The Caspian Gordian Knot
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The vast energy resources of the Caspian Sea have provoked a
clash of interests between many countries and transnational
corporations. In the markedly new historical and geopolitical
environment, few of the newly established states in the region
consider relations with Russia to be a priority, and are using the
oil and gas factor as one of the most effective political tools in
international relations. This scenario considerably complicates
Russia’s relations with former Soviet republics in the Caucasus and
Central Asia.

The book by Vagif Gusseinov, director of the Institute of
Strategic Evaluation and Analysis, discusses the problems of the
Caspian Sea region from the perspective of the economic and
geopolitical events that transpired there in the late 20th century.
On the basis of prolific data, the author demonstrates that the
immense geopolitical shifts at the end of the 20th century have
intensified the old disagreements in the Caspian region and
aggravated a great deal of new ones. Disagreements abound in the
realms of politics and economics, foreign policy and military
strategy, ecology and crime. There also exist serious social,
ethnic and religious problems, as well as the overt ambitions and
projections of political leaders. In the Caspian Sea region, all of
these problems appear to be closely interwoven.

The first part of the book, covering the period of December 1991
through December 2001, provides a brief analysis of the oil
policies pursued by the U.S.S.R. and other leading countries of the
second half of the 20th century. After the breakup of the Soviet
Union, transnational oil corporations gained access to the Caspian
Sea basin, while the United States and other Western countries
increased their influence in the region.

In the early 1990s, the Azerbaijani Caspian shelf became the
main card in the game. Gambling on its oil reserves, Baku played
for high stakes and deftly maneuvered between the interests of the
world powers and oil companies. Gusseinov emphasizes that
Azerbaijan’s oil policy was based not only on oil research and
production, but on the transit of oil. The author analyzes oil
contracts signed by Azerbaijan in 1994 through 2000, giving special
attention to “the contract of the century” for the development of
the Azeri–Chirag–Guneshli oil deposits, which produced the first
“young” oil as early as November 1997. This period also saw the
first disagreements between Azerbaijan and Turkmenistan over the
ownership of a number of deposits.

At the same time, Western countries were strengthening their
positions in Azerbaijan’s oil industry and economy as a whole –
much due to Azerbaijan’s proactive position in encouraging foreign
investments and promoting new contracts. The efforts made by
foreign countries to establish control over the Caspian oil
resources contrasted with Russia’s gradual loss of key positions in
Azerbaijan’s foreign economic policy. It should be noted that
Russia’s policy in the Caspian region was marked by inconsistency
and contradictions. For instance, the Russian Ministry of Foreign
Affairs made a series of strong protests against the conclusion of
“the contract of the century,” notwithstanding that one of the
contractors was the LUKoil company of Russia.

After the change of the country’s leadership in 1993, Azerbaijan
turned to Russia with cooperative projects and eventually began to
practice fairly well-balanced relations. At the same time,
Azerbaijan’s foreign policy was clearly marked by pro-Western
tendencies while its military policy was oriented toward
cooperation with the U.S.A., Turkey, Germany and NATO. It was only
in the late 1990s that the relations between Russia and Azerbaijan
started to show signs of constructive solutions to mutual

Several chapters in Gusseinov’s book are specially devoted to
the legal status of the Caspian Sea, and the development of
approaches to this sensitive problem from various nations. The
author also discusses the Eurasian oil transportation corridor. In
analyzing the problem of Caspian hydrocarbon supplies to the world
markets, he points to the geopolitical nature of the struggle for
transportation routes for “early” and “big” Caspian oil. This
problem is also viewed with reference to the Chechen war and,
specifically, to «the roots» of the Chechen conflict that has been
continuously undermining stability and thereby severely damaging
the investment climate in the oil and gas industries of the Caspian

The book provides a profound analysis of the reasons for, and
possible consequences of, the problems with settling the
territorial disputes over the Caspian oil deposits between Iran,
Turkmenistan and Azerbaijan. It also studies the aftermaths of
repartition of the Caspian Sea boundaries, as well as the spheres
of influence in the Caspian region as a whole. According to
Gusseinov, it would be naive to expect that the determination of
the legal status of the Caspian Sea in the new post-Soviet
environment will eliminate all the problems involved and put an end
to the emerging international disputes over legal issues or
specific aspects of activities of the coastal countries.

Even a brief survey of the situation underscores the fact that
the new and old problems surrounding the Caspian region will remain
on the international agenda for many years to come. Events around
the Caspian Sea will most likely affect the security of Russia and
other Caspian states in the political, economic and military
spheres. Consequently, it is critical now for Russia to form a new
policy concerning the Caspian region. This policy should account
for both modern realities and possible future developments. In this
new geopolitical situation Russia still has good opportunities for
retaining and even strengthening its role in this highly important