Caspian countries ready to end their sea of troubles

Caspian countries ready to end their sea of troubles

When is a sea not a sea? The question has vexed the five states surrounding the Caspian Sea for 26 years. But the conundrum is set to be answered within days in a geopolitical breakthrough affecting both the global energy industry and Central Asian relations.

The Caspian, the world’s largest enclosed body of water, is rich in hydrocarbon deposits and a natural barrier between Turkmenistan’s large gas reserves and Europe. Once it was divided between the Soviet Union and Iran. But in 1992 the collapse of the USSR created four successor states with Caspian shores — Russia, Kazakhstan, Azerbaijan and Turkmenistan — and threw the status of the sea into a generation-long morass of diplomatic wrangling.

The impasse has stymied projects such as Turkmenistan’s proposed 300km-long undersea gas pipeline to Azerbaijan, to tap European markets.

Now uncertainty is set to clear. On Sunday in Aktau, on the Kazakh shore, the presidents of the five states are expected to sign a convention governing the sea’s legal status.

Russia, which sees the region as its geopolitical stomping ground, has set aside objections to the Turkmen pipeline and other demands in exchange for closer co-operation with the former Soviet states and security guarantees that assert its military dominance over the sea, amid attempts by China and the US to build ties.

“The states used to be diametrically opposed to each other, now we finally have pushed them together,” said one person involved in the negotiations. “It has been such a long time waiting.”

Whether the sea is in fact an enormous lake was at the heart of the talks. International treaties govern seas and oceans, and make clear how far sovereignty and economic and military zones extend from coastlines. Diplomats said Moscow and Tehran argued that the same should apply to the Caspian.

But lakes have no global rules. Azerbaijan, the officials said, wanted the Caspian to be entirely carved up on this basis.

“Despite the complexity of the problems, and serious differences in the national interests of the negotiators, the coastal states have gradually come to understand the need for a comprehensive settlement of all aspects of maritime activities,” said Zulfiya Amanzholova, Kazakhstan’s chief negotiator on Caspian issues. “Work has not stood still, as it might seem from the outside.” 

Sunday’s agreement will set out “sea area delimitation, national seabed division, military co-operation and economic activities . . . shipping, environmental protection and marine scientific research,” according to documents seen by the FT.

Energy politics are paramount. A Kazakhstan-led consortium is producing oil from the Kashagan project in the Caspian’s north-east and Russia’s Lukoil is pumping crude close to the Russian shore. The convention should clear obstacles for other hydrocarbon exploration projects. 

Critically, it also contains an agreement on undersea pipelines, which could pave the way for Turkmenistan’s long-delayed project.

Russia has historically blocked such initiatives, seeing a potential rival to state-owned Gazprom’s exports to Europe. But diplomats and analysts say that Moscow has moderated its objections, given Gazprom’s dominance in the EU market and the Kremlin’s desire to maintain good relations in its traditional sphere of influence amid a fractious relationship with Nato and the US. 

“The pipeline agreement is the major breakthrough,” said the person involved in the negotiations. “Russia wants to put this issue to one side, in order to strengthen its relations in the region.” 

Kate Mallinson, partner at Prism political risk management, said Moscow’s agreement was “connected mainly to Russian strategy in the Middle East, not energy”, and reflected a changing geopolitical order. 

“Russia will have sought concessions behind the scenes from its former Soviet partners in return for its new willingness to come to the table,” Ms Mallinson said. She added that Azerbaijan’s gas needs, for domestic purposes as well as for filling a new pipeline to Europe, would have eased negotiations with Turkmenistan.

Marco Alverà, chief executive of SNAM, Europe’s largest natural gas utility, said the expected agreement over the Caspian was “a very interesting development”.

“Turkmenistan has a lot of gas, and it is a doable pipeline, a cheap pipeline. It is a great option for Europe and Azerbaijan,” Mr Alverà said. “We would certainly be interested but we need to wait and see for a final decision . . . It will be years before any real construction starts.” 

The convention will confirm that only the signatories are allowed a military presence on the sea. Essentially, this blocks any potential Nato presence. Russia is by far the most powerful naval power of the five and has used warships in the Caspian to launch missile attacks on Syria, around 600km away.

Moscow also wants to maintain close ties with Tehran, as part of its ambitions to become a major actor in the Middle East, given their shared support for Syria’s Bashar al-Assad and plans by Russian energy companies to invest in Iran’s oil and gas sector.

Follow Henry on Twitter at @HenryJFoy

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