AZERBAIJAN - Legal Status Of The Caspian Sea.

The five Caspian states - Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan - are yet to agree on dividing their sea into national sectors under a final system. Iran regards the Caspian as a lake and says its legal position is based on the Soviet-Iran treaties of 1921 and 1940. The 1940 treaty says the Caspian is "a Soviet and Iranian Sea", with its core being "the Principles of Equality and Exclusivity".

In March 1998, Russian Deputy Foreign Minister Boris Pastukhov told Azeri President Aliyev Moscow no longer had objections to unilateral offshore oil and gas development by the Caspian states. Pastukhov also told Aliyev that Moscow agreed the water should be regarded as a sea, rather than a lake. On July 6, 1998, then Russian President Boris Yeltsin and President Nursultan Nazarbayev of Kazakhstan signed a bilateral agreement dividing the seabed of the northern Caspian between the two states.

Iran has been opposed to a sectoral division of the Caspian and to the proposed sub-Caspian pipelines on environmental grounds. In May 2000 Iran blamed Azerbaijan and Russia for the deterioration of the sea's environment. It said industrial waste was threatening the local Iranian fishing industry and encouraging the spread of infectious deseases. Iran, however, has opened its zone of the southern Caspian to petroleum E&P deals with foreign companies.

A problem for Baku is the dispute between Azerbaijan and Turkmenistan over offshore territories which include oil-rich areas. Baku said in March 2000 that Turkmenistan had begun preparations for a joint Turkmen-Iranian development of a disputed Caspian oilfield called Serdar by the Turkmen side and Kaypaz by the Azeris. Turkmenistan also has claims over the Azeri and Chirag offshore oilfields which are being developed by the BP Amoco-led AIOC (see below). The argument began in 1997, when Turkmen President Niyazov said Serdar, Azeri and Chirag belonged to his country.

While Azerbaijan and Turkmenistan agree to a proposed sectoral division of the Caspian seabed, they differ on the sharing of the sea itself. Turkmenistan is sympathetic to some aspects of Iran's position. Envoys from the US State and Energy Departments in early 2000 submitted to the two governments three options for defining a median separation line. These are based on the methods used to define separation lines in the North Sea, in the Arabian Gulf off Qatar, and in offshore Indonesia.