TURKMENISTAN - Background Of Caspian Disputes.

Legal issues on the Caspian Sea's resources revolve around whether development rights are governed by treaties signed between the former Soviet Union and Iran (which did not establish seabed boundaries or discuss oil and gas exploration), and whether the Caspian is a body of water affected by the Law of the Seas (inland lakes are not covered by this law).

If the Law of the Seas convention applied to the Caspian, full maritime boundaries of the five littoral states would be established based on the equidistant division of the sea and undersea resources into national sectors. It was understood by Iran and Russia that, if the law were not applied, the Caspian and its resources could be developed jointly.

The Russians have argued that neither the Law of the Seas nor its precedents apply because the Caspian is an enclosed sea. In December 1996, Russia called for joint navigation rights, joint management of fisheries and environmental protection, and the establishment of an inter-state committee of the five littoral republics. The committee was to licence exploration in a joint-use zone in the center of the Caspian, beyond a 45 nautical mile exclusive national zone, and a joint corporation of these states to exploit the area's resources.

Iran has backed Russia's claim that regional treaties signed in 1921 and 1940 by Tehran and Moscow are valid, implying that all Caspian littoral states must approve any offshore oil developments.

Iran's support of Russian proposals for joint development posed a problem for US firms under Washington's "Presidential Executive Orders" which impose an embargo on trade and investment with Iran.

Azerbaijan has rejected the Iranian view, believing that boundaries were formalised under the Soviet Union. Baku has called for the Law of the Sea to be applied, and has advocated the establishment of maritime boundaries into national sectors based on the equidistant division of the sea. Boundaries would follow those established and recognised under the Soviet Union to delineate republic sectors for oil exploration and development.

Kazakhstan has supported Azerbaijan's view for the establishment of national sectors, but has stated that co-operation on the environment, fishing, and navigation would be beneficial.

Yet on July 6, 1998, then President Boris Yeltsin of Russia and President Nursultan Nazarbayev of Kazakhstan signed an "eternal friendship" treaty in Moscow dividing the seabed resources of the northern Caspian between the two countries. The treaty also gave indirect confirmation of the onshore border between Russia and Kazakhstan - another major concession as until then Moscow refused to cede Russian claims over northern Kazakhstan.

The accord, however, was not ratified by the Russian side and specifically stated that other issues such as pipelines or telephone cables were to be governed by subsequent agreements. Officials in Moscow said at the time the Kremlin had been assured by the Kazakhs that they will not build or participate in trans-Caspian pipelines before agreeing on them with Russia. The pledge was in return for above-mentioned Russian concessions.

This dealt a blow to a US-proposed system of trans-Caspian oil and gas pipelines to the West to be built from Kazakhstan, Uzbekistan, Turkmenistan and Azerbaijan - thus bypassing both Russia and Iran.

Turkmenistan's position is still evolving. It supported Russia's proposal for a 45-mile nautical zone at a November 1996 meeting in Ashgabat of the foreign ministers from the five littoral states. At that meeting, Turkmenistan signed a protocol with Iran and Russia to establish a joint-stock company to develop the energy resources in the national zones of the three countries. However, Ashgabat has changed its position since then.

In February 1997, Presidents Niyazov of Turkmenistan and Nazarbayev of Kazakhstan signed a statement calling for a sharing of the Caspian based on Soviet-era divisions until the littoral states agreed on a new status. Turkmenistan's position changed again after a dispute with Azerbaijan over the Kyapaz/Serdar field.

Azerbaijan reached a $1 bn deal with Rosneft and LUKoil to develop this field in July 1997. Turkmenistan included this field (Serdar) as part of its Block 30 licencing offer in September 1997. Later it awarded the field to Mobil, but the US major said it would only begin work on this after the territorial dispute with Azerbaijan has been resolved. Ashgabat also had claims over the Azeri and Chirag fields, now being developed by a BP-led consortium (see surveys of Azerbaijan in Review Nos 1-2, of Kazakhstan in Nos. 3-5 & Russia in Nos. 6-9).

Ashgabat's then oil minister Batyr Sardzhaev stated: "We have decided we have to divide the Caspian on the principle of the median line". During summit talks in Moscow on Aug. 7, 1997, Yeltsin pledged co-operation with Turkmenistan in the Caspian. Yeltsin and Niyazov confirmed the "cancellation" of the July deal for Kyapaz signed by Rosneft and LUKoil.

Niyazov said Turkmenistan, and not Azerbaijan, had the right to the field. He and Yeltsin agreed that Serdar was within Turkmenistan's sector. Yeltsin and Niyazov called for speeding up "a solution to get out of the deadlock and the signing of a convention" on the Caspian legal status.

On July 7, 1998, however, Ashgabat attacked the July 6 agreement of Yeltsin and Nazarbayev, which was rejected by Tehran. On July 7, Niyazov flew to Tehran and met with Iranian President Khatami. He said the five Caspian states "must reach a fairer division" of the sea's resources, but in the following month his government launched the first round of its offshore tender and included Serdar.

The ambivalent Turkmen position reflects President Niyazov's way of bargaining with Moscow, Baku and Tehran at the same time. He keeps opposing Russian initiatives concerning the Caspian - or trading of concessions with Kazakhstan, Azerbaijan or Iran - until he gets his way. He is insisting on Serdar and Azeri as being "exclusively Turkmen fields" and on a share of the Chirag field.

A joint Azeri-Turkmen commission established to negotiate ownership of Serdar/Kyapaz and the other disputed fields has since made little progress. But Ashgabat says it will eventually win the ownership claim over Serdar.

Niyazov also wants a majority share of the Lachin, Yelbars and Burgut blocks. Tehran has insisted on their being developed jointly as in the case of the other offshore fields in the southern Caspian.

The US says a resolution of the Caspian's legal status must be decided by the five littoral states. However, the US would not favour any solution which precludes American companies' involvement in the sea because of Iranian participation.

In mid-2000 the Moscow government of President Putin unveiled a foreign policy doctrine giving weight to measures that will support the Russian economy. The emphasis on economics was in part a response to criticism that the foreign ministry was slow to defend Russia's interests in the competition for Caspian Sea petroleum.

Putin has made former energy minister Viktor Kalyuzhny his special envoy to the Caspian region. On a visit to Iran in early August, Kalyuzhny called for a speedy solution to the question of the Caspian's legal status. Iranian foreign minister Kamal Kharrazi then said Tehran would accept a solution involving a 20% share of the sea's resources for Iran.