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Putin’s Caspian Diplomacy

The results of the recent visit by Russian president Vladimir Putin to Baku have received different interpretations in different media. This week’s column focuses on figuring out exactly what those results are, and what they mean, for the aspects of Russian-Azerbaijani relations that are most pertinent to Caspian Sea division and related issues.

1. The Basis of the Russian-Azerbaijani Agreement

The language of the agreement on the seabed and undersea resources is especially interesting. On the one hand, it establishes the basis for drawing the dividing line between Russian and Azerbaijani “sectors or zones.” On the other hand, it refers to “relevant contiguous and opposite states,” which clearly implies that the principle embodied in the Russian-Azerbaijani agreement should be considered as applicable to the division of the Sea as a whole among all five littoral states. This is in the line of the new Russian activism in the Caspian, which began last spring following a decision by the Security Council of the Russian Federation to re-activate Russian policy in the region. At that time, the head of the Caspian Sea working group of the Russian foreign ministry, Andrei Urnov, put forward in public a new Russian approach to the demarcation of national sectors and establishment of a legal regime to regulate the use of its waters and subsoil resources.

This approach has formed the basis of Russian policy towards Caspian Sea legal issues since then. Indeed, the principle to be implemented between Russia and Azerbaijan is that same as was agreed between Russia and Kazakhstan last year. It is the “modified median line” principle. The “median line” principle involves drawing a line equidistant from the closest mainland points of each of two adjacent countries. The “modified median line” principle allows small adjustments in this equidistance line to account for de facto boundaries or for practical reasons such as avoiding administrative problems that would result from splitting a single oil field between two states.

It is therefore correct to conclude that this represents a compromise between the two parties. Russia, which challenged the basis of Azerbaijan’s offshore projects in 1994 (and so brought into public view a split, much remarked at the time, between the foreign ministry and Lukoil), concedes Azerbaijan’s legal right to pursue those projects, while Azerbaijan restricts its insistence on national sectors to the seabed and subsoil resources.

X Other than the modified median-line principle, there are only two are methods are available under international precedent. These are the drawing of lines perpendicular to the general direction of the coast, and the bisection of an angle formed by the coastline of the two states. In the Caspian instance, their results are nearly identical to the median-line principle (also called the “equidistance method”), which itself satisfies a standard proportionality test. The language in the agreement between Russia and Azerbaijan even makes indirect but unmistakable reference to the Russian-Kazakhstani agreement as a precedent.

2. What Azerbaijan Gains from the Agreement

From this agreement, Azerbaijan gains an advantage against Turkmenistan, and Russia gains an advantage against Iran. Azerbaijan’s advantage is the following. In the mid-1990s Turkmenistan had supported Russia’s proposal for 45-mile nautical zone national zones, with a “joint-use” area in the middle of the Caspian. However, in February 1997 Turkmenistan signed a statement with Kazakhstan calling for the sea to be divided into national sectors according to Soviet-era administrative divisions. Turkmenistan’s position changed again after it decided to dispute Azerbaijan’s right to a field called Kyapaz by Azerbaijan and Serdar by Turkmenistan. This is a part of the “Contract of the Century” Azeri-Chirag-Guneshli complex being developed by the Azerbaijan International Operating Company (AIOC).

During 1999 Turkmenistan’s President Niyazov tried to hold agreement on the Trans-Caspian Gas Pipeline (TCGP) hostage in connection with the Kyapaz/Serdar dispute. (The question was over the volumes of natural gas from the two sides to be allocated to the TCGP. These negotiations failed last year and are for the moment still in suspended animation, although the two sides have agreed in principle on their respective quotas through the intermediation of Turkey’s President Sezer.) The Kyapaz/Serdar petroleum deposit is estimated to lie about one-quarter in the Turkmenistan sector of the Caspian Sea, if the Caspian were to be divided by the median-line rule. In the end, Niyazov threatened to file a case before the International Court of Justice (but seems never to have done so), even though Baku offered to form a 50-50 joint venture with Ashgabat to exploit the resources there, and even though it would not be cost-effective for Ashgabat to do so alone. In this context, the implication of the “modified median line” principle for the Baku-Ashgabat dispute over the Kyapaz/Serdar deposit is that the principle according to which the median line may be modified would give the right to exploit the deposit over to Azerbaijan, unless there is a specific agreement made otherwise.

With Azerbaijan coming down explicitly in favor of the modified median-line principle, only Turkmenistan and Iran remain to oppose the Russian démarche. Russia, by its agreement with Azerbaijan, moves a step closer to isolating Iran in its insistence on an “equal” division of the Caspian. (This usage implies that each of the five countries receives 20 per cent, whereas under the modified median-line principle Iran’s share is about 13 per cent.) Turkmenistan’s position on this question has waffled back and forth but despite Niyazov’s lip-service to the need to take account of Iran’s position and to arrive at all decisions by consensus, it is clear that he will adopt whichever principle is most expedient for himself. He has recently come down with an implicit endorsement of the national-sector principle.

Thus Turkmenistan had already advocated the establishment of national sectors in 1997 and, in February 1998, issued a joint statement with Azerbaijan advocating adoption of the median-line principle (not “modified” median line). However, in July 1998, President Niyazov turned about-face to endorse Iran’s insistence on an “equal” division of the Caspian. Yet his subsequent moves indicate a reversion to the national-sector principle, and it is clear that only by the modified median-line principle does he have any possible claim at all to Kyapaz/Serdar. Thus the modified median-line principle, which would limit Iran’s share of the Caspian to little more than one-eighth, is on the face of it the most advantageous alternative now before Niyazov.

3. What Russia Gains from the Agreement

Iran’s response to the Russian-Azerbaijani agreement shows how isolated Teheran feels. For the first time in a long while, Iran in its public statements is explicitly invoking and insisting upon its bilateral Soviet-era treaties with the USSR as the basis for any future division of the Caspian. (Those treaties, however, do not even address division of the waters, seabed or subsoil resources, nor do they provide any principle from which to infer what division would follow.) Iran has now even publicly hinted at its apprehension that the common use of the waters of the Caspian would give any littoral state license to send a naval flotilla anywhere without needing to ask any other littoral country’s permission. Although this may be a slightly exaggerated fear, it is clear that Russia is the only country having vessels that might do that.

Presidents Putin and Aliev also agreed on the idea, suggested by Niyazov last year, of holding a five-nation summit in Ashgabat to resolve all outstanding questions concerning Caspian Sea demarcation and regime definition (including issues of shipping, fishing, ecological conservation and other inherently cooperative issue areas). The month of March has been suggested. Kazakhstan would probably accept such an invitation. This can only reinforce Iran’s feeling of isolation because, despite Niyazov’s words about the need for decisions by consensus, it would be extremely embarrassing for Iran to find itself faced with the choice between giving in on the modified median-line principle on the one hand, and, on the other hand, being publicly spotlighted as the only littoral country refusing to adopt an otherwise commonly agreed proposal.

The incontrovertible result to this point, is that Russia is the only Caspian littoral country that has established the demarcation of its national sector according to principles commonly agreed by its two adjacent littoral neighbors (in this case, Kazakhstan and Azerbaijan). Moreover, those principles the same in both instances. This circumstance provides stability in the business environment for companies seeking to invest in the Russian sector, and that is no small feat. It also provides a strong precedent for the ultimate resolution of all Caspian demarcation issues.

4. Conclusion

It is impossible for someone with a background in Soviet foreign policy not to compare this very skillful diplomacy to the famous Litvinov Protocol of the interwar period. In the late 1920s, the U.S. secretary of state Frank Kellogg and the French foreign minister Aristide Briand worked together to draft the multilateral treaty bearing their names, to which the signatories to which declared nothing less than their renunciation of war as an instrument of national policy. The Kellogg-Briand Pact was signed in Paris in August 1928 by fifteen nations invited by the two principals. The Soviet Union was not among these fifteen, but in response to a French invitation acceded unconditionally and indeed became the first adherent to complete the formal ratification process at the end of September that very year.

Then came the stroke of genius. In December, the USSR proposed to Poland and Lithuania that the terms of the Pact enter into force among them, but without waiting for the requisite number of ratifications of the Pact itself to be deposited by its own signatories. In the end the USSR and four other countries signed this “Litvinov Protocol” in February 1929, and another four countries adhered to it subsequently. It was a brilliant move that took the initiative away from the Western capitalist powers at the same time as well as showing up the contrast between their public advocacy of the Pact in beautiful speeches on the one hand, and, on the other hand, their lethargy and disinterest in actually ratifying it and seeing it enter into force.

The principle of national sectors according to the modified median line was never embodied in a treaty like the Kellogg-Briand Pact, but it was a general principle that was generally, if informally, well regarded. Nevertheless, Russian diplomats, and now Putin himself, have been going around the Caspian littoral states, establishing bilateral consensus now with Kazakhstan, now with Azerbaijan, perhaps next–who knows?–with Turkmenistan, and always on principles that were mutually compatible.

Niyazov will clearly relish being center stage at the Ashgabat conference if indeed it comes to that. The question is whether he will play too many ends against the middle, as he did in early 2000 with the TCGP negotiations. Also it is worth noting that there have been disputes verging on small-scale military hostilities between Azerbaijan and Iran over the demarcation of their respective Caspian sectors. The two questions now are: What can Russia or Azerbaijan or Iran offer him to either make or break the conference? And will Niyazov get so caught up in the game again, that he will forget that reaching a settlement is actually in his interest?

Given his halting of gas deliveries to Russia on January 1 due to the failure to agree a price for exports in 2001, and given his tacit recognition of the need for non-Russian export routes such as the TCGP, one can be fairly sure that any Ashgabat summit on Caspian demarcation will sooner or later find itself taken up with negotiations over prices and quantities of Turkmenistan’s natural gas exports. And that is one place where Teheran has little practical to offer to Ashgabat.

Copyright © Robert M. Cutler unless otherwise noted.
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URL:  http://www.robertcutler.org/blog/2001/01/putins_caspian_diplomacy_1.html
First published in FSU Oil & Gas Monitor, No. 117 (31 January 2001): 3–5.

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