The Legal Status of the Caspian Sea: Implications on Caspian Resources
Development and Transport
This week deputy foreign ministers of Iran,
Azerbaijan, Russia, Kazakhstan and Turkmenistan held their 47th meeting (the
so-called Working Group on Determining the Legal Status of the Caspian Sea). As
expected, still no concrete result.
The Caspian Sea, the largest landlocked body of
salty water in the world, is surrounded by five “Caspian States”:
Russia in the north; Iran in the south; Azerbaijan in the west, and Kazakhstan
and Turkmenistan in the east. Caspian Sea’s location at
the crossroads of Asia, Europe, and the Middle East has kept the region’s
strategic importance to international geopolitics.
Before the breakup of the Soviet Union in 1991,
Soviet-Iran treaties governed the exploitation of the Caspian Sea, but since
then a legislative black hole in governance and delimitation has been created.
All littoral states agree that a multilateral treaty is the ideal way to
resolve their dispute over the division
of the sea bottom and the delimitation of surface waters.
For more than two
decades the Caspian littoral states have been working on resolving the Caspian
problem in numerous meetings at various levels including the summit conferences
of the heads of states and governments. However, despite
over 40 ad hoc working group meetings at the level of deputy foreign ministers
and four Summits[i] of Caspian Sea Heads of
State, they have been unable to find a
solution that would satisfy all.[ii]
There are great
difficulties in resolving this issue since even international laws fail to
provide an adequate framework. All the treaties in the past relate to
navigation and, to a lesser extent, fishing rights, but not to seabed mining. Navigation
and fishing rights should not be confused with the right of using the mineral
resources. With mineral resources, the seabed is taken to consideration and not
the water layer. Failed
consensus due to diverse motives and interests paved the way for unilateral
actions, bilateral and trilateral agreements,[iii]
and consequent disputes.
The legal headache
of dividing up the sea continues to pose a serious obstacle to the development
of several fields and blocked many projects including trans-Caspian oil and gas
pipelines. After all, how the Caspian seabed is divided among the littoral
states will determine which hydrocarbon fields will fall into whose sector.
about the legal framework of the Caspian Sea should make distinction between
legal status and legal regime. While the legal status, whether a particular
body of water is a lake or a sea, relates to the sovereignty, the legal regime
relates to using rights and obligations. In the absence
of a definitive determination of such regime the Caspian Sea legal status will
continue to be discussed with no end.
disputes over the legal status and regime of the Caspian Sea be resolved by the
international laws? Although the relevance of international maritime laws to
the Caspian case is another disputed subject, the likelihood is somewhere
between very difficult and impossible. All littoral states have some legal
grounds for their arguments, but taking the matter to
the international legal tribunal would perhaps create more problems than
- First, the real headache is the division of natural
resources under the seabed and laying pipelines on it. But there has never
been an agreement accepted by all the littoral states on these issues in
- Second, which international law would be the reference?
Since the name of the Caspian is still not legally set as sea or lake, no
international law is applicable. Although, the weight of historical
evidence indicates the Caspian rather as an international lake, it is
neither a sea nor a lake. Therefore, neither the international law of the
sea nor the law of inland lakes applies directly to it.
- Third, even if we set the name today its legal
regime needs to be solved according to the international law which existed
at the time of the problem.
- Forth, how can an unsolved problem in the past
between two parties (Russia and Iran) be solved today with three
- Fifth, there is the problem of the definition of
these three new players. If we accept that 1921 and 1940 agreements are
not anymore valid because a fundamental change in circumstances took
place, then are Azerbaijan, Kazakhstan and Turkmenistan new successor
states or newly independent states (vis-à-vis the 1978 Vienna
Convention)? If the latter is accepted then how would it fit into the
Minsk Agreement of the Commonwealth of Independent States as well as the
1991 Alma-Ata Declaration? If they are recognised as new independent
states then how can they use arguments to fit into Customary International
- Sixth, the 1982 UN Convention on the Law of the Sea
(UNCLOS) provisions regarding enclosed or semi-enclosed seas are not
regarded as part of customary international law.
- Seventh, the Caspian Sea does not fall clearly
under the definition of enclosed, semi-enclosed, or open seas as set out
in Articles 1, 2, and 122 of UNCLOS. By the way, except for Russia none of
the Caspian littoral states ratified that Convention.
- Eight, application of UNCLOS to the Caspian Sea
would also be complicated by the sea’s dimensions.
- Ninth, the entire Iran-USSR land boundary on both
sides of the Caspian Sea was delimited by the agreements concluded in the
mid-1950s. The 1954 Iran-USSR Agreement defined an administrative
borderline (the so-called Astara-Hasankuli line[v])
between the USSR and Iran on the Western and Eastern side of the Sea.
However, no provisions were made to demarcate the Caspian Sea.
Interestingly, the aviation agreement concluded in 1964 between the two
countries upheld this imaginary line for determining the flight
information region as the marine border.
- Tenth, in the early 1970s, the Soviet Ministry for
Oil and Gas Industry divided the north of the Astara-Hasankuli line into
four regional sectors by utilizing the modified median line principle:
Russia, Azerbaijan, Kazakhstan and Turkmenistan. These Republics were also
granted the right to develop the fields in their own sectors. However,
this had a mere administrative value and could not be interpreted as
awarding the republics any proprietary rights, since according to the
Soviet constitutions exclusive ownership of all natural resources belonged
to the Union.
In fact, it
is because of many unique features that the Caspian Sea may need a special
framework that would define its legal status and regime. This, however, would depend entirely on
the unanimous agreement of all
The littoral states have their own interpretations and
views on the demarcation of the Caspian Sea. Kazakhstan and Azerbaijan were in
favour of the complete division (seabed or subsoil, water layer and air space)
by applying the UN Convention on the Law of the Sea of 1982 to the Caspian Sea.
Russia and Iran wanted the Caspian Sea to remain a shared sea (except for
10-mile coastal zones), in which all littoral states would be equally entitled
to make use of both its waters and its seabed. When its proposal for joint
control over the entire Caspian by all littoral states was not accepted, Iran
suggested dividing the Caspian Sea into five equal parts regardless of the
length of the coastal line of each state. This means, Iran has always defended
the legal status of a lake.
After offshore discoveries in its territorial waters
Russia has changed or modified its opinion and has started to defend the idea
of joint ownership in the undivided water layer and dividing the seabed (and
the oil and gas resources underneath) into national sectors through a modified
median line. This new proposal of Russia has been supported by Azerbaijan and
Kazakhstan. Turkmenistan, meanwhile, has been holding a swinging and variable stance.
Distribution of hydrocarbon reserves depending on legal status of the Caspian
Source: Eugene Petrov and
Nikolay Amelin (2015). Gaining a Regional Perspective Caspian. GEO ExPro. Vol.
10, No. 5.
In reality the issue is not only the partitioning of
the Sea itself but also partitioning the multiple interests involved. The
position of Azerbaijan, Kazakhstan and Turkmenistan has
been driven first by commercial then political considerations.
The positions of Iran and Russia indeed involve greater political and security
components than the commercial. This is because they
have much larger reserves outside the Caspian Sea. Particularly for Iran it is
more of a national security issue.
In the absence of a stable legal framework, a military
conflict over the disputed hydrocarbon fields and perhaps trans-Caspian
pipelines cannot be downplayed. As new fields are discovered in the future,
even the bilateral treaties can become a conflict issue. When the late Turkmen
President Saparmurat Niyazov said in 2002 that "the Caspian smells blood”
he was pointing out the possibility that territorial spats could one day get
out of hand. Let us hope the future will prove him wrong.
All Caspian littoral states have been involved in
ownership disputes over a small number of oil and gas fields. The most serious
ones are between Azerbaijan and Turkmen and between Azerbaijan and Iran. The
Russia-Kazakhstan dispute has been managed diplomatically when Presidents of
both countries signed a protocol in May 2002 to jointly develop the three
fields located on the median line between the two countries.
The first dispute between Azerbaijan and Turkmenistan
concerns three major offshore fields – Azeri, Chirag and Guneshli.[vi]
On 20 September 1994, Azerbaijan and a consortium of foreign oil companies
signed the so-called “Contract of the Century” to develop these fields.
Turkmenistan, however, claimed that Azeri and (partly) Chirag fields are indeed
in Turkmen territorial waters. Turkmenistan even suggested to agree on a
long-term leasing arrangement since Azerbaijan has already started work on
This dispute still continues but the real dispute between Azerbaijan and
Turkmenistan is indeed over another field - the Kapaz (known as Serdar in
When the State Oil Company of the Azerbaijan Republic
signed an agreement in 1997 with Lukoil and Rosneft for joint exploration and
development of the Kapaz oil field,[viii]
Turkmenistan strongly reacted and declared that the field belongs to
Turkmenistan. The same year, the late Azeri President Heydar Aliyev proposed to
develop the field together with Turkmenistan but his offer was rejected.
relations between the two countries deteriorated so badly that the two
presidents did not meet for over a decade. In 2007, the new Turkmen President
Berdymukhamedov invited Chevron executives to discuss developing the field. In
2009 Azerbaijan repeated its offer to Turkmenistan to develop the field
together but received no reply. Instead, in 2009 Turkmen President announced
that his government would be taking Azerbaijan to the International Court of
Arbitration to resolve this dispute.
Figure 1: The Uncertain Status of the Caspian Sea
Another field, Alov (called Alborz in Iran)[ix]
is a dispute subject between Azerbaijan and Iran. In July 1998, a Production
Sharing Agreement signed with Azerbaijan and a consortium of oil companies gave
permission to the consortium to conduct seismic operations on Alov.[x]
Iran strongly opposed the decision and asked Azerbaijan to stop activities
until the establishment of a legal regime for the Caspian. When this call was
ignored, National Iranian Oil Company formed the KEPCO (Khazar Exploration and
Production Company) consortium with Shell, Lasmo plc and Weba to conduct
similar studies in the same area. Azerbaijan protested that some of the studies
were conducted within its territorial borders. The tone between the two states
increased until an Iranian warship and two military aircraft threatened two
Azeri vessels exploring the field on behalf of BP on 23 July 2001. As a result,
BP suspended drilling in the area and the development of the field was frozen.
Meanwhile Iran has started its own exploration plans for
Alborz. Reportedly, Iran has resumed in November 2015 talks with Brazil’s
Petrobras. In 2010 Khazar Exploration & Production Company had reached an
agreement with Petrobras on developing two exploration blocks in deep-water
Caspian, but international sanctions forced the Brazilian major to leave Iran.
On 23 February 2016, following the visit of
Azerbaijan’s president Ilham Aliev to Tehran, it was announced that Iran and
Azerbaijan have agreed in principle to develop jointly this disputed field
without giving any details.[xi]
There have been talks in Western political and
economic circles about trans-Caspian energy pipelines since the mid 1990’s -
one transporting Kazakh/Turkmen gas and the other transporting Kazakh oil to
Europe via the Caucasus and Turkey.
In August 2007 the
US Agency for International Development awarded a $1.7 million grant to the
SOCAR to conduct a feasibility study on the construction of trans-Caspian oil
and natural gas pipelines. Also, during a meeting between Presidents Clinton
and Niyazov on 23 April 1998 the US Trade and Development Agency awarded a
$750,000 grant to conduct a feasibility study by Enron for a natural gas
pipeline from Turkmenistan to Azerbaijan. But nothing concrete has happened until
agendas of players inside and outside the region have particularly been
reflected in a series of pipeline plans. Pipelines can, in a way, be a tool to
build relationships between countries. As is case in the Caspian and Black Sea
regions, however, pipelines can become to symbolise political dominance over
the countries rather than being just commercial outlets for hydrocarbons. When
seen from a geopolitics perspective, pipelines may have a stabilising effect
and can prevent wars, but they can the reason for instability, conflict and
even war. To which category would a trans-Caspian pipeline fall in? This is
hard to guess.
A stable and
predictable legal environment that preserves corporate confidence in the legal
validity of such projects is vital for the realisation of these pipeline
projects. Moreover, several of the Caspian littoral states are opposed to
trans-Caspian pipelines on environmental grounds, fearing that such pipelines
could potentially cause an ecological disaster in the region.
The idea of constructing a trans-Caspian oil pipeline
goes back to the second half of the 1990s. Clinton administration's 1998
initiative for an East-West trans-Caspian energy transport corridor was
foreseeing an Aktau-Baku-Tbilisi-Ceyhan oil export route stretching from
Kazakhstan to the eastern Mediterranean.
On 16 June 2006 leaders of Azerbaijan and Turkmenistan
signed a framework agreement to create a trans-Caspian project for sending
Kazakh oil via the BTC. In April 2007 a memorandum was signed to carry oil
extracted from Kashagan and Tengiz fields to Sengachal terminal near Baku
through the 700 km undersea pipeline between Aktau and Baku. But after so much
talk and ink the trans-Caspian oil pipeline project has not been realised due
to several reasons, including political and commercial.
So far three options have been considered
to bring Turkmen gas to the Western markets; by pipeline, via LNG or via CNG.
However, the strong Russian opposition to the concept of laying a physical pipe
on the Caspian seabed based on environmental and legal grounds has made the
pipeline option rather problematic. And the other two options are considered
too costly when the transport volume and the distance travelled are considered.
In the early 1990s, Turkish and
Turkmen leaders suggested the concept of a trans-Caspian Gas Pipeline Project, which would transit Turkmen gas westward
to Baku across the Caspian Sea for transhipment further west through Georgia
and Turkey. Supported by the US, this pipeline would be
linked with the Baku-Tbilisi-Erzurum pipeline and through it to the Nabucco
Pipeline. Gas from the Tengiz field in Kazakhstan would also link to the line
at Aktau in Kazakhstan, as suggested by the US in 1997. USA and Turkmenistan
signed a feasibility study agreement in 1998. Turkey
and USA agreed to support the project.
In 1999, Turkey and Turkmenistan
signed a 30-year agreement to export gas from Turkmenistan to Turkey. In
addition, the same year Azerbaijan, Georgia, Turkey and Turkmenistan signed an
Intergovernmental Declaration on laying the legal framework of the construction of
the trans-Caspian pipeline.
Unfortunately, the parties failed
to reach a common agreement and negotiations collapsed in 2000 – due to
payment and price issues, the lack of a legal framework governing the use of
the Caspian Sea, and capacity allocation among Turkmenistan and Azerbaijan.
Oppositions from Russia and Iran to such a project had also impacted to the
shelving of the project.
However, after the Russia-Ukraine gas disputes in January
2006 the project has started to reappear. Turkmenistan
signed a memorandum of understanding in April 2008 with the EU to supply gas starting in 2009, presumably through a trans-Caspian
pipeline. In December 2008, two Nabucco gas pipeline project partners, OMV and
RWE established the Caspian Energy Company to assess options for the building
of a trans-Caspian pipeline and to look for partners for a project which would
build and operate such a pipeline.
When Turkmenistan stressed in a statement
in April 2009 (following the Russia-Turkmenistan gas crisis) that it wishes to
see “the shortest and most convenient routes” to market developed, hopes were
raised again for revitalizing the trans-Caspian gas pipeline.
In addition, several favourable
developments helped building this feeling: Turkmen gas sales to Russia ceased,
sales to Iran reduced, operator of Turkmenistan's Block One fields Petronas
took a 15.5% stake in Shah Deniz, high level European Commission officials paid
frequent visits to Turkmenistan, and Turkmenistan involved in TAPI pipeline.
The latter is significant because it meant the end of Turkmenistan’s long
supported policy of not been involved in pipeline projects.
Besides, Turkmenistan and Azerbaijan have
demonstrated interests to deliver their gas to Southern Gas Corridor. In May
2015, the Ashgabat Declaration[xii] brought Turkey, Turkmenistan,
Azerbaijan and the EU together in a statement that recognised the importance of
equal and mutually beneficial cooperation in ensuring reliable natural gas
supplies from Turkmenistan to Europe but without any serious talks, let alone
taking any tangible steps.
status and regime of the Caspian Sea was ruled by the Soviet-Iran
Treaties of 1921 and 1940 until the breakup of the Soviet Union. Since then it
has become a legal uncertainty and a headache, even if the past Treaties are still
binding for all Caspian states (including the newly independent states).
As far as
Caspian Sea’s legal status is concerned, t
he past Treaties do not provide any specific answer. They only mention
that it is a Soviet-Iranian sea. Also, no marine
boundaries or delimitation lines in the Caspian Sea between Soviet and Iranian
parts are provided in any of the past Treaties.
As for its legal regime, the past
treaties relate solely to regulation of navigation and fishing but do not
address the issue of the seabed sovereignty or delimitation of seabed resources.
issue boils down to the question of how to demarcate or share the Sea among the
littoral states by taking into account of the past treaties and current
the littoral states have been discussing for two decades how the problems
related to the demarcation (who gets what and how), the issue has not yet been
settled. After 43 "going nowhere" sessions of the special working
group and a handful of Summits the positions of the countries are very
well-known. This situation has blocked many projects including trans-Caspian
pipelines and many oil and gas fields situated in areas contested by
When international oil companies entered the region in
the early 1990s, their main worry was commercial as well as political risks and
challenges they would be faced with. In less than a decade managing these risks
has turned out to be only a small part of a risk chain, which is tied to the
uncertain legal framework of the Caspian Sea.
It is still not clear whether
trans-Caspian pipelines will ever be built. If at least one of them is built,
USA and the EU will be likely to support the construction as it will boost
Western influence and hence may change the balance of power in the region. That
is why the Western powers speak out in favour of non-Russia and non-Iranian
export outlet for Caspian hydrocarbon resources.
While the big powers such as
USA/EU, Russia and China will shape the region’s geopolitical future, the
regional players including Turkey and Iran will try to advance their interests.
Since the players in the region have conflicting interests and priorities, the
trans-Caspian pipelines are likely to ignite conflicts of interests and a
geopolitical competition between the different players.
Political disagreements among the
players are inevitable in the region and will surface once their interests and
priorities clash. Unless military security in the Caspian basin is ensured,
Iran and Russia will delay by any means the process of the resolution of the
legal framework. Iran, on the other hand, is likely to delay any agreement on
the Caspian Sea legal framework until its relations
with the US is put on track. With sanctions being lifted on Iran, it is not yet
clear what influence that might have on Tehran's position, though it is likely
that Iran, which now has become a competitor, will continue to oppose the
construction of any trans-Caspian
Multidimensional aspects of a legal
framework in terms of theoretical and practical basis require the political
will of the key players for a consensus. As Vladimir Putin stated in 2002, the
future of the Caspian – whether it is a sea of cooperation or a clash of
interests – will depend on how the littoral states untangle the tight Caspian
knot of problems. Although some argue that a five-way treaty currently seems
highly unlikely, there is still hope.
general consensus so far is that the seabed (and the oil and gas resources
underneath) should be divided into national sectors and the sea’s surface and
water layer should be shared. But how this division may be accomplished still
remains a challenge.