Caucasian Regional Studies
The International Association For Caucasian Regional Studies
Law Politics Sociology Economics Modern History International Relations
Caucasian Regional Studies, Vol. 3,
Issue 1, 1998
THE CASPIAN SEA STATUS DISPUTE: AZERBAIJANI PERSPECTIVES
Michael P. Croissant, Cynthia M. Croissant*
The largely untapped energy reserves of the Caspian Sea were
opened to significant international investment following the breakup of the Soviet Union.
Using modern three-dimensional survey techniques, experts now estimate the Caspian to
contain 15.6 billion barrels of proven recoverable oil reserves and a further 163 billion
barrels of possible reserves. These vast oil deposits - twice as large as believed
previously - represent the biggest oil find since the opening of the North Sea in the
1970s.(1) With global oil demand expected to rise at the rate of one million barrels per
day (bpd) per year throughout the rest of the decade,(2) the Caspian has seized the
attention of the industrialized countries and offered the potential for huge hard currency
revenues for the littoral states.
In the midst of the heightened post-Cold War interest in the energy resources of the
Caspian, a dispute has arisen over the legal status of the Caspian Sea. Russia, on the one
hand, contends that the Caspian is actually an inland lake and thus subject to joint
control by all the littoral states. Azerbaijan, on the other hand, argues that the Caspian
is a sea that should be divided into national sectors over which each state has exclusive
sovereignty. Although Russia has attempted to frame its position on the Caspian in terms
of its supposed concern for the Sea's environmental health, for Moscow the disagreement
over the Caspian's status is a question of maintaining its centuries-long influence in the
Transcaucasus and Central Asia. For Azerbaijan, the status dispute is a question of
upholding and strengthening its sovereignty and independence after centuries of foreign
Background: The Geopolitics of The Caspian Sea
The Caspian Sea is the world's largest inland body
of water, covering 370,000 square kilometers - an area roughly the size of Japan.
Geographically, the basin is typically divided into the North, Middle, and South Caspian.
The northern portion of the Sea has low shorelines and is very shallow in general, being
less than eight metres deep. The North Caspian covers 61,408 square kilometers in area.
The Middle Caspian, on the other hand, is 85,200 square kilometers in area with a depth of
95-130 meters at its shallowest. The western shore of the Middle Caspian runs into the
foothills of the Great Caucasus Mountains after hitting a narrow marine plain.
The South Caspian, a depression covering 92,112 square kilometers, contains the
Caspian's greatest depths as well as its largest and most productive oil and natural gas
fields. The most promising oil-producing area in the South Caspian is along a narrow
structural zone extending across the Caspian from Azerbaijan's Apsheron Peninsula to
western Turkmenistan's Peri-Balkhan region.(3) Although the shallower waters of the
southwestern side are more extensively explored than those of the eastern side, the entire
area has much potential for further oil field discoveries.(4)
While the geography of the Caspian Sea has remained constant for millennia, the
region's geopolitics - that is, the interplay between geography and politics in the
Caspian Basin - have changed significantly in the past five years. Whereas during the
Soviet period the Sea was bordered by the U.S.S.R. and Iran, the post-Soviet Caspian is
surrounded by five countries - Russia, Iran, and the newly independent republics of
Azerbaijan, Kazakhstan, and Turkmenistan. Faced with the immense challenges of
independence, the latter republics have been forced for the first time to formulate
economic and foreign policies and promote internal stability. However, the Caspian Basin's
oil wealth and strategic location at the crossroads of Europe, Asia, and the Middle East
have made the region of great interest to Russia, Iran, and Turkey.
The breakup of the Soviet Union prompted a renewed struggle for influence beyond the
shores of the Caspian in Central Asia and the Transcaucasus among the regions' three
historical rivals-- Russia, Iran, and Turkey. Sharing common bonds of ethnicity and
language with the Muslim republics of Central Asia and Azerbaijan, Turkey has moved to
assert itself not only as the potential leader of a new Turkic bloc at the heart of
Eurasia, but also as a bridge between the republics and the West. Iran, on the other hand,
has sought to use cultural commonalties and trading opportunities as vehicles for
increased political and economic leverage in the region to the detriment of Turkey and its
Western allies. Russia, however, has been determined to maintain a sphere of influence
over the republics along its southern flank to the exclusion of all other international
After a brief period in which Moscow made relations with the West
its top foreign policy priority, Russia came to view the states of the former Soviet Union
as its own exclusive sphere of influence by late 1992. By virtue of its status as a
superpower and in the light of its historical role in the area, Moscow perceives itself as
the sole guarantor of peace and stability in its so-called "Near Abroad". As a
strategic land bridge to the Middle East, Russia's southern flank is viewed as a
particularly integral part of the post-Soviet space. The dispute over the status of the
Caspian Sea has taken place against this backdrop of a Russia intent on retaining a sphere
of influence over its southern regions.
The Legal Dispute
Beginning in the fall of 1994, Russia put forth
the argument that, as an enclosed body of water with no outlet to the ocean, the Caspian
is really an inland lake and should be subject to international rules regarding lakes.
Under these rules, no littoral country could claim an exclusive zone within the Caspian,
and all decisions regarding development of the Sea's resources would have to be agreed
upon by all five littoral countries. This would effectively stop implementation of oil
contracts signed by Azerbaijan, Kazakhstan, and Turkmenistan and nullify their ability to
make independent decisions on the exploitation of their Caspian energy reserves.
On the other side of the legal standoff is Azerbaijan, which argues adamantly that the
Caspian is a sea and thus should be divided into national sectors within which individual
countries have exclusive sovereignty (see Figure 1). Azerbaijan has gone as far as to
incorporate its claim into its recently approved constitution. Under Article 2 of the
Economic Independence Law and Article 10 of the Property Law of the Constitution,
"Land and its mineral resources; internal and territorial waters; the continental
shelf; flora; and the air basin within the limits of the territory of Azerbaijan are the
Republic's exclusive property."(5) Kazakhstan has expressed support for Azerbaijan's
argument, but Iran and, to a lesser extent, Turkmenistan6 have supported the Russian
Figure1: The Caspian Sea And Sectoral Divisions
International Treaty Law
Both sides in the debate
over the Caspian's status claim a legal foundation for their argument and insist that the
rest of the world adopt their position. Azerbaijan has claimed that the 1982 United
Nations Convention on the Law of the Sea should be applied to the Caspian. Given the Law
of the Sea provisions, a compelling case can be made for the Azeri argument that the
Caspian falls under the jurisdiction of the Law of the Sea and can be divided accordingly.
Some relevant provisions of the Convention are:
States are entitled to claim up to 12 nautical miles (nm) of
sovereign territorial sea, between 200 and 350 nm of continental shelf depending on the
configuration of the continental margin, and a 200 nm Exclusive Economic Zone (EEZ).
Where claims to continental shelf and EEZ overlap (as in the
Caspian), it requires that: "The delimitation of the continental shelf. . . shall be
effected by agreement on the basis of international law. . . in order to achieve an
equitable solution" (emphasis added).
Part IX of the Convention deals with "enclosed or
semi-enclosed seas". (Therefore, being landlocked does not disqualify the Caspian
from being a sea.)
Article 122 further defines an enclosed (or semi-enclosed)
sea as : "A gulf, basin or sea surrounded by two or more states and connected to
another sea or the ocean by a narrow outlet or consisting entirely or primarily of the
territorial seas and exclusive economic zones of two or more coastal states".(7)
According to Clive Schofield and Martin Pratt, "while the Caspian does not meet the
first criterion, it is difficult to see why it cannot qualify under the second".(8)
Despite the apparent validity of Baku's claim, Russia argues that historic treaties
with Persia and later Iran imply that the sea can not be divided. The treaties and their
relevant provisions are:
The Treaty of Turkmanchai (10 February 1828) established
that the land boundary between Russia and Persia would end at the Caspian Sea, thus
implying that the Sea was not subject to delimitation at the time.
The Treaty of Friendship (26 February 1921) established
freedom of navigation for all Soviet and Persian ships on the Caspian, but said little of
the nature of sovereign rights over the Sea.
The Treaty of 27 August 1935 reiterated freedom of
navigation on the Caspian and established a 10-mile fishing zone, but no formal boundary
The Treaty of 25 March 1940 reiterated the freedom of
navigation and fishing rights of the 1935 treaty.(9)
Since these treaties were never formally rescinded, Russia insists that they are still
Although Azerbaijan, Kazakhstan, and Turkmenistan did not sign the treaties, the Alma
Ata Declaration of December 1991, which established the Commonwealth of Independent
States, included a provision recognizing the validity of all treaties and agreements
signed by the U.S.S.R. and was signed by all of the former Soviet republics. There is,
therefore, a case for keeping the treaties between Russia and Iran in force. Because none
of the treaties contained any provision for formal delimitation of the Caspian, Russia
claims legal justification of its argument for a joint sovereignty settlement.
Based on this analysis of the international treaties pertaining to the current dispute
over the Caspian Sea's status, it is clear that both sides have legal grounds for their
argument. Importantly, there are also a handful of historical precedents that support both
joint sovereignty and sectoral division of inland bodies of water.
Precedents for joint sovereignty
In international relations, a
regime of shared sovereignty is often referred to as a condominium. Thus, Russia argues
for a condominium of equal sharing of an indivisible Caspian Sea. There is only one major
precedent in international law for joint control over an enclosed body of water: the
sharing of the Gulf of Fonseca among El Salvador, Honduras, and Nicaragua. Although
condominia are most often created by express agreement between the concerned parties, in
the case of the Gulf of Fonseca condominium was the result of a decision of the
International Court of Justice. The reason for this was that the Gulf had formerly
belonged to a single state-- Spain-- and had long been treated as a unified body of water.
The court saw no advantage in disrupting this unity following the emergence of successor
states.(11) This precedent is very similar to the situation in the Caspian with the
emergence of successor states to the former Soviet Union, but it differs in that the
entire Caspian did not belong to a single state.
Precedents for sectoral division
According to Azerbaijan, each country has
exclusive sovereignty over a territorial sector of the Caspian established by dividing the
Sea evenly among the five littoral states. Although Baku rejects Russia's claim that the
Caspian is to be treated as an inland lake, there are many precedents for dividing lakes
between two or more states. Some well known examples are Lake Victoria (among Kenya,
Tanzania, and Uganda), Lake Malawi (between Malawi and Mozambique), the Great Lakes of
North America (between Canada and the United States), Lake Titicaca (between Bolivia and
Peru) and Lake Geneva (between France and Switzerland). There are no legal obstructions to
the Caspian being divided in such a manner.(12)
Azerbaijan also rejects the argument that the treaties between Russia and Iran prohibit
the division of the sea by claiming that the sea has already been divided by Russia
itself. This point is made by several commentators who claim the following:
As early as the 1950s, Soviet authorities divided the Caspian Sea into sectors. This
approach was apparent in the activities of both the Soviet central government and many
separate ministries that were involved with Caspian activities, including energy (oil and
gas), economics (fishing), and transportation. Russia and Iran divided the Caspian sea
into zones in a like manner. . . After the breakup of the Soviet Union, the leaders of the
newly formed states signed an agreement recognizing the division of the Caspian Sea into
national sectors that were formed during the Soviet period. These new independent national
sectors, then, correspond to the old republic sectors that existed in the U.S.S.R.(13)
In invoking the 1921 and 1940 treaties in its polemic with Azerbaijan over the status
of the Caspian, the Russian Foreign Ministry is, for some reason, overlooking another
document. In early 1992, after the U.S.S.R.'s collapse, the Ministry of the Petroleum
Industry issued a directive on dividing oil fields in the Caspian among the newly formed
Moscow also divided the Caspian Sea floor into separate national energy sectors, and
Russia's Ministry of Energy signed the appropriate agreements.(15)
Based on these claims, the current Russian position against sectoral division of the
Caspian ignores precedents set by Moscow both before and after the breakup of the Soviet
Although there are sufficient legal pretexts and precedents for carrying on the dispute
over the Caspian Sea's status, framing the current debate in terms of whether the Sea can
be divided based on its status is misleading. The question of whether the Caspian is a sea
or a lake is actually a front for the real question: Can the republics of the former
Soviet Union make their own decisions independent of Russia? It is in probing this
question that one uncovers the implications for Azerbaijan of the ongoing clash over the
Implications for Azerbaijan
Of the five littoral states,
Azerbaijan has been the most attractive to foreign companies seeking to tap into the
Caspian's vast energy reserves. Azerbaijan's sector of the Caspian is estimated to contain
25 of the 32 known oil and gas fields of the Sea as well as 145 of the 386 prospectives
structures,(16) putting Azeri oil reserves at 3.(6) billion proven and 27 billion possible
barrels.(17) Moreover, Baku's offshore fields lie beneath relatively shallow water, thus
allowing easier and cheaper oil extraction than is possible elsewhere in the Caspian.(18)
Azerbaijan inherited a dilapidated oil industry and an almost nonexistent
infrastructure from its seven decades as a Soviet republic.(19) Although Azerbaijan was
the main oil producing region in the Soviet Union through the 1940s, Moscow concentrated
on its Siberian fields beginning in the 1960s and let the Caucasian oil industry fall into
disrepair. As Figure 2 and Table 1 indicate, respectively, Azeri oil production and the
Azeri share of total Soviet production have thus been on the decline since the 1960s.
Figure 2: Azerbaijani Oil Production (Million
Tons per Year)
|Azeri Percentage of Total Soviet Oil Production
Because of the neglect of the Azeri oil industry by the central
authorities in Mosocow in the later years of the Soviet Union, Azerbaijan became an
investment opportunity waiting for the political situation to change. In the years
immediately following independence, Azerbaijan capitalized on foreign interest in its
Caspian resources by attracting international investment.
In September 1994, the government of Azerbaijan signed a major US$8 billion contract
with a consortium of oil companies from the United States, the United Kingdom, Norway,
Turkey, Russia, Saudi Arabia, and Japan. The agreement, called the "Deal of the
Century" by many commentators, provides for the exploitation of an estimated four
billion barrels of oil in the offshore Guneshli, Azeri, and Chirag fields on the Caspian
shelf near Baku. Beginning in late 1997, these three fields are expected to produce 32
million tons of so-called "early oil" over the next seven years (Early oil is
the preliminary oil produced before the total infrastructure is in place and the fields
are producing at maximum capacity in 2005). Total projected profits from the venture,
which will produce an estimated 650 million metric tons of crude over a 30-year period,
are US$100 billion or more at current prices.
Azerbaijan has followed up its September 1994 oil deal by concluding, at the time of
writing, nine additional contracts with international oil companies. The agreements
together amount to nearly US$30 billion in investment in a handful of fields on
Azerbaijan's Caspian shelf.(20) Negotiations are also underway on a host of agreements
covering other offshore Azeri fields.
Azerbaijan plans to use the recent surge of international investment to reverse its
steady decline in oil output since independence. As Table 2 indicates, production from
newly discovered and renovated fields is expected to raise oil output by 65 percent from
its 1995-level by the year 2000. By 2010 Baku hopes to produce 900,000 bpd, a massive 257
percent increase from its pre-independence level.
|Oil Output in Azerbaijan Through the Year 2010
||2000 - 2010
Azerbaijan has made development of the oil industry the cornerstone of its national
economic policy and the focus of hopes to reverse its steady economic decline since
independence. It is estimated that the September 1994 oil contract alone will bring a
profit of more than US$80 billion for Baku,(21) and many of the contracts have included a
signing bonus amounting to hundreds of millions of dollars. In addition, scores of new
jobs will be created in the country; it is predicted that eventually 90 percent of the
professional staff and 95 percent of the nonprofessional staff working on oil projects
will be Azerbaijanis.(22) There has also been a surge in construction and renovation in
Azerbaijan as foreign investors have begun to build infrastructure including pipelines,
roads, railroads, office buildings, and hotels. Services necessary for business like a
reliable phone service and the Internet are also becoming available.
In order for Azerbaijan to realize fully the benefits of its oil development potential,
it is essential that Baku retain sovereignty over its own affairs and its oil fields in
particular. During decades of rule from Moscow, Azerbaijan saw little benefit from the oil
that was taken from its offshore fields as the majority of its oil revenues were sent to
Moscow. Baku is now relying on future offshore production to boost its economy. About
eighty percent of current Azeri production comes from offshore fields,(23) and of all the
contracts signed thus far or under negotiation with international oil companies, only the
Kursangli and Karabagli structures are onshore (see Table 3). If Azerbaijan is denied sole
ownership of its own sector of the Caspian, it will thus lose almost all international
investment and most of its oil production.
Oil Fields Under Contract or Negotiation in Azerbaijan
Oil, Million Metric Tons
|D-3, D-9, D-39
Russian success in denying sectoral division of the Caspian would also
impact negatively on Azerbaijan's political independence. Joint dominion over the Sea
would empower the dominant regional actor, Russia, with the greatest voice in the
exploitation of the Sea's energy reserves and undercut the independent decision-making
ability of Azerbaijan and the other littoral states. Unable to develop its resources and
thus to chart its own path to economic and political independence, Baku would again become
a virtual client of Moscow.
Realizing what is at stake for its future as an independent state, Azerbaijan has
proceeded with its oil development scheme despite Russia's objections. At the same time,
Baku has also moved to undermine the Russian position on the need for joint control.
Moscow's approach to the status dispute is founded on the claim that the Caspian Sea is a
fragile, unique ecosystem and supports a fishing industry that needs to be protected from
the harmful effects of "intensive unilateral development of natural
resources".(24) Russian officials have thus argued that joint control will better
protect the ecological health of the Caspian and environs.
Russia's newfound desire to protect the environment is ironic considering that the
Caspian Sea is now, according to Azeri scientists, the "most ecologically devastated
area in the world" because of severe air and water pollution incurred during Soviet
rule.(25) While struggling to reverse the environmental damage suffered under Moscow's
watch, Azerbaijan is tightening pollution standards for oil companies at work on the
seabed. Proposed standards regulating the release of oil waste products near shore will
correspond to those in force at British oil deposits in the North Sea,(26) and Baku has
stipulated frequent meetings with oil company officials to discuss the environmental
impact of offshore development.(27) Thus, while attempting to protect its own sector of
the Caspian from further environmental damage, Azerbaijan is also striking preemptively at
the heart of Moscow's argument for a joint sovereignty settlement.
Recent Developments in The Status Dispute
Although Russian opposition to
any sectoral division of the Caspian held strong for more than two years, Moscow's
position began to erode in 1996 due to the apparent realization that "it cannot stop
the division of the sea... The only question is how the division will now be formalized de
jure."(28) On 12 November 1996 Russia offered to recognize an exclusive 45-mile
offshore economic zone for each country. It also expressed willingness to discuss, on a
case-by-case basis, national jurisdiction over oil and gas deposits beyond the 45-mile
limit at sites where drilling is already in progress. All other deposits would be
"commonly owned" through joint-stock companies of the five Caspian countries.
The proposal also included a "double-tender system" giving riparian countries
first claim to development of fields ahead of non-Caspian bidders in any future oil and
Common jurisdiction would grant Russia a share in the other littoral countries' mineral
resources and empower Moscow with great leverage both to require the routing of export
pipelines through Russia and to otherwise push its interests in any decisions on the
production and marketing of Caspian oil and gas. It would also restrict the ability of
Azerbaijan, Turkmenistan, and Kazakhstan to conduct business directly with Western
companies. The Jamestown Foundation summarized that the proposal "would create legal
havoc in the Caspian Sea, draw dividing lines through Azerbaijani, Kazakhstani, and
Turkmen oil and gas deposits, produce political complications, and, obviously, discourage
Western investment".(30) As the bulk of Baku's oil riches are situated beyond the
45-mile zone, Azerbaijan was the only littoral country to decline from signing the
Already besieged by Russia and Iran on the matter of the Caspian's status, Azerbaijan
became embroiled in yet another ownership dispute in January 1997, when Turkmenistani
President Saparmurad Niyazov unleashed the claim that the Azeri and Chirag fields being
developed by Azerbaijan and an international consortium under the September 1994
"Deal of the Century" are situated in Turkmen waters and therefore are Turkmen
property. Baku rejected the claim out of hand but offered to hold talks with Ashgabat to
clarify the matter.(32) Although Turkmen opposition to the two fields' development died
down thereafter, Ashgabat laid claim to the offshore Kyapaz field following an initial
July 1997 agreement on the field's exploitation between Azerbaijan and two Russian oil
companies.(33) This time Turkmen authorities threatened to take their case to the United
Nations or an international court, insisting that no more oil agreements should be signed
by Baku until the question of the Caspian Sea's status is settled definitively.(34)
Although Ashgabat's insistence that the status issue be resolved before oil development
efforts can go forward reflects Russia's original position on the issue, Turkmenistan's
claims to offshore fields in the Azerbaijani sector of the Caspian amounted to a de facto
endorsement of Baku's position on the Sea's status. This move in the direction of
Azerbaijan became more pronounced in March 1997, when the Turkmenistani president signed
an agreement with his Kazakh counterpart stating that "all countries bordering the
Caspian Sea must stand by the principle of dividing the water area out to a middle line
until the Caspian Sea's legal status is determined".(35)
Another interesting wrinkle in the Caspian status debate emerged in July 1997, when
Azerbaijan and the Russian oil giant LUKoil signed a $2 billion deal for the development
of the offshore Yalama oil field. The field is located so far north that it terminates at
the edge of the sector of the Caspian Sea that Baku has carved out as its own. In fact,
Yalama may be contiguous with offshore structures within the Russian zone which LUKoil has
been licensed to develop. Thus, it has been speculated that LUKoil may at some future date
decide to merge the two contracts and develop the structures as one.
If such a merger were to take place, it would have interesting ramifications for the
Caspian Sea status dispute. Developing the Yalama and Russian fields as one would forward
Moscow's position that "lines in the sea do not serve to make one field Azerbaijani
and another Russian. The Russian government might use a merger as ammunition-- that is, as
a foothold into the Azerbaijani sector of the Caspian".(36) While there is so far no
sign that LUKoil may merge the two contracts, the situation will no doubt be watched
carefully by Baku and international investors.
While many important developments in the Caspian status dispute have occurred since
1994, perhaps the most significant was the United States' endorsement of the Azeri
position in November 1996. In response to Russia's proposal for limited national division
of the Caspian, U.S. Special Ambassador to the Newly Independent States, James Collins,
wrote in a letter to Azeri President Heidar Aliyev that Washington "support(s) our
investment companies and uphold(s) the idea of the sectoral division of the Caspian
Sea".(37) Because Washington had previously declared the Sea's status a matter to be
resolved by mutual agreement of the littoral states, this unambiguous stand against joint
sovereignty over the Caspian-- in direct opposition to Russia's position on the issue--
appeared to mark a significant change in U.S. policy.(38)
The ostensible change in U.S. policy was due in large part to a growing interest in the
vast energy potential of the Caspian Basin. The United States, a consumer of about 6
billion barrels of crude oil annually, is becoming increasingly aware of its
over-dependence on Persian Gulf oil. Washington is thus seeking to ensure that predictions
of the Caspian Sea becoming the West's second largest source of oil are made a reality.
The United States apparently believes that the partition of the Sea among the littoral
states will best facilitate the timely and sensible development and export of the
Caspian's energy riches. However, in the light of past U.S. accommodation with Russia, it
remains to be seen whether Washington's new approach to the Caspian indicates that the
Clinton Administration is really ready for a face-off with Moscow.
Conclusions And Future Prospects
The root cause of the dispute
over the status of the Caspian Sea is Russia's unwillingness to see its former vassals
assert genuine political and economic independence from Moscow. Although the U.S.S.R. no
longer exists, many Russian politicians continue to view Azerbaijan's vast resource wealth
as the property of Moscow;(39) a 1994 directive of the Russian Foreign Ministry lamented
Azerbaijan's claims to "the most important region of the Caspian Sea" and
complained that "the closed Caspian Sea basin is being divided up and Russia is being
left with the most unproductive and prospectless sector".(40) Moscow is surely aware
of the fact that recent estimates of nearly 200 billion barrels of oil situated in the
Caspian Basin mean that trillions of dollars are at stake in the outcome of the status
Perhaps more important than asserting proprietary rights over the Caspian's natural
resources, however, is Russia's desire to prevent the emergence of a major Western
economic and political foothold in its backyard. As the negative Russian response to NATO
Secretary-General Javier Solana's February 1997 visit to the Transcaucasus demonstrated,
Moscow fears that an explosion of investment by Western oil firms will lead to a
heightened Western political presence in the southern republics.(41) Because "the
loss of control over a region that is so rich in natural resources would mean for Moscow
the loss of its own influence" in the southern republics, Russia is determined to
impede the development of true independence for Azerbaijan and prevent its integration
with Turkey and the West.
The greatest obstacle to Russian efforts has been the regime of Azerbaijani President
Heidar Aliyev. Contrary to initial expectations when he came to power in the wake of what
many claimed was a Russian-inspired military revolt in June 1993, the former head of the
Azerbaijani KGB and Politburo member has governed as a nationalist and distanced himself
from Russia. Although responsible for bringing Azerbaijan into the Commonwealth of
Independent States (C.I.S.), Aliyev has been adamant in maintaining his country's
sovereignty and independence.
In addition to asserting control over the sector of the Caspian carved out by
Azerbaijan, Aliyev has defied Russian pressure for the right to base troops in the
country. Baku has refused Russia's insistence on establishing two military bases in
Azerbaijan and declined to cooperate with Moscow on joint defense of Azerbaijan's border
with Iran.(42) Moreover, in negotiations on new amendments to the 1990 Conventional Forces
in Europe Treaty, Baku succeeded in blocking Russia's right to base military forces in the
republic even temporarily.(43) Thus, in the light of the fact that both Georgia and
Armenia have a major Russian troop presence, Aliyev's stalwart resistance to Russian plans
has denied Moscow a unified defense perimeter in the Transcaucasus.
Although Aliyev has been quick to avoid any unwarranted increase in Russian influence
over his republic, he has realized that, in view of Russia's geopolitical power, it is
impossible to act in complete disregard of Moscow's interests. Thus, the Azeri ruler has
welcomed participation by Russian oil companies in offshore oil development and has
accepted a pipeline from Baku to the Russian Black Sea port of Novorossisk as one of two
pipelines to carry early Azeri oil to market.(44) Moreover, the Aliyev regime has promoted
Russian participation in efforts to achieve a political settlement to the Nagorno-Karabakh
conflict and agreed to a Russian presence in any future multi-national peacekeeping force
dispatched to enforce such a settlement.(45)
However, Aliyev has noted that there must be a measure of give-and-take in
Russian-Azerbaijani relations: "Azerbaijan... is prepared to consider Russia's
interests, but Russia must in turn consider Azerbaijan's interests".(46) Despite his
willingness to concede a limited Russian role in the region, Aliyev has often found Moscow
willing to pursue policies contrary to Azerbaijani interests. While the Caspian status
dispute is certainly a key example, Russia has also acted against Azeri interests in other
In February 1997, Azerbaijan was awakened to the fact that Russia currently controls
the only export pipeline from Baku to international markets when Moscow refused to begin
pumping Azeri oil through the Baku-Novorossisk pipeline. The refusal abrogated a January
1996 Russian-Azerbaijani agreement on the transport of 70,000 metric tons of oil in the
first quarter of 1997.(47) Although it was speculated that the decision was undertaken in
order to give Moscow leverage in negotiations with the breakaway region of Chechnya--
which the pipeline crosses, the Russian refusal caused concern for Baku and international
oil companies about the willingness of Moscow to meet its obligations for early oil
Azerbaijan has also accused Russia of backing Armenia in the conflict over
Nagorno-Karabakh. On several occasions during the peak of fighting between 1992-1994, Baku
asserted that Russia was providing weapons and military personnel to Karabakh Armenian
forces battling for independence from Azerbaijan. Most recently, Azerbaijan has fingered
allegations that 86 T-72 tanks and 50 armoured personnel carriers were transferred to
Armenia from Russia-- free of charge and without the apparent endorsement of the Russian
government-- between 1994 and 1996 as signs of Russian bias toward Yerevan.(49)
Azerbaijani officials have suggested that the alleged Russian arms transfers represent
a bid by Moscow to disrupt the three-year cease-fire in Nagorno-Karabakh and to topple the
Aliyev regime. There is certainly logic to this assertion:
Aliyev's replacement with a leader more amenable to Russian interests would alter the
strategic situation in the region almost overnight. Moscow would likely be called upon to
impose a pax Rus in Nagorno-Karabakh, especially if Azerbaijan were to lose additional
territories to Russian-backed Armenian forces. Moreover, the explosion of renewed violence
would no doubt stir unease among international investors at work in Azerbaijan and delay
the development of the republic's energy resources, thus opening the door for a Russian
power grab vis-a-vis Caspian oil.(50)
Aliyev's departure would thus cast serious doubts on Azerbaijan's prospects for
remaining an independent state.
Despite Russian opposition to his policies, Aliyev has noted that he will not alter
Azerbaijan's oil development and foreign policy priorities.(51) Recent trends indicate not
only that Russia is softening on the prospect of sectoral division, but also that
Azerbaijan is gaining important international support for its position. Although these are
promising steps toward finding a compromise on the status issue, it is unlikely that
Moscow will agree to any settlement that will hasten its loss of influence in the region,
and it is equally unlikely that Baku will accede to any measure that will dilute its own
sovereignty. Thus, as long as Russia remains intent on asserting a sphere of influence
over the Transcaucasus and Central Asia, Baku's quest for true independence will put it on
a collision course with Moscow.
As the recent signs of increased U.S. engagement in the region indicate, the stakes in
the new "Great Game" for oil and influence in Central Eurasia are rising.(52)
The importance of the Caspian Sea in global politics is summed up in the following
The Caspian issue is one of the most important geopolitical problems on the territory
of the former U.S.S.R. The interests of the world's major states are intertwined there.
Strategically important oil fields and fish stocks are located there. Oil and gas
pipelines of vital importance to the Caspian states (including Russia) will originate
there. . . Not just oil officials and diplomats, but cultures and geopolitical
orientations are clashing there. The status quo there will not be maintained for long. The
only question is who will change it and to whose benefit.(53)
At the centre of this growing storm is Azerbaijan, whose efforts to exert sovereignty
over its own sector of the Caspian will have a great impact not only on the future of the
Sea as an oil-producing region, but also on the very geopolitical makeup of Central
Eurasia in the next century.
- Hugh Pope, "Caspian Oil
Deposits May Be Much Larger Than Estimated", Wall Street Journal (30 April
- Kent E. Calder, "Asia's Empty
Gas Tank", Foreign Affairs (Vol. 75, No. 2, March/April 1996): 59.
- Robert B O'Connor Jr., Richard A.
Castle, and David R. Nelson, "Future Oil and Gas Potential in Southern Caspian
Basin", Oil and Gas Journal (3 May 1993): 117-120.
- Gregory F. Ulmishek and Charles D.
Masters, "Oil, Gas Resources Estimated in the Former Soviet Union", Oil and
Gas Journal (13 December 1993): 62.
- Scott Horton and Natik Mamedov,
"Investment in Azerbaijan's Upstream Requires Attention to Legal Details," World
Oil (April 1996): 88.
- In keeping with its policy of
neutrality in foreign policy, Turkmenistan has avoided taking a clear-cut stand on the
status issue. In practice, Ashgabat's pursuit of international investment in its offshore
deposits follows the sectoral approach, but it has attempted to avoid estranging Moscow
and Tehran on the issue. In November 1996, Turkmenistan signed a memorandum with Russia
and Iran on the creation of a joint company to develop the Caspian's resources. Bruce
Pannier, "Turkmenistan, Russia, Iran Sign Agreement", OMRI Daily Digest
(Vol. 2, No. 220, 13 November 1996).
- Annick de Marffy-Mantuano,
"Current Development: The Procedural Framework of the Agreement Implementing the 1982
United Nations Convention on the Law of the Sea," American Journal of
International Law (Vol. 89, No. 814, Oct. 1995).
- Clive Schofield and Martin Pratt,
"Claims to the Caspian Sea", Jane's Intelligence Review (February 1996):
- Ibid.: 78.
- Article 62 (1) of the Vienna
Convention on the Law of Treaties provides these guidelines for termination of a treaty:
1. A fundamental change of circumstances such as occurred with regard to those existing at
the time of the conclusion of a treaty, and which was not foreseen by the parties, may not
be invoked as a ground for termination or withdrawing from the treaty unless: (a) the
existence of those circumstances constituted an essential basis of the consent of the
parties to be bound by the treaty; and (b) the effect of the change is radically to
transform the extent of obligation still to be performed under the treaty.
- Schofield and Pratt, "Claims
to the Caspian Sea": 78.
- Ibid.: 78.
- Aleksandr Akimov, "Oil and
Gas in the Caspian Region: An Overview of Cooperation and Conflict," Perspectives
on Central Asia (June 1996).
- Aidyn Mekhtiyev,
"Chernomyrdin Has No Complaints Against 'Contract of the Century,'" The
Current Digest of the Post Soviet Press. (Vol. 46, No. 41, 9 November 1994): 26.
- Robert Barylski, "Russia, The
West, and the Caspian Energy Hub" Middle East Journal (Vol. 49, No. 2, Spring
- Jennifer DeLay, "Azerbaijan
Has Lion's Share of Caspian Blocks, SOCAR Official", Pipeline News (No. 52,
22-28 March 1997).
- Pope, "Caspian Oil Deposits
May Be Much Larger Than Estimated".
- Segodnya, 8 September 1995,
in Foreign Broadcast Information Service-- Central Eurasia (hereafter FBIS-SOV), #95-188-S
(28 September 1995): 10.
- "Azerbaijani Oil Today,"
US Embassy Report; Baku, Azerbaijan (1 November 1995).
- Heiko Pleines, "Major
International Projects in the CIS, Part I: Central Asia", Pipeline News (No.
3, 2-8 March 1996); and Liz Fuller, "Azerbaijan Signs Another Oil Contract", OMRI
Daily Digest (Vol. 2, No. 241, 16 December 1996).
- "Will Azerbaijan Really
Benefit From the Consortium Contract?" Azerbaijan International (Vol. 3, No.
2, Summer 1995): 40.
- Einar Bergh, "AIOC Current
Developments", Azerbaijan International (Vol. 4, No. 2, Summer 1996): 44.
- "Azerbaijan Country
Brief," Energy Information Administration, US Department of Energy (May 1996).
- FBIS-SOV, #95-188-S (28 September
- Quoted in Central Intelligence
Agency, The World Factbook 1993-1994 (Washington , D.C.: Brassey's, 1993):
- Jennifer DeLay, "Azerbaijan's
New Pollutions Standards Less Strict Than in Soviet Era", Pipeline News (No.
62, Part II, 31 May-6 June 1997).
- Einar Bergh, "AIOC Current
Developments", Azerbaijan International (Vol. 4, No. 1, Spring 1996): 44.
- Georgy Bovt, "Russia, Iran
Agree that Rules on Caspian Sea are Affair of Littoral States, None of Which Should Take
Unilateral Steps," Current Digest of the Post Soviet Press (Vol. 47, No. 44,
November 1995): 15.
- "New Twist in Legal Battle
Over Caspian Resources," Fortnight in Review (Vol. I, No. 10, November 1996).
- Iran argued for a 10-mile zone;
Russia, 20 miles; Turkmenistan, 60 miles; Kazakhstan, 80 miles; and Azerbaijan lobbied for
division of the entire sea into sectors. Bruce Pannier, "Caspian Sea Agreement
Signed," OMRI Daily Digest (Vol. 2, No. 221, 12 November 1996 ).
- "Azeri Oil Chief Rejects
Turkmen Claim to Caspian Oilfield", BBC Summary of World Broadcasts (29
- Russia annulled the agreement at
the end of July, stating that the Turkmen claim on the Kyapaz field made its legal
position untenable. "Russia Annuls Kyapaz Contract", RFE/RL Newsline
(Vol. 1, No. 86, 1 August 1997).
- DeLay, "...As Turkmenistan
Protests Initial LUKoil-Rosneft Kyapaz Deal".
- Quoted in "Kazakhstan,
Turkmenistan Agree on Caspian Sea Problem", Interfax (27 February 1997).
- Jennifer DeLay, "The
Attraction of Location: What If LUKoil Merged Yalama and its Dagestani Fields?" Pipeline
News (No. 61, Part II, 24-30 May 1997).
- Quoted in "U.S. Official
Arrives in Azerbaijan", United Press International (13 November 1996).
- Jennifer, Delay, "US May
Finally Be Taking Sides in the Dispute Over Ownership of Caspian Oil", Pipeline
News (No. 38, Part II, 25-30 November 1996).
- For example, Russian Prime
Minister Victor Chernomyrdin claimed in May 1996 that Western oil companies pose a
security threat to the CIS because they seek to control the region's strategic resources.
Jennifer DeLay, "Russian PM Calls U.S. Companies a Threat, Addresses Oil Club", Pipeline
News (No. 13, 11-17 May 1996).
- Quoted in Yeni Gunaydin, 17
October 1994, in FBIS-SOV, #94-203 (20 October 1994): 34.
- Valentin Kunin, "Russia
Against NATO Presence in Caucasus", RIA Novosti (20 February 1997).
- "Azerbaijan Sidesteps Russian
Call to Join CIS Border Defense Pact", Monitor (Vol. 2, No. 97, 16 May 1996).
- Roland Eggleston, "Wary of
Russia, Azerbaijan Wins CFE Concessions", Radio Free Europe/Radio Liberty (3
- Joseph R. Masih and Michael P.
Croissant, "Pipeline Politics in the Transcaucasus", National Security
Studies Quarterly (Vol. 3, No. 1, Winter 1997): 70-71.
- In response to Moscow's demand for
a Russian-dominated peacekeeping force to monitor a proposed peace settlement, Aliyev told
Russia's Nagorno-Karabakh envoy that "Russia cannot deploy its troops in Azerbaijan
by itself. They will have to tread over my dead body first. Russia's troops can be
deployed within the framework of an international force". Quoted in Hurriyet
(5 June 1994).
- Quoted in "Is Aliev
Considering a Strategic Bargain With Moscow?" Monitor (Vol. 2, No. 180, 27
- "Russia Refuses to Transport
Azeri Oil", Segodnya (6 February 1997).
- Jennifer DeLay, "Transneft
Plays the Chechen Card: Export Route Issue Looms Over Caspian Oil Fields", Pipeline
News (No. 46, Part II, 1-6 February 1997).
- Vladimir Semiryaga, "Aman
Tuleyev Says There Are Forces in Russia Interested in Undermining the CIS Integration
Process", RIA Novosti (14 February 1997).
- Michael P. Croissant,
"Tensions Renewed in Nagorno-Karabakh", Jane's Intelligence Review (July
- Jennifer DeLay, "Azerbaijan
to Continue With Strategy For Developing Offshore Oil and Gas Deposits", Pipeline
News (No. 42, Part III, 11-17 January 1997).
- See Michael P. Croissant,
"U.S. Interests in the Caspian Sea Basin", Comparative Strategy (Fall
FBIS-SOV, #95-188-S: 10.