By Anton Evstratov
Relations between the Caspian states (Azerbaijan, Iran, Kazakhstan, Turkmenistan and Russia) are currently being built largely under the influence of the Caspian memorandum signed in August 2018.
The key issues covered by the Convention concern the legal status of the waters, the seabed and the subsoil, demarcation, natural resources, fisheries and navigation. Some issues are left to be determined by further bilateral or multilateral agreements between the coastal States. The Convention reserves all rights over the Caspian Sea and its resources to the five coastal States. It excludes access to and the use of the Caspian Sea by third States.
The latter each of the signatory countries seeks to interpret for the internal audience in its own favour. However, even success in this matter does not remove from regional players the need to extract the maximum from the signed agreement and the situation.
Recall that the official name of the Caspian Memorandum is “The Convention on the Legal Status of the Caspian Sea”. This is a historical document that resolved many years of disagreement about the ownership and status of the Caspian Sea between Iran and the republics of the former USSR. However, according to the Convention, the final separation of the sea did not happen – countries must resolve territorial disputes bilaterally. As a result, disagreements between Iran, Azerbaijan and Turkmenistan persist indefinitely, while Russia and Kazakhstan secured their previous positions. The convention’s strategic importance is primarily for Moscow and Tehran, since It prohibits a foreign military presence in the Caspian, which has often manipulated Azerbaijan in its relations with Iran.
Cooperation between the Russian Federation and Iran is becoming more intense. On April 1, Iran’s Oil Minister Bizhar Namdan Zangane visited Moscow, who held several meetings there, including with his Russian counterpart (Energy Minister of the Russian Federation) Alexander Novak. It is known that at the meeting not only general issues were discussed, but also cooperation in the oil sector in the format of OPEC +
At present, especially active negotiations are underway on Russian investments in the Iranian economy, which has lost European and some Asian capital after the US withdraws from the “nuclear agreement” with Iran and the resumption of the US sanctions regime against Tehran. A new phase of the Russian Iranian consultations will be the meeting of the Permanent Russian Iranian Commission on Trade and Economic Cooperation, scheduled for June 15. In addition, Iranian representatives will again arrive in Moscow at the Russian Energy Week forum, scheduled for October this year.
At the same time, Russia continues to develop oil fields in the northern part of the Caspian Sea. In recent months, two new wells have been put into operation (at the Filanovsky field and at the Korchagin field). Work is continuing the commissioning of a new field, Rakushechnoye, which is scheduled for 2023.
All three projects are being implemented by the Russian company LUKOIL.
This company also works with Kazakh partners, including in the operation of the Zhenis field, a contract for which was signed by the Russian giant Kazakhstan KazMunaiGas in cooperation with the Ministry of Energy of Kazakhstan. As a result, the joint firm Zhenis Operating was established, with the task to develop the field. LUKOIL is also already engaged in the exploitation of Kazakhstan’s Karachaganak, Kumkol and Tengiz fields, the Trans-Caspian Pipeline Consortium and a joint venture to develop the Central Field in the Caspian Sea.
Azerbaijan, in turn, directs maximum efforts to organize the supply of its hydrocarbons to Europe. At the final stage is the tender of the pipeline Greece-Bulgaria, designed for Azerbaijani gas. This pipeline, known as IGB, should provide gas to European markets from the Shah Deniz field. Thus, it will be connected to another major pipeline – TAP. Similar work is being done by Bosnia and Herzegovina – the republic will receive Azerbaijani gas through Croatia.
Another major tender for the Caspian was won by the Chelyabinsk Pipe Rolling Plant. It is he who will have to build the Turkmen part of the Turkmenistan-Afghanistan-Pakistan-India gas pipeline, which ensures the delivery of Turkmen gas to major Asian markets. The tender was organized by the Turkmengaz concern and involves financing the project in the amount of $ 219 million. The Islamic Development Bank is one of the main creditors of the gas pipeline, but recently it has become known that the Saudi state corporation Saudi Aramco is financing the project. Such intentions were voiced by KSA Oil Minister Khaled Al-Faleh in an interview with the Riyadh newspaper. The official also announced Aramco’s work not only with Turkmenistan, but also with Azerbaijan and Kazakhstan.
In addition to the purely economic component of these intentions, it can be assumed that in this way Riyadh seeks to open in the Caspian a kind of “new front” of confrontation with Iran. Since the Caspian Sea, according to the signed convention, cannot be the object of military-political penetration of non-regional states, the kingdom is forced to use the only available way available now – the economic one.
Iran, in turn, is making efforts for rapprochement with Azerbaijan, relations with which the Islamic Republic had previously been problematic. On March 14, a regular meeting of the Iran-Azerbaijan Joint Commission on Economic Cooperation was held, during which the Iranian Minister of Economy and Finance Farhad Deipasand stated about improving relations between Baku and Tehran in the oil and gas sectors, as well as in investment, tourism, logistics, etc. According to the official, the time has come for the two countries to switch to the preferential trade regime. In 2018, bilateral trade increased by 74%, reaching a figure of $ 446 million. The parties were able to agree on the controversial points of their relationship. Azerbaijan, after the signing of the Caspian memorandum, denounced fears of the possibility of the appearance of Israeli military bases on its territory, and Iran assured the partner of its unwillingness to spread the ideology of the Islamic Republic to its territory.
Nevertheless, some Iranian-Azerbaijani problems remained. For example, during the celebration of the 40th anniversary of the Islamic Revolution, the president of the Islamic Republic of Iran, Hassan Rouhani, stated that during the rule of the Qajar dynasty, most of the lands in the Caucasus were rejected from Iran. Thus, a claim was made, including on the territory of modern Azerbaijan. Armenian Prime Minister Nikol Pashinyan did not add an understanding of the Azeris to Iran, who met with the Armenian community of Tehran in the hall where one could see a banner with the inscription “Karabakh belongs to Armenia”. The latter fact provoked protests, both in Iran and in Azerbaijan.
Now, it is obvious that after the signing of the Convention on the Legal Status of the Caspian Sea, the political problems of the region were largely resolved, and the decisions of the others acquired the necessary vectors. This allowed the Caspian littoral states to concentrate more on economic problems than before.
Russia and Kazakhstan continue and deepen their cooperation in the oil and technical sphere, developing both their own projects and bilateral initiatives. Now, Moscow has a favourable for itself, both economic and political situation in the region, which allows it, on the one hand, to develop Kazakhstani fields, and on the other – not to fear the appearance of non-regional players in the Caspian Sea.
Iran, which is actively increasing its cooperation with Azerbaijan, despite the competition with this country over the territory of the Caspian Sea, is now in a similar situation. On the one hand, the IRI thus gains obvious economic advantages – both in terms of gas and oil production, and in the implementation of the North-South corridor.
Azerbaijan, in addition to rapprochement with Iran, is actively working to deliver its gas to Europe. Nevertheless, this question is quite dependent on Baku, because pipelines in the eastern part of the Old Continent are being built by local companies.
Turkmenistan found itself in a similar position with the only difference that its gas mainly goes to Asian markets. In this context, it is possible to consider the construction of the gas pipeline Turkmenistan-Afghanistan-Pakistan-India, which should open a new, in parallel with the Chinese, direction for Turkmen gas. The conclusion of a contract with the Chelyabinsk Pipe Rolling Plant is one of the first real measures in this direction. Now, the project’s prospects look vague, given its ambitious nature and plans for Afghan territory – permanently the scene of armed confrontation.
Despite the apparent cloudlessness of the regime established in the Caspian Sea, there are some negative points.
First, by not being able to penetrate the sea by military and political means, interested non-regional players will try to act through the economy. This can explain, for example, the interest in the region of Saudi Arabia – obviously, not only economic.
Secondly, several contradictions between the Caspian countries themselves also remained. We are talking about Iran’s disagreement with the prospect of getting only 11-13% of the Caspian seabed, WTO time, as in the de jure Soviet era, Tehran had the right to use 50%. It is in this context that the contradictions of Iran with Azerbaijan and Turkmenistan are mainly. Moreover, the Iranian-Azerbaijani problems also include the religious factor and the Armenian-Azerbaijani issue. The latter are not fully resolved and are generally outside the Caspian perspective, which means they have prospects for development.
However, these problems are of a local nature, and they are unlikely to affect other Caspian states, as Kazakhstan, that together with Russia, has developed for itself the most favourable regime of operating in the Caspian Sea, both in political and economic planes.
(The views expressed in this article belong only to the author and do not necessarily reflect the views of World Geostrategic Insights)
Image Credit: Reuters/Alexei Nikolsky