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Monday, June 29, 2015

Caspian Sea: Oil Issues and Iran, Russia, Azerbaijan, Turkmenistan, and Kazakhstan

Click on map to enlarge
So on yesterday's Midrats Episode 286: A Restless Russia and its Near Abroad with Dr. Dmitry Gorenburg, we had a little discussion about the status of naval forces in the Caspian Sea (beginning about 44:37).

Claude Berube tweeted this morning about an article which described Azerbaijan's new Caspian Sea Naval Base.

Now, from the Oil and Gas Journal comes Iran yields to Russia in talks over Caspian resources:
Iranian acquiescence to Russia, to which the Islamic Repubic increasingly turns in response to pressure from the West, has become a standard feature of long-unresolved deliberations over jurisdiction and resource ownership in the Caspian Sea. Iran has surrendered its Soviet-era claim to half of the world's largest inland lake and has aligned itself with Russian insistence that countries lacking Caspian shorelines-especially from the West-stay out.
The status of the Caspian Sea fell into question with the demise of the Soviet Union. The three littoral republics that emerged from that change demanded larger shares of the Caspian than allotted to them by treaties negotiated in 1921 and 1940, which granted the former Soviet Union half of the sea and Iran the remainder.

Much is at stake. The Caspian Sea, usually referred to as the boundary mark between Asia and Europe is not only rich in oil and gas; it also produces more than 80% of the world's sturgeon. After the collapse of the Soviet Union, the large South Caspian Basin became available to investment by western oil companies seeking exploration and production opportunities.

Caspian border countries all produce and export oil and natural gas, and all claim shares of Caspian resources. Azerbaijan is the hub for export of Caspian gas to western markets. Access to Caspian gas has been central to efforts by the European Union (EU) to diversify its members' gas purchases away from Russia.

International oil companies have been developing oil and gas in the deep basin of the Caspian Sea since the region became accessible to outside investment about 2 decades ago. The formation of Azerbaijan International Operating Co. opened a new era for development. The 1994 signing of the contract known as the "Contract of the Century," as US Sec. of Energy Samuel Bodman called it, allowed Azerbaijan oil to reach global markets for the first time a decade later via the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Throughout this new era, Russia has tried to steer movement of Caspian oil and gas through its territory to keep control of the region's transport infrastructure. In 2005, more than two thirds of all crude oil exported from the Caspian moved through the Caspian Pipeline Consortium (CPC), operated by Russia. By 2010, Russia's share of Caspian oil transport had fallen below 40%.
The whole article requires a subscription, but what I've put up does give a sense of why there is a naval build up in the area.

More from that article Claude referenced:
In Azerbaijan's case it is particularly worried about Iran, with whom it has had a number of minor incidents. In the longer term it is worried about Russia, which strongly opposes the construction of a trans-Caspian gas pipeline from Turkmenistan, which Baku in principle supports. Russia also has tried to get all the littoral states to restrict the militaries of outside powers (meaning, the U.S.) from getting involved on the Caspian, which Baku has pushed back on. Nevertheless, Russia and Azerbaijan are slated to carry out their first-ever joint naval exercises in September.
For a change, the U.S. probably won't send a fleet to the area . . .

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