By Charles Coe

02-05-02 The leaders of the five Caspian littoral states failed to inject any new momentum into efforts to resolve the conundrum that is the legal status of the sea during their summit in Ashgabat on April 23-24.
Rather than get down to business, the five opted to dance around the issue and toss an occasional stone, thereby highlighting the fact that major differences still exist between some of the littoral countries and that the debate is likely to drag on for years to come.
It was hoped that the summit would be a gathering that give a boost to negotiations. Yet the leaders of Russia, Iran, Kazakhstan, Azerbaijan and Turkmenistan could not bring themselves to sign a joint statement outlining a position of general consensus on the legal status of the Caspian Sea. However, the five leaders -- unwilling to admit defeat and knowing that the issue is going to come to a head sooner or later -- accepted the fact that their respective committees must continue negotiations and agreed to hold another summit in a year's time, probably in Iran.

Among the five littoral states, this situation probably bodes least well for Turkmenistan, which hosted the summit, as the country is dependent on its Caspian neighbours to export its huge natural gas resources as well as the crude it produces. But the situation is problematic for Azerbaijan and Iran as well.
Foreign interest in Turkmenistan is waning, largely in part to President Saparmurad Niyazov's erratic policies, but also because of the country's continuing disagreement with Azerbaijan over offshore oilfields. Turkmenistan's disputed territorial waters offer little encouragement for exploration offshore.
And while Iran has had foreign companies conducting surveys in the southern Caspian, it has yet to conduct any exploratory drilling. Financing such as venture may be a problem. Iran insists that it is entitled to 20 % of the Caspian based on treaties that it signed in 1921 and 1940 with the Soviet Union, but the other Caspian states do not agree with this line of reasoning.

Russia, Kazakhstan and Azerbaijan have signed bilateral agreements with one another endorsing the principle of division of the sea using the median-line principle. Turkmenistan's idea of how the sea should best be divided remains murky.
Iran's claims in the southern Caspian put it on course for a future serious disagreement over the Alov-Araz-Sharg fields, which are claimed by Azerbaijan. Baku has awarded a concession for the offshore oilfields to BP, but last summer an Iranian gunboat forced two research vessels to withdraw from the area. It remains to be seen how the drama over this block will play out following Washington's recent promise to assist Baku in protecting Azerbaijan's "maritime boundaries." Since it has yet to take steps to develop whatever may turn out to be its portion of the Caspian, Iran has previously suggested that no development of crude or gas resources take place in the sea until a comprehensive settlement can be agreed by all five countries.

Meanwhile, Azerbaijan has outpaced both Turkmenistan and Iran in its development of hydrocarbon resources in the southern Caspian, having received billions of dollars of foreign investment from western oil companies. Azerbaijan has moved forward with efforts to develop its offshore resources, most notably the Azeri-Chirag-Guneshli (ACG) oil fields and the Shah-Deniz gas field; both projects are being led by BP. Phase 1 development for the ACG concession is currently getting under way, but Turkmenistan has contested Azerbaijan's claim to part of the block and has called for development of the concession to be halted until the Caspian's legal status is determined.
Russia and Kazakhstan have agreed to compromise on the development of the oil fields in the northern Caspian that straddle their respective sectors. This arrangement suits both countries in that it helps Kazakhstan with its quest to develop production capacity and bolsters Russia's efforts to convince Kazakhstan to use its crude pipeline system to export future crude production.