Parting the Caspian Sea

This weekend, government and industry representatives from all five Caspian Sea littoral states -- Russia, Iran, Kazakhstan, Turkmenistan and Azerbaijan -- will meet in Astrakhan to discuss the sea’s “economic development” prospects.  The Russian Ministry of Economic Development and Trade, which will host the conference, has portrayed the event as an unprecedented step forward in addressing the region’s environmental challenges and economic potential. 

The region remains potentially lucrative yet also significantly underdeveloped, particularly in the hydrocarbons sector.  The Caspian Sea may hold as many as 50 billion barrels of oil reserves and 6.6 trillion cubic metres of natural gas, and in 2010, Caspian oil exports are expected to exceed Venezuela’s.

The region’s economic potential can hardly be called into question.  What is less clear is the status of the sea itself.  Several bilateral agreements have been reached in the last five years that have helped to delimit Caspian maritime boundaries: 

• Azerbaijan has made the most progress, particularly in improving its formerly contentious relationship with Turkmenistan. 
• Baku and Astana have both resolved their maritime borders with Russia.
• However, delimitation has been challenged by questions over the status and nationality of military forces that may operate in the Caspian -- a particularly thorny issue for Russia, which is loath to see enhanced US or NATO military cooperation with Azerbaijan and Kazakhstan.   

Iran has also played the proverbial spoiler in Caspian delimitation talks, insisting that each state receive a 20% share of the seabed.  Such a division would give Iran territorial control over several promising hydrocarbon fields that are currently claimed by Azerbaijan. 

Yet this weekend’s summit will likely gloss over the legalities of dividing the Caspian.  Russia is keen to portray itself as a regional leader, and will use the meeting to showcase its preponderance of local economic and military influence.  Five years ago, it was virtually unthinkable that states with interests as diverse as Iran, Russia and Turkmenistan would hold economic development talks on the Caspian; as such, the conference represents undeniable progress towards normalising regional relations. 

However, establishing an uncontested legal and international legal framework for doing business in the Caspian is the next -- and much higher -- threshold that must be crossed if the littoral states truly aspire to fulfil the region’s economic potential.