Total oil reserves of the Caspian Sea region are estimated to mount to over 200 billion barrels. These are the world?s second highest reserves only behind the Middle East with 700 billion barrels but ahead the United States or Western Europe with 110 billion barrels.
Total oil reserves of the Caspian Sea region are estimated to mount to over 200 billion barrels. These are the world?s second highest reserves only behind the Middle East with 700 billion barrels but ahead the United States or Western Europe with 110 billion barrels. The current production in the region is a mere 1 million barrels per day but it could rise to 3.4 million barrels per day until 2010. But therefore, preconditions like sufficient pipeline access and investments have to be met. Projects have been hampered by the political instability in the region. There is the problem of Nagorno-Karabakh, the ethnically steaming enclave between Azerbaijan and Armenia, the Russian struggle in Chechnya, the insecurity about the situation in Afghanistan, separatist movements in Abkhazia, Georgia or the Israeli Palestine conflict. These make the region a victim of many geopolitical influences and a most risky place for major investments.
To ad to these issues, there is a political dispute over how to divide the Caspian Sea and its resources among the littoral states. Today, over 80 percent of the Caspian oil reserves lie in the territories of Azerbaijan and Kazakhstan which have roused the covetousness of their neighbours.
The main problem which has to be solved is the legal status of the sea. As early as 1881, Russia and Iran concluded an agreement on how to divide the sea among them. During the Soviet Union in 1921 and 1940, this treaty was confirmed. With the collapse of the Soviet Union, the newly independent states, Azerbaijan, Kazakhstan and Turkmenistan, claimed control over their sea border. At that time, Moscow tried to keep control over the Sea and its resources and prevent Western companies from entering the region.
In 1994, Azerbaijan was the first country that challenged the Russian dominance in the region. It signed the first oil contract with Western oil companies and unilaterally started the exploitation of the Caspian Sea?s oil reserves. Shortly afterwards, Kazakhstan was the second littoral state that invited foreign companies to develop its oil reserves.
According to the norms of international laws the Caspian can be interpreted to be either a lake or a sea. Geographically the Caspian Sea is a lake, insofar as it lacks access to an ocean, but because of its size it can be regarded as a Sea. The earlier Soviet -Iranian agreement treated the Caspian as a lake. However, if the Caspian is perceived as a sea, every coastal state has rights to continental shelf (the continuation of the land territories of the coastal state up to 250 meters depth in the Sea) and an economic zone of 200 miles. Because of the shallowness of the Caspian Sea, the right for a continental shelf would not leave any common zone in the middle of the Caspian and in some cases, not even the economic zone could be guaranteed. Therefore the Caspian Sea would have to be divided like a lake.
In 1996, the diplomatic confrontation among the littoral states escalated. During a visit of Nursultan Nazarbayev, the President of Kazakhstan, in Baku, the two countries announced that they oppose a common ownership of the sea and wanted to divide it in national sectors. Each country should be free to exploit natural resources in his sector. Furthermore, the Caspian should be demilitarized. Here, the intention was clearly to counterbalance a potential Russian threat.
Today, it is mainly Iran, which opposes the division of the sea in separate sectors. The country would only receive 12 to 14 percent of the surface area. However, according to international law, only one subject of the old USSR-Iran treaty has changed. Iran has not and gained therefore no right to ask for new sea borders. It is up to Russia, Azerbaijan, Kazakhstan and Turkmenistan to divide the heritage of the Soviet Union among them. But this legal point has not been proven yet and it seems likely that the struggle has to be solved politically.
Lately, Russia annoyed Iran as it decided to draw a line in the Caspian Sea, which enabled oil companies to start their exploration work. Russia claims that it has only divided the seabed use and that would not violate the Russian Iranian treaty.
Today, most of the littoral states have concluded bilateral agreements on how the Caspian is to be divided between them. Only Iran is still opposing this process and announced that it would not recognize bilateral treaties and insist on using the sea resources together, as it was done before the fall of the Soviet Union.
To solve these issues once and for all, the 5 littoral states met in Moscow this week but failed to agree on a convention which should have defined the legal status of the Caspian Sea. That only means that the year-long struggle will continue at the next meeting in September in Ashkhabad.