Caspian agreement: Many issues still to be settled Legal Issues
On 12 August 2018, the five Caspian littoral states, after two decades of negotiations, finally agreed on the status of the region when they signed the ‘Convention on the Legal Status of the Caspian Sea’ document in the port of Aktau in Kazakhstan. While the document mentions the term ‘Caspian Sea’, Russian Foreign Minister Sergei Lavrov clearly stated that it is a special body of water to which the 1982 UN Convention on the Laws of the Seas (UNCLOS) do not apply. While Russian President Vladimir Putin termed the signing of the convention a “historic success”, Iranian President Hassan Rouhani stated that more talks were needed on the Caspian borders. The above statement gives an insight into the outcome of the agreement and its relative benefits to the respective member-states.
The Caspian Sea is an extremely important, landlocked water-body not only in terms of its strategic location as a connecting link between the energy rich Central Asia and Eastern Europe but also in terms of the energy deposits it is estimated to contain. Various estimates state that it holds 50 billion barrels of oil and nearly nine trillion cubic meters of gas in proven or probable reserves. At current market prices, that is several trillion dollars' worth of energy resources. It is also the home to the sturgeon fish – a source for the expensive delicacy caviar. While various bilateral agreements between the Soviet Union and Iran regulated the use of the water-body, the disintegration of the Soviet Union in 1991 added three new countries to the Caspian shores, Kazakhstan, Azerbaijan and Turkmenistan, who claimed their share of the cake. This meant that the agreement on the use of the Caspian Sea had to be re-negotiated to address their concerns and rights.
Over the period of years, based on mutual understanding, Russia, Kazakhstan and Azerbaijan, the three maritime neighbours, resolved their issues related to the delimitation of the bottom of the northern part of the Caspian Sea by signing various bilateral agreements. By 2003, the agreement on the junction point of the delimitation lines of the Caspian Sea bottom's contiguous sectors between Kazakhstan, Azerbaijan and Russia was also concluded. Iran had criticised these agreements claiming that any agreements regarding the water-body had to involve the opinion of all the littoral states. Kazakhstan also concluded an agreement with its other maritime neighbour, Turkmenistan, in 2014 over the demarcation of the maritime boundary between the two. All these agreements thus had three important and definitive outcomes;
- Maritime boundary issues in the northern part of the Caspian were already resolved long before the 2018 Summit.
- The agreements resolved all issues related to the exploitation of oil and gas deposits within their sectors for Kazakhstan and Russia.
- They provided a boost for the respective countries to begin the exploitation of the oil and gas deposits that were now within their sovereign limits.
However, the southern part of the Caspian, shared by Azerbaijan, Iran and Turkmenista,n was a different scenario altogether. The situation was tense to a level wherein, in 2001, Iranian gunboats and aircraft threatened Azerbaijani survey ships working on the Alov-Sharg-Araz structure, contested by Iran. Thus the disputes among the three south Caspian littoral states continue to persist over various hydrocarbon fields, precisely over the demarcation of the seabed and the subsoil resources.
Hence any agreement among the five littoral states on the Caspian Sea has to resolve a few things before they could begin the exploitation of the region’s energy deposits.
- Demarcation of maritime boundaries of Iran, Azerbaijan and Turkmenistan over which they would have sovereign rights on the surface, sea-bed, sub-soil, airspace, and
- Exploitation of energy deposits outside the sovereign maritime boundaries of any littoral state.
A close look at the document reveals that the special status accorded to the Caspian is a compromise between those who propagated it to be designated as ‘Sea’ (as defined by the 1982 UNCLOS) and those who proposed it to be designated as a ‘lake’. The agreement, with respect to regulations, differentiates between the water surface and the sea-bed. With regard to the resolution of the issues mentioned above, Articles 6, 7 and 8 are of significance and hence need to be understood together. They state that the sovereignty of a state shall extend to a distance of 15 nautical miles (nm) (termed as ‘territorial waters’) giving it exclusive rights over the surface, seabed, subsoil and the airspace over it. However Article 7(3) states that the delimitation of the territorial waters between the states with adjacent coasts shall be affected by agreement between those states. In essence, the demarcation of territorial waters itself between any two member-states with adjacent coasts is supposed to be a result of an agreement between only those two concerned states. The convention thus leaves the two states to iron out their differences.
Through Article 8(1), the delimitation of the seabed and the subsoil resources among the concerned states with adjacent and opposite coasts is also left to an agreement between the concerned member-states.
The document not only prevents the presence of armed forces of non-Caspian states in the Caspian Sea, but also prevents a Caspian littoral state from leasing its territory to any other state to commit aggression.
The most important outcome of the convention, in a nutshell, is ‘Caspian for the Caspians’. All the aspects related to the exploitation of the water-body, either as a transit medium or from the perspective of exploiting its energy reserves, are solely under the purview of the five littoral states. The joint use of the surface, seabed and subsoil resources that falls outside the territorial waters of each member states is a substantial agreement that has wider implications for the region as well as for those interested to invest in the resource-rich region. Each littoral state holds the veto over exploitation of any energy reserve in the common space areas.
The agreement also leaves it to the concerned member states to resolve all their issues bilaterally. With that perspective, the issues between Iran and Azerbaijan over the Araz-Alov-Sharg field and the Azerbaijan and Turkmenistan over the Serdar/Kapaz field remain unresolved, maintaining the status quo. Given the importance of these reserves for their respective struggling economies, each would bargain to gain the most from the disputed fields, thus prolonging any agreement over their exploitation. Therefore, issues at the southern end of the Caspian will continue to persist for a foreseeable future.
The convention also does not alter any situation for the northern end of the Caspian. It in fact reinforces the existing agreements among Russia, Azerbaijan and Kazakhstan and the agreement between Kazakhstan and Turkmenistan. The convention thus, through a regional mechanism, not only legalises their agreed maritime boundaries but also their rights to continue exploitation of the energy deposits within their respective sectors.
For Turkmenistan, however, two issues still remain unresolved. While maritime boundary and seabed and subsoil demarcation with Iran still remains to be addressed, concerns persist over the construction of the Trans-Caspian Pipeline (TCP) connecting the Turkmenbashi port of Turkmenistan to the Baku port in Azerbaijan. The proposed subsea pipeline will transport gas from Turkmenistan and Kazakhstan to Europe bypassing Russia and Iran. It is an extremely important project for Turkmenistan from the perspective of diversifying its energy exports, which currently are heavily dependent on China. Turkmenistan supplies nearly 40 percent of China’s total gas imports via a Central Asia-China pipeline and shipments by tankers of super-chilled liquefied natural gas. With the TAPI project on the south still in its infant phase and the cessation of gas imports by Gazprom in the north from 2016, Turkmenistan hopes to diversify its energy exports through the Trans-Caspian pipeline by exporting gas to Europe. However, Russia and Iran have raised objections to the project citing environmental concerns and the pending status of the Caspian. While the recent convention through Article 14(3) allows the member-states to lay submarine cables and pipelines on the bed of the Caspian Sea, as determined by their mutual or bilateral agreements, Article 14(2) states that it must comply with environmental standards and requirements embodied in the international agreements, including the Framework Convention for the Protection of the Marine Environment of the Caspian Sea (Tehran Convention 2003). The Tehran Convention makes protection and conservation of the marine environment of the Caspian a collective responsibility. It means that any of the five member-states can thus raise environmental concerns over the TCP or any other project. Hence any expectations of a complete and mutually agreeable resolution of the issue are misconceived and premature.
For Iran too, the convention does not resolve its maritime disputes with its neighbours Azerbaijan and Turkmenistan. However, by raising environmental concerns over the project through the Article 14(2) of the Convention, it still retains its advantage over the status of the TCP project. Iran is hence likely to exploit this leverage to negotiate with its neighbours with respect to the disputed energy deposits, in order to get a better deal from them.
The Convention on the Legal Status of the Caspian Sea is a symbolic success for the Caspian region, which took decades of deliberations and intense negotiations. It is indeed a positive step, reflecting a degree of congruence of interests among the Caspian littoral states. However, several issues still need to be addressed, some of which have to be dealt with bilaterally. An important outcome, rather a strategic one, is that regional players have retained control over all aspects of the use of the Caspian. This is of immense significance for the European and American investors who have been waiting to invest in the regional energy projects, specifically in Azerbaijan and Turkmenistan. There is still a long way before the capital starts rolling in.