agreement determining the junction point of the borders of their adjacent sections of the seabed. Prior to that, in February 2003, Azerbaijan and Kazakhstan signed an agreement on the delimitation of the Caspian seabed. So, by May 2003 the three countries had divided the seabed and natural resources in the northern part of the Caspian Sea. 

Iran strongly opposed bilateral and trilateral agreements, declared them unlawful and continued to insist on the legitimacy of the Soviet-Iranian treaties. Turkmenistan kept neutrality and did not officially oppose the division of the seabed along the modified median line, while at the same time refraining from pushing too eagerly for an agreement with its neighbors, mainly because of the dispute over the Serdar field, commonly known in Azerbaijan as Kyapaz.  

Russia’s energy strategy for the development and transportation of oil and gas in the Caspian region deserves special mention. After the collapse of the Soviet Union Russia was the main and only transit state for its Caspian neighbors’ energy resources. Geopolitical struggle focused on the transportation of hydrocarbons from the region to international markets. Russia lost its monopoly when the Baku-Supsa and Baku-Tbilisi-Ceyhan oil pipelines and the Baku-Tbilisi-Erzerum gas pipeline went into operation, but it still remains the main transit country for Kazakh oil via the Tengiz-Novorossiysk and Atyrau-Samara pipelines, and an alternative route for gas exports from Azerbaijan and Turkmenistan.  

Although the oil and gas reserves contained in Russia’s sector of the Caspian Sea are not considered significant by Russian standards, the region is important for the government and companies for a number of reasons. One of them is the geostrategic position of the world’s largest intracontinental body of water at the junction of Central Asia, the South Caucasus, and the Near East. Russian companies view the Caspian Sea as a testing ground for offshore production technologies that can later be used in the Arctic. And yet, Russian companies, with a few exceptions, have not been very active in Russia’s sector of the Caspian Sea, even though its probable reserves are comparable with those of its neighbors. But the situation is gradually changing and oil and gas majors are beginning to eye it closer for regional projects.

Summit outcomes and interim results

Political battles over the Caspian Sea are no longer violent as they were in the 1990s and have given way to a principled and constructive dialogue conducted simultaneously on several tracks. The Special Working Group has been engaged in active and regular five-party talks since 1996 to determine the legal status of the Caspian Sea. Its previous meeting took place in Tehran in June 2015. Each country is represented by a deputy foreign minister or a special envoy of the head of state. The Russian delegation is led by Igor Bratchikov, Russian presidential envoy for delimitation and demarcation of the state border. The group is focused on coordinating the principles of joint work in the region and the use of the sea. It is also drafting a convention on the status of the Caspian Sea. The Special Working Group plays a leading role in preparing top-level meetings held regularly since the Tehran Summit in the fall of 2007.

In Tehran, the summiteers adopted a 25-point declaration and proclaimed the Caspian Sea a “sea of peace.” They agreed not to use their armed forces for solving disputes or provide their territories to third countries for aggression against the neighboring coastal states. At their meeting in Baku in November 2010, the presidents signed the Agreement on Security Cooperation, which regulates cooperation in ensuring non-military security and combating transnational crime, poaching, drug trafficking, and other illegal activities. The five states also signed the Framework Convention for the Protection of the Marine Environment of the Caspian Sea, which became a kind of ecological roadmap.

The Caspian summit held in Astrakhan in September 2014 produced three sectoral agreements on the protection of bioresources, prevention of emergencies, and cooperation in the field of hydrometeorology. But its main result was the political statement of the heads of state, which laid the groundwork for cooperation in the Caspian Sea and its division. The coastal states pledged to maintain the atmosphere of good-neighborliness and constructive cooperation in the region. As Vladimir Putin pointed out, the statement might be a step towards signing the Caspian Sea Convention at the next summit. The countries determined that their sovereign rights would apply to a 25-mile exclusive economic zone. They also reaffirmed their previous obligation to keep the region clear of third countries’ armed forces.   

What to expect from the fifth summit?

The fifth summit, to be held in Astana in 2016, will be pivotal in many ways.

Firstly, at their previous meeting in Astrakhan, the heads of state expressed hope that the talks on the status of the Caspian Sea could be completed in Astana. Diplomats close to the talks say that the documents concerning the Convention and other matters are almost finalized and only the political will of the leaders is needed to enforce them.

Secondly, being an experienced and active politician, Kazakh President Nursultan Nazarbayev tries to make any international event as effective and productive as possible. So, Kazakh diplomats will seek to achieve maximum results at the upcoming summit.

But serious difficulties remain unresolved. The main one is Iran’s insistence that the sea should be divided into equal 20-percent sectors. However, this can hardly be done with Azerbaijan’s offshore field development operations underway. Azerbaijan is also in dispute with Turkmenistan over the Kyapaz/Serdar field. There is no agreement among the littoral countries on trans-Caspian infrastructure projects. Russia and Iran insist that any cross-border maritime project should take into account the opinions of all countries involved since the Caspian Sea has a very sensitive ecosystem, and a possible industrial accident will affect everyone. However, Turkmenistan has been pushing for a trans-Caspian pipeline without discussing it with its neighbors. Turkmen President Gurbanguly Berdimuhamedov made his position on this issue quite clear at the Astrakhan Summit, reiterating it twice during the talks in narrow and expanded formats.

What will happen if no agreement is reached?

A failure in Astana will most likely delay the decision on the status of the Caspian Sea indefinitely. But even if no breakthrough is made, the meeting can still produce important resolutions to boost regional cooperation. 

Environmental issues were and will be a key topic. The parties have approved a number of relevant documents, the central of which is the Framework Convention for the Protection of the Marine Environment of the Caspian Sea, also known as the Tehran Convention. Countries also implement their own programs to breed baby sturgeons to maintain their population, but the situation remains quite dire with no tangible progress made so far.

At the start of a new hydrocarbon development era in the Caspian Sea, experts and scientists suggested putting all such projects on hold in order to create better conditions for long-term procurement of marine bioresources. Russian scientist Azhdar Kurtov says that fishing and caviar generate as much revenue as oil and gas production. However, now that some twenty large hydrocarbon projects have been launched in different parts of the sea, with some of them changing its natural geological features and landscape, there is no going back.

For example, artificial islands were built during the development of the Kashagan field in Kazakhstan’s sector of the sea, causing serious environmental problems. Even the most advanced technologies cannot guarantee zero discharge during oil drilling, production, and transportation. Active resource exploitation also upsets natural habitats, breeding grounds and migration routes used by fish and marine mammals. Unfortunately, as environmental issues interfere with the development of energy resources, they are mostly pushed to the back burner. 

Establishing a permanent five-party commission within the framework of the ecological convention would be the perfect solution. The commission should have ample rights and possibilities to punish oil and transportation companies for violating environmental standards at sea. But things are quite bad even at the national level. Russian environmental monitoring services say they have no resources to monitor the situation in the Russian sector of the Caspian Sea on a permanent basis, and penalties and fines for violations are merely symbolic. Also, there are no mechanisms and funds for cleaning up pollution. The situation is similar in other countries of the region. If things do not change in the next fifteen to twenty years, pollution will ruin the sea and destroy its biodiversity.  

Secondly, the discussion in Astana will focus on economic cooperation. The success of the Eurasian Economic Union (EAEU), which involves two of the five Caspian states, Russia and Kazakhstan, highlights the need for the other coastal states to join the dialogue. Iran has already displayed interest in creating a free trade zone with the EAEU and even started negotiations. Azerbaijan is cautious, mainly because of Armenia’s participation in the Union and the unsettled conflict in Nagorno-Karabakh, although its approach has been more pragmatic lately. Judging from numerous media publications in Azerbaijan, official Baku is prepared to consider economic benefits from cooperation with the EAEU.

The presidents of the Caspian states will have to consider the possibility of creating a platform for regional economic integration, using the EAEU experience. Iran’s turn towards the region raises expectations at the summit in Astana. The northern vector in Iran’s foreign policy became a priority after President Hassan Rouhani’s inauguration in July 2013. Iran has changed its ambassadors in two (Russia and Kazakhstan) of the four neighboring Caspian states, replacing them with experienced diplomats. Mehdi Sanaei, one of the leading Iranian specialists on Russia, was posted to Moscow. Since then the two countries have reached several agreements, vowing to resume military-industrial cooperation and build new nuclear power plants in Iran. A new railway service between Iran and Kazakhstan via Turkmenistan has been commissioned, allowing for direct cargo transportation between Russia and Iran. A similar railway route via Azerbaijan is now under discussion. A key issue will be the lifting of sanctions on Iran to remove remaining obstacles to more intensive economic cooperation. 

The third, and most important, aspect is security, especially in light of Russia’s involvement in the Syrian conflict and the use of its Caspian Flotilla ships for attacking Islamic State targets. Apart from Russia, there are two other Caspian states, Iran and Turkmenistan, which are immediately affected by the conflict by bordering on areas controlled by the Islamic State. Iran is the main force that has been successfully dealing with the new security threats in Iraq and Syria. All other Caspian states have a different kind of problems to cope with as many of their citizens, enticed by efficient propaganda, are joining ISIS.

The Islamic State is viewed by all countries as a major threat to the world. Russia’s operation undermines the Islamic State’s strength and popularity among potential recruits in the region. And still, none of the Caspian states, except for Iran, has officially supported Russia’s decision to join the fight. Moreover, military assistance is not even considered, even though Kazakhstan sent its military specialists in support of coalition operations in Iraq, and Azerbaijan participated in peacekeeping missions in Iraq and Afghanistan. 

Moreover, the use of the Caspian Sea by Russia for attacks on ISIS has raised official questions. At a meeting with Vladimir Putin in Tehran in November 2015, Turkmen President Gurbanguly Berdimuhamedov said: “Our Kazakh partners are also worried by things taking place above the Caspian Sea, by military problems. They raise questions about international civilian flights and whether the routes and flight levels must be changed. I don’t know if you are aware or not, but out Kazakh partners are worried.” The reference to Kazakhstan was certainly not accidental since Astana never denied the Turkmen leader’s statement, even though shortly before that the two countries had exchanged diplomatic recriminations over Nursultan Nazarbayev’s remarks about tensions on Turkmenistan’s border with Afghanistan. Putin promised to minimize possible inconveniencies and assured Berdimuhamedov: “Our Kazakh friends have so far not told us about their concerns. But we will take them into account. We understand that there are certain inconveniencies, but you all know that Russia’s efforts to fight terrorism involve costs that are a burden, above all, to the Russian Federation.”   

The neighbors’ reaction to Russia’s actions clearly indicates that the Caspian states have no effective concerted system for responding to real military threats in the region. Each country builds and uses its armed forces separately. This emphasizes the need for a joint mechanism to ensure regional security. In the long term, it would be expedient to create a coordinating center for the commanders of the Caspian states’ navies or Defense Ministry officials, or a situation center where the countries could exchange information and work out common strategies for responding to potential risks. 

And yet, despite the tensions created by Russia’s activities in the Caspian Sea, there is some progress as well. There is a growing understanding that closer security coordination and interaction are needed. On November 26, 2015, the Command of Russia’s Southern Military District announced that “participation of the Caspian Flotilla in trilateral Kazakh-Azerbaijani-Russian naval exercises under the supervision of the Russian Navy commander-in-chief will be a priority task” in 2016. These will be the first international naval maneuvers in the modern history of the Caspian Sea since 1991. One can only hope that international tensions and common risks and challenges will eventually help the Caspian states drop their mutual claims and concerns in favor of coordination and close cooperation.