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AZERBAIJAN - Russian-Kazakh Deal For North Caspian.

An important breakthrough occurred on July 6, 1998 as Presidents Yeltsin of Russia and Nazarbayev of Kazakhstan signed an agreement on dividing the northern portion of the Caspian seabed between the two countries. The deal marked the first time that Russia has legally recognised Kazakhstan's claim to its offshore oil resources.

This first bilateral deal between any of the littoral states finally cleared the way for the various consortia to develop the Azeri-claimed zone of the southern Caspian. It gave much needed security to AIOC, by far the biggest among these consortia in Azerbaijan.

On the other hand, only the seabed is addressed in the July 6 deal. The agreement specifically states that other issues such as pipelines and telephone cables will have to be governed by subsequent accords. This gives Russia the right to veto the "trans-Caspian corridor", a US-proposed system of undersea pipelines for crude oil and gas to be pumped from Kazakhstan, Turkmenistan and Uzbekistan to a point near Baku and then to run overland to transit through Turkish territory (see OMT).

Although the July 6 deal directly benefits the huge northern Caspian consortium, Offshore Kazakhstan International Operating Co. (OKIOC), it deals a blow to the latter's and AIOC's plans to have an oil export route independent from the Russian pipeline system. The deal has various other implications.
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Publication:APS Review Gas Market Trends
Date:Jul 10, 2000
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