Russia Wins In Breakthrough For Trans-Caspian Pipeline

Diplomatic breakthrough on disputed sea and energy issues.

After more than two decades of bickering over who owns what, five countries bordering the Caspian Sea—Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan—signed the Convention on the Legal Status of the Caspian Sea last month in the port city of Aktau in Kazakhstan.

At stake are exploration rights to some 48 billion barrels of oil and 292 trillion cubic feet of natural gas, according to US government estimates—not to mention the economic destinies of some of the more volatile states in the Middle East.

“It is a significant treaty,” says Kate Mallinson, managing director of Prism, a political-risk consultancy based in London. “For the first time since the fall of the Soviet Union, the sovereign rights of successor states over the Caspian have been recognized by Russia.”

First, the treaty strikes a compromise on the vexing question of whether the energy-rich Caspian really is a sea, which would subject it to one specific set of UN rules, or just the world’s largest lake. It was decided that it was something in between: “a special body of water,” as Russian Foreign Minister Sergey Lavrov put it. That settled, the five nations sorted out rights for transportation and underwater pipelines.

“It clarifies the business environment for investors and paves the way towards building the Trans-Caspian Pipeline,” says Annette Bohr, associate fellow of the Russia and Eurasia Program at London-based think tank Chatham House. “Its route lies well north of any seabed which Iran might claim.”

Kate Mallinson, Prism: “It’s a significant treaty.”

The long-delayed pipeline would be capable of transporting some of Turkmenistan’s huge reserves of natural gas to Azerbaijan, then through the recently inaugurated Trans-Anatolian Pipeline to Europe.Even larger volumes of Turkmen gas may come to Europe via connection to the proposed White Stream pipeline running under the Black Sea from Georgia to Romania, from whence it can travel existing pipelines across Ukraine to Central Europe.

The Caspian treaty became possible because Russia has become less concerned about Central Asian competition in gas exports to Europe than about regional security issues and growing its presence in Iran and the Middle East. “The treaty cements [Russia’s] military dominance,” says Bohr, “allowing its Caspian flotilla access to the whole sea while excluding outside powers and seaborne transport of their military matériel.”

That amounts to another sign that “Eurasia is turning away from the West,” says Mallinson, adding that Russia’s rising influence should send warning signals to western companies heavily invested in the region.

“Territorially, Iran is the big loser,” says Bohr. “Previously, its claims extended over 50% of the Caspian. Although the seabed has not yet been delimited, it may now be looking at 13% or less. But it is in a very weak position and welcomes closer ties with Moscow.”

That sentiment is no doubt reciprocated in the Kremlin, which values Iran as an ally in Syria and potentially across the broader Middle East.