Energy-rich Caspian becomes centre of US-Russia power struggle

Oct 17, 2007 02:00 AM

by Judy Dempsey

Is the Caspian a sea or a lake?
The answer has immense repercussions for the energy industry. If it is a lake, there are no obligations by countries that flank it to grant permits to foreign vessels or drilling companies. But if it is sea, there are international treaties obliging those countries to an array of permits.

The Caspian, one of the world's largest enclosed bodies of water, has become the centre of a new power game involving the United States and Russia as well as its bordering countries, including Iran, over who should control the vast energy reserves under its depths.
The Caspian's status has been in dispute since the collapse of the Soviet Union in 1991. Over the past few years, the United States has been trying to establish alternative energy routes that would weaken the regional dominance of Russia and Iran, while Russia has sought to control the transportation routes across these waters.

When Vice President Dick Cheney visited Kazakhstan last year, he used the occasion to launch a fierce attack against President Vladimir Putin of Russia, accusing him of rolling back democracy and suppressing human rights. By delivering the speech in Kazakhstan, the Bush administration was staking out US influence in the region, where it has stepped up plans to build a pipeline that would bypass Iran and Russia.
Then it was Putin's turn to put down his marker. On the first visit in 64 years by a Kremlin leader to Tehran, he met his Iranian counterpart, Mahmoud Ahmadinejad, whose country faces a fresh round of sanctions by the United Nations if it does not comply with Security Council demands for reining in its nuclear program.

But while the standoff between Iran and the United Nations stole the limelight, the reason for Putin's visit was a summit meeting with Ahmadinejad and three Central Asian leaders who are now being wooed in the Caspian power game.
"The summit in Tehran was about the future status of the Caspian Sea," said Johannes Reissner, Middle East expert at the German Institute for International and Security Affairs in Berlin. "Iran and Russia have enormous interests in resolving this status. But there are major disagreements between them."

In addition to Iran and Russia, Azerbaijan, Kazakhstan and Turkmenistan also have Caspian coastlines. And while all of them want a large stake in the oil reserves, and to use of the sea for transportation, none of them have been able to agree on the status of the coveted waters.
Russia and Iran, historically, have agreed that the sea was a lake and that it should be shared equally between the two of them. That all changed after the collapse of the Soviet Union in 1991. Iran and Russia wanted earlier agreements, signed in 1921 and in 1940, to continue. Moscow had obtained consent from the newly independent republics of Azerbaijan, Kazakhstan and Turkmenistan that they would be bound by any agreements signed by the Soviet Union, of which they had been a part.

But in 1998, Azerbaijan declared that since the Caspian was an international lake, it should be recognized as such. In practice, this would mean that the surface and seabed would be divided into five sectors determined by the length of each country's shoreline. Under such a scenario, Russia would lose out, and Iran even more so.
Iran opposed this plan, since its share of the waters would be reduced to under 14 % from about 20 %, according to experts. As soon as Putin was elected president in 1998, he tried to break the deadlock to speed up energy links between Russia and the Central Asian countries and to pre-empt US advances into the region.

Energy analysts said that Putin, seeing that the United States and other Western energy companies were eager to forge energy exploration contracts with Kazakhstan and Azerbaijan and to influence the Caspian negotiations, tried to find compromises among all the coastal states.
But attempts to determine the status of the Caspian have often proved hazardous. In 2001, Iran deployed a warship and fighter jets asa warning to Azerbaijan, which had sent vessels to explore for oil for British Petroleum along the southern Caspian oilfields. Azerbaijan, which depends on Russia for energy transit routes, had agreed to forge a separate deal with Putin in which those two nations divided a part of the seabed. A similar deal was struck with Kazakhstan. In both cases, Iran was excluded from the negotiations.

"Over the past few years, Iran has felt increasingly isolated," said a European diplomat who requested anonymity because he was involved in the region. "It sees what Russia is doing. It is being excluded from the big decisions being made in the region."
Russia has not managed to keep the United States out of its traditional sphere of influence. In 2005, the United States supported the Baku-Tbilisi-Ceyhan pipeline, which allows oil to be transported across Georgia and Turkey, bypassing Iran and Russia. The United States, too, is actively supporting the trans-Caspian pipeline, through which Turkmenistan would send natural gas under the Caspian to Azerbaijan and then on to Europe. According to EU diplomats, the US would like to weaken Europe's dependence on Russia, and at the same time isolate Iran.

Vladimir Milov, director of the Institute of Energy Policy in Moscow, said he was sceptical about a pipeline under the Caspian.
"The perspectives for a trans-Caspian pipeline, putting aside the US optimism, appear bleak due to unresolved Caspian seabed division disputes," he said in September. As if to confirm this, the Caspian summit produced no breakthrough. The five leaders agreed to form an economic cooperation organization. They are to meet next year in Azerbaijan, leaving open for the moment the viability of a trans-Caspian pipeline and the Nabucco project but confirming Russia's influence in the region.

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