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 Sea (inland lakes are not covered by this law). If the Law of the Sea convention were 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. 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 Sea 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. On the other hand, Presidents Boris Yeltsin of Russia and Nursultan Nazarbayev of Kazakhstan on July 6, 1998, 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 current onshore border between Russia and Kazakhstan. That was another major concession as until then Moscow refused to cede Russian claims over northern Kazakhstan.

But the accord specifically stated that other issues such as pipelines or telephone cables will have to be governed by subsequent agreements. Officials in Moscow said 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 (see details in OMT).

Turkmenistan's position is still evolving. It initially 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 division 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 a field called Kyapaz by Baku and Serdar by Ashgabat. Azerbaijan reached a $1 bn deal with Rosneft and LUKoil of Russia to develop this field in July 1997. Turkmenistan, which had laid claim to this field, included Serdar as part of its Block 30 licencing offer in September 1997. Ashgabat also had claims over the Azeri and Chirag fields, now being developed by a BP-led consortium.

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, President 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 President Yeltsin agreed that Serdar field 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, President 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. 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 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 which are disputed by Iran and which Tehran has insisted on their being developed jointly as in the case of the other offshore fields in the southern Caspian.

The deputy foreign ministers of Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan were scheduled to meet in Moscow in the first week of September 1998. On Aug. 4, the Russian foreign ministry said the meeting could bring about a solution. In late July Russian deputy foreign minister Boris Pastukhov met Azeri President Aliyev in Baku. Although they did not reach an accord on dividing the water, they agreed that the seabed should be divided. They also agreed that median lines should be separating the Caspian into national sectors.

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.