15-05-02 Moscow has scored a first success in its drive toward a series of bilateral deals as an alternative to an overall agreement of all five Caspian littoral states, including Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan. Russian President Vladimir Putin and his Kazakh counterpart Nursultan Nazarbayev signed a bilateral agreement on how to divide the northern Caspian riches.
The document, "Protocol to Supplement June 6, 1998, Agreement Between Russian and Kazakhstan on Delimitation the Northern Caspian", defines "a modified median delimitation line of the seabed in the northern Caspian" between Russia and Kazakhstan. The deal implies that three hydrocarbon fields divided by the median line, Kurmangazy, Central and Khvalynskoye, would be exploited on parity basis by the two countries.

Putin stated that the deal was fair for both sides and came as a "breakthrough" in the Caspian cooperation. "We acted bearing in mind one another's interests," Putin was quoted as saying. The deal would havepositive effects "for our partners in Europe and North America" and spark interest of all importers of hydrocarbon resources, Putin said.
In response, Nazarbayev described the deal as the most significant of all post-Soviet agreements. "Without President Putin's political will this issue would not be solved," the Kazakh leader was quoted as saying.

The most high-profile attempt to clinch an overall deal took place last month when leaders of Russia, Azerbaijan, Turkmenistan, Iran and Kazakhstan met at the unprecedented Caspian summit in the Turkmen capital, Ashgabat, on April 23-24. Yet they failed to achieve a consensus on how to divide the Caspian riches. In the wake of the failed Caspian summit, Putin stated that Moscow could push for a series of bilateral deals, instead of an overall consensus of all five littoral states.
Until last year, Russian officials used to argue that further delays in determining the status of the Caspian could cause new tensions among the Caspian states. Yet recently Russia moved closer toward separate deals with northern Caspian littoral states -- including Azerbaijan and Kazakhstan -- on how to agree on dividing the sea. In recent years, many Russian officials tended to question the economic viability of the Caspian oilfields. However, in the wake of the deal with Kazakhstan, Moscow now sounds more upbeat regarding the Caspian's oil riches.

The Russian Natural Resources Ministry said that the northern Caspian could yield up to 50 mm tpy of crude. The deal between Russia and Kazakhstan could serve as a model for bilateral agreements among other littoral states, it said.
Moreover, Russia offered Kazakhstan the opportunity to sign a long-term 15-year deal on the transit of at least 15 mm tons of Kazakh oil a year through the Baku-Novorossiisk pipeline, Russian Energy Minister Igor Yusufov announced in Moscow. Moreover, Russia's top oil company LUKoil has sizable interests in Kazakhstan and the Caspian shelf. Since 1996, LUKoil has invested about $ 500 mm into oil projects in Kazakhstan. LUKoil is now pumping more than a mm tpy of crude in Kazakhstan, and the company plans to boost annual output to 4 mm tons.

Russia has long lobbied in favour of the CPC (Caspian Pipeline Consortium) pipeline that runs across Russia from the Tengiz field to Novorossiisk on Russia's Black Sea coast. In the meantime, both an oil pipeline from Baku to the Turkish port of Ceyhan and the Shah Deniz gas pipeline from Azerbaijan to Turkey should be operational by 2005.
Also, Russian Prime Minister Mikhail Kasyanov met his Kazakh counterpart Imangali Tasmagambetov in Moscow. They praised the bilateral Caspian deal and noted recent growth in bilateral trade -- from $ 4.7 bn last year to more than $ 5 bn expected in 2002. Yet despite a new wave of official optimism, in recent years relations between Russia and Kazakhstan have been anything but cloudless.
Bilateral ties were complicated by perceived mistreatment of ethnic Russians in Kazakhstan as well as a series of incidents relative to Russia's space program. The most recent accident took place when the roof of a 65-meter-high hangar at the Baikonur Cosmodrome in Kazakhstan collapsed, killing eight construction workers -- seven Kazakhs and one Belarus national. Baikonur is Russia's main commercial rocket-launching site.

In recent years, there have been numerous disputes between Russia and Kazakhstan over the Baikonur lease, which amounts to more than $ 100 mm a year. Kazakh authorities have also regularly complained over Russian spacecraft debris falling on Kazakh soil after launches from Baikonur. It is understood that the hangar collapse at Baikonur could renew disputes over space-sector safety between Russian and Kazakh officials.
On April 24, a Russian cruise missile, fired from a testing site in the Russian Astrakhan region, landed in neighbouring Kazakhstan. Although the missile hit an unpopulated area and caused no casualties or damage, the incident sparked protest by Kazakhstan anyway.

Nonetheless, Moscow and Astana seem to be moving closer. Notably Kazakh Foreign Minister Kasym Zhomart told that Kazakhstan was not going to allow foreign military bases on its soil in order to support international anti-terrorist action in Afghanistan. It is understood that despite verbal support, the Kremlin was not exactly happy over the Western military presence in Central Asia, hence Zhomart's statement could be interpreted as a gesture designed to please Moscow.