Developments in the evolving Caspian legal regime: Part 2 of 2

by Dr. Robert M. Cutler

I conclude the short series, on efforts to settle the international legal status of the Caspian Sea. Last week I addressed the inheritance from the Soviet period and surveyed the most salient events during the 1990s up to the end of 1997. I now pick up the thread at the beginning of 1998 and put the most recent developments into context.

Developments in 1998
In February of 1998, Azerbaijan and Turkmenistan agreed on the median-line principle of division in a joint statement, but this did not resolve their dispute over the oil field that Azerbaijan calls Kyapaz and Turkmenistan calls Serdar. Then in July of 1998, Turkmenistani President Saparmurad Niyazov endorsed Iran's advocacy of an "equal" division of the Caspian, meaning that it advocated a solution that would allot 20 % to each littoral country.
That same year, Russia and Kazakhstan reached an agreement to divide the north Caspian seabed by the modified median-line principle while the waters remained subject to joint use and such issues as the environment, shipping and fishing were to be co-operatively resolved. However, this agreement between negotiators was not successfully translated into treaty language.
Although initialled by the presidents of the two countries, the Russian-Kazakhstani agreement remains an aide-memoir that has not been spelled out and submitted to the national parliaments for ratification. Nevertheless, in July of 1998, soon after the agreement was reported, Iran and Turkmenistan issued a joint statement supporting the 1996 Russian proposal, which Moscow had just abandoned.

As the Trans-Caspian Gas Pipeline (TCGP) project began, during 1999, to become more and more of a realistic prospect, Ashgabat increased its diplomatic distance from Moscow's position. The mere idea of building a pipeline across the seabed floor contradicted the position of Iran as well as Russia, both of which continue to advocate a moratorium on any such pipelines until there is an overall agreement on the status of the sea.
According to one credible report, the problem with the 1998 Russia-Kazakhstan agreement was that Moscow sought to use the median line of the deepest channel to delimit national sectors. This is the customary method for dividing rivers, but in the case of the Caspian Sea the earth's rotation causes seabed erosion that would shift the division to Russia's advantage over time. This would account for the failure of the bilateral 1998 agreement to be translated into treaty language. It would certainly account for Kazakhstan's suspicion and hostility over Russia's intentions.
The "modified median line" approach usually does not provide for joint development of disputed fields. Rather, the median line is modified precisely in order to take into account such considerations, allocating fields to national sectors on the basis not only of geography but also of previous industrial development, historical precedent and so forth. However, such considerations become relevant only with respect to fields that may be divided by a strict median-line approach.

Methods of Demarcation
International precedent provides two methods for delimiting the Caspian other than the modified median line. Both of them -- the drawing of lines perpendicular to the general direction of the coast, and the bisection of the angle formed by the coastline of the two states -- give results nearly identical to the median-line (equidistance) method.
It is significant that Russia has altered its negotiating position with Kazakhstan bilaterally to a modified median line. The "modified median line" principle is the one that an international court would probably adopt for demarcating national sectors in the Caspian Sea. This allows small adjustments in the median ("equidistance") line to take de facto boundaries into account and to avoid administrative problems that could arise from splitting a single field between two states.
However, there is expert opinion in Kazakhstan, outside government circles, which takes an even harder line towards Russia than the "modified median line" principle agreed by Astana. According to this view, the correct principle is a "strict median line" approach. The reasoning behind such a view, to be found among specialists in the Kazakhstani Academy of Sciences, seems to confound the national-sector division of the Caspian Sea with Central Asian border problems in general. Yet it is rooted in an understandable suspicion.

Even Kazakhstan's right to develop the Vostochny Kashagan deposit could be thrown into question by one Russian interpretation of the existing Russian-Kazakhstani understanding. One expert at the Russian Foreign Ministry's Moscow State Institute of International Relations now claims that this understanding means that Kazakhstan would require Russian approval to begin exploiting Vostochny Kashagan's resources.
His reasoning is that even to set up drilling rigs would mean disturbing the waters of the Caspian itself; and according to the provisions ofthe understanding that are designed to govern fishing and shipping, the waters, as opposed to the seabed, are subject to joint use and hence require common agreement to be disturbed.
Throughout the 1990s, Moscow sought to restrain the development of energy resources of the region outside of Russia by playing upon the transportation monopoly inherited from the Soviet period. It used this as a way to obtain entry by Russian energy trusts into development projects in Azerbaijan as well as Kazakhstan.
In the past Russia has disputed the Kurmangazy and Vostochny Kashagan oil fields. If the aspect of Russia's current proposal that seeks joint development of divided fields is merely a survival of its 1994 idea to establish a joint corporation of all littoral states to exploit the sea's resources in common, then perhaps it can be fairly easily discarded.

Recent Developments
The head of the Russian Foreign Ministry's Caspian working group, Andrei Urnov, made a number of public statements in late spring of this year to the effect that Russia would favour the modified median line as a general principle for demarcating all national sectors in the Caspian Sea.
This would not involve drawing international boundaries but rather "sea-bed delineation for the purpose of subsoil use." Then in mid-July, Viktor Kaluzhny, Russia's deputy foreign minister and President Vladimir Putin's special representative for Caspian energy issues, visited Baku and Ashgabat.
According to Russia's newest proposal, the five littoral states would be assigned national sectors, with the 50-50 split applying to any divided fields. Also, a common centre would be established in Baku to address environmental and navigation issues and other matters requiring joint co-operation.
Following this, a conference would be convened to draft a document finalising the sea's status. Azerbaijani President Heidar Aliyev did not reject the Russian proposal outright, but neither did he alter Baku's insistence on dividing the surface as wellas the seabed into national sectors. Also, he is unlikely to favour the idea of splitting disputed fields on a 50-50 basis.

Azerbaijan's dispute with Turkmenistan over Kyapaz/Serdar is not the only issue here. Baku's relations with Tehran -- especially with respect to several offshore fields -- have become increasingly tense, with accusation of border violations. In Ashgabat, however, Kaluzhny's proposal encountered a flat refusal. President Niyazov wanted to begin by signing a five-party Convention, taking up environmental and other issues (including fishing) only afterwards. And after he refused to discuss Caspian issues at the CIS summit in early August, Iran cancelled its attendance at a subsequent Caspian meeting scheduled for the middle of the month.
Tehran, after earlier indications that it might back away from an "equal division" of the Caspian, has now re-affirmed authoritatively that it has not abandoned this principle. In general, it now supports the Russian proposal for joint use of deposits that straddle the to-be-defined national sectors and for the establishment of a co-ordinating centre for issues such as the environment, fishing and shipping. And to make things still more interesting, Ashgabat's most recent statement on Caspian division endorses Tehran's advocacy of "equal division" (i.e., 20 % each all around).

Conclusion
There is something odd about Kalyuzhny's proposal that fields lying across two national sectors be divided 50-50, regardless of the proportion of resources to be found in each of the claimed national sectors. Since the purpose of modifying the median line is to avoid problems that may arise from dividing oil and gas fields between two countries, the reason for adopting both the "modified median line" principle and the 50-50 principle is hard to fathom. The former would presumably preclude the need for the latter.
Perhaps Kaluzhny foresees that disputes will be solved by simply applying the 50-50 principle, thus obviating the precise specificationof a median line in practice. However, the definition of an oil or gas field can change over time. For example, in southern Turkmenistan on the Iranian border, Soviet engineers developed two fields that were 30 miles apart, treating them as separate fields. Subsequent geological studies, however, showed that they were in fact both part of a single larger gas field. This has ramifications for the Russian proposal.
To take a hypothetical example in the current Caspian context, if Russia's Severny Kashagan deposit and Kazakhstan's Vostochny Kashagan deposit were shown in the future to be two parts of a single structure, then the adoption of the a priori 50-50 principle for shared division of fields straddling demarcated national sectors would entitle Russia to claim half of the combined resources of the two fields. Moreover, Kaluzhny is on record as saying that the Khvalynskoye, Severnoye and Tsentralnoye fields would qualify as "disputed" between Russia and Kazakhstan. He also considers the Kyapaz/Serdar field to be Azerbaijan's but, as explained above, Turkmenistan disputes this.

A still further effect of this aspect of Russia's proposal would be to complicate the development of deposits that may be disputed among Azerbaijan, Turkmenistan, and Iran. There is, as noted above, increasing friction between Azerbaijan and Iran over several such deposits.
Given the present constellation of forces, the current Russian proposal is instructive for illustrating the state of play. It takes some of the interests of other Caspian littoral states into account but is unlikely to unleash a diplomatic dynamic that will resolve all issues authoritatively. The international legal regime of the Caspian Sea will, for the foreseeable future, continue to be constructed from the bottom up as a consequence of facts that are established on the ground (and in the water).

Robert M. Cutler was educated at the Massachusetts Institute of Technology and the University of Michigan and holds a Ph.D. in Political Science. He has worked in European and Eurasian affairs for 20 years, specialising in Euro-Caspian and post-Soviet energy. His management specialities include organisational analysis and design and organisational learning under complex systems of information and cross- cultural communication.