Dina Malysheva, Doctor of Political Science, leading researcher, Institute of World Economy and International Relations, RAS (Moscow, Russian Federation)

Several decades ago nobody could imagine that the Caspian Sea (totally dominated by the Soviet Union and nearly considered to be its inland lake) would attract intense attention of the world economic and political centers. Today Russia, the legal successor of the now dead U.S.S.R., has to play according to different rules: it has to find common language with Iran and the newly independent Caspian states (former Soviet republics) concerning the seas international legal status and to defend its interests related to it in a bitter rivalry with regional and international players.

The Caspian region today is the hub of competing trade and economic, business, and military-political interests. There is even talk about a new Great Game that has already started there and two main rivalsthe United States and Russia.

Is there any ground for this talk? Whose interests will bring security to the region? Which country will be able to ensure stability there? No unambiguous answer is possible: the situation is too fluid. One can talk about trends that affect the regions security. They are created by the regions specifics and its conflict potential, and can be discerned in the conduct of the main players, Russia in the first place.

Another Persian Gulf?

As soon as the Soviet Union disappeared from maps the leaders of Azerbaijan, Kazakhstan, and Turkmenistan started talking of the growing importance of the Caspian region as the main supplier of energy fuels to Europe and Asia. They insisted that the Caspian oil reserves were equal to or even much larger than those of the Persian Gulf, and were discussing the prospect of their countries turning into important players in international oil and gas politics. They expected the Caspian Sea to become the second Persian Gulf, the idea supported by many political scientists and businessmen.1

It should be said, however, that numerous forecasts and expert assessments do not agree upon the regions estimated energy reserves. The proven recoverable oil reserves are lower than expected; nearly all of them are concentrated in the Azeri sector. Here I shall not assess the Caspian hydrocarbon reserves or the economic potential of the prospected fields. The problem requires special studies; it has been already discussed in detail in numerous publications.2 Here are several figures to illustrate the gap between different Western assessments of possible and proven reserves. According to the U.S. Federal Power Commission, the Azeri Caspian sector contains 27 billion barrels of oil (and 3.6 to 12.5 billion proven reserves) while the British Petroleum (BP) cites a much lower figure of 7 billion.3 Compare this figure with the figures for Iraq: its possible and proven reserves are estimated at 215 and 112 billion barrels, respectively.4

Recent prospecting confirmed considerable oil reserves in certain places (Kashagan in Kazakhstan is one of them). Information about huge oil reserves that were the talk of the day in the early 1990s was highly contradictory, in some places such reserves were never found. In January 2001, Agip of Italy failed to find the expected reserves in Kurdashi; American Exxon/Mobil was very much disappointed with the first exploratory wells in Oghuz (Azerbaijan). According to press reports, prospecting in Lenkoran-Talysh Deniz conducted by Total Final Elf of France is close to a failure. So far, gas prospecting in Apsheron (Azerbaijan) conducted by Chevron, where huge amounts of gas were forecasted, gives no cause for optimism.

Late in the 1990s the prospects of the Caspian states looked much dimmer than at the beginning of the same decade. Starting with late 1997 the OPEC countries increased their oil export; in 1997-1998 Asia was hit by a financial crisis and the world oil prices began to slide down (in 1998 alone they dropped by 40 percent). Oil companies working in the Caspian slowed down their business activity there.5 Many serious experts and analysts were very pessimistic about the regions future. The Institute for Public Policy in the United States, for example, that had not been inclined to overestimate the Caspian energy potential, gloomily predicted: The Caspian Basin is not going to be the ace in the hole for international energy security.6

On the whole, according to Western assessments, the proven recoverable oil reserves of the Caspian are comparable to the North Seas oil potential but are 22.5 times smaller than in the Middle East with its 60 percent of the world oil reserves. This alone is enough to doubt the regions potential to develop into the second Persian Gulf. There are other negative factors: it is far removed from the main consumers of hydrocarbons (Western Europe and Southeast Asia); its transport infrastructure is undeveloped; it is ridden with unsettled conflicts; it is unstable both economically and politically, etc. At the same time, despite these factors and the doubts in the regions vast oil riches tension has not subsided and many-sided rivalry goes on unabated. Why?

First, it is expected that in the nearest decade the North Sea will supply much less oil; the prospected hydrocarbon reserves on the Norwegian coast of the North Sea and the Barents Sea have been nearly exhausted. The demand for Caspian oil, among other alternative sources of oil, may increase. Second, the United States and Southeast Asia will require much more electric energy; economies will depend on oil exports on a much greater extent. Third, it is expected that in the nearest 10 to 20 years gas will be in much greater demand. This means that the Caspian gas reserves will be welcome on the world markets; the demand for them will be growing even faster than the oil demand. Fourth, the U.S. antiterrorist operation in Afghanistan and statements about its extension added attraction to the Caspian region. This is why the Caspian region is described as an alternative to the Middle East.

Yet, despite its recently boosted strategic importance the overoptimistic forecasts of the regions prospects and its drawing closer to the second Persian Gulf status have no firm grounds. At best, its energy fuel reserves will become an auxiliary source for the world leaders, the United States in the first place. However, the regions gas and oil will hardly become the basis of the U.S. energy-related security.7 One can expect that a Middle East crisis can make the Caspian oil and gas very much needed: on 29 January, 2002, in his annual address to the nation President Bush openly threatened certain states (including Iran and Iraq) which he described as the axis of evil and accused them of supporting international terrorism. Together with the armed conflict between Israel and the Palestinians the planned retribution blows will turn the volatile region into an extremely risky zone.

The Caspian region is not immune to possible political and military conflicts either, despite the efforts of Russia and its Caspian neighbors to lower the conflict level. The set of contradictions that appeared immediately after the Soviet Union had fallen apart is crumbling at a very slow pace.

Russias Interests

Following the Soviet Unions disintegration Russia has been losing its influence there. The new Caspian states (Azerbaijan, Kazakhstan, Turkmenistan) cut down their trade with Russia and turned to other (mainly the Turkish and Iranian) markets. They did offer certain advantages; the reorientation was also spurred on by the new states transport isolation. This should not be taken to mean that the Caspian region has lost its importance for Moscow. In fact, Russia is working toward preserving and strengthening its economic and military-political presence there, hopes to secure its leading positions on the international markets and squeeze out its potential political and economic rivals by extending its control over offshore oil and gas extraction and transportation routes of energy fuels. These long-term interests prompt an increased attention to the following problems.

First, military and political security which Moscow sees as directly related to the settlement of the Karabakh, Abkhazian, Chechen, and Kurd conflicts. Russia regards militarization of other Caspian states and military-political penetration of non-regional powers as another threat. Second, ecological safety that Russia needs very much since its coastal part has an important role to play in reproducing its power resources. Transport and power mainlines designed to deliver energy fuels from the Caspian to Europe, Central Asia, China and the APR are another major concern: they help promote Russias foreign economic interests.

Recently, Moscow has been exhibiting new trends in its Caspian policy that testify to the increasingly pragmatic attitudes toward the recent geopolitical realities. Today, unlike the Soviet Union, Russia is no longer willing to oppose the United States and the regional power centersthe Russian diplomacy is trying to protect, and is not always succeeding, the interests of Russian industrial and power-producing companies. So far, there is no coordinated state strategy that could unify the competing trends in the foreign economic and foreign political sphere.

Certain events have testified that the Russian leaders are attaching the ever-growing importance to the region and the power and energy resources factors as a whole. In 1996 the Foreign Ministry of Russia set up a working group for the Caspian Sea to work on Russias suggestions on the seas status and regime, the use of its biological and mineral resources and oil transport.8 In May 2000 the RF Security Council announced the Caspian the traditional zone of Russias national interests while a presidential decree instituted the post of the presidents special representative (in the rank of deputy foreign minister) for settling the Caspian Sea status problem; it appointed former energy minister Viktor Kaliuzhniy to this post. On 25 July, 2000 Russian oil companies LUKoil, Iukos, and Gazprom set up a Caspian Oil Company to develop new oil and gas fields in the region. Viktor Kaliuzhniy is constantly moving among the Caspian capitals to coordinate the stands on the most sensitive issues such as the status, pipelines, security, etc. In October 2000 President Putin visited Kazakhstan and Kyrgyzstan; in January 2001 he paid an official visit to Azerbaijan, while the presidents of Azerbaijan and Turkmenistan came to Moscow with official visits in February 2002. State contacts between Russia and Iran became much livelier. Russia knows that the legal status of the sea and the related problem of the division of its energy riches are the main stumbling block in the relations among the Caspian states.

Status Controversy

Historically, the status of the Caspian Sea (its main elements: navigation, the use of biological, mainly fish, resources, the use of other resources and protection of the ecological system9) was determined by the bilateral agreements between the Russian Empire (later the R.S.F.S.R. and the U.S.S.R.) and Persia (Iran). Upon the Soviet Unions disintegration the four post-Soviet Caspian states and Iran became the legal successors to the agreements. The history of talks on the status and the evolution of the sides approaches have been described in detail in numerous publications.10 I shall mention here that throughout the entire negotiation process all these countries were protecting their own dominating national interests and were often not prepared to concessions.

Russia suggests that the seabed be divided among the coastal states along the modified median line that starts at the existing land frontiers. The water mass should remain in common use. Viktor Kaliuzhniy explained this in the following way: We shall divide the seabed or, rather, its resources. Water remains in common use and there will be no frontiers.11 On 6 July, 1998 this was fixed in a bilateral agreement signed with Kazakhstan (On Delimitation of the Seabed of the Northern Part of the Caspian in Order to Observe Sovereign Use of Resources) and confirmed on 9 September, 2000 in the Russian-Kazakhstani Declaration on Cooperation on the Caspian signed in Astana. In January 2001 during the Russian presidents visit to Baku Russia and Azerbaijan agreed on the same.

Tehran is insisting on what it calls a just division, that is, equal shares (20 percent) for each of the five coastal states. This will increase the national sectors of Iran and Turkmenistan as compared with the division along the median line. This would mean a revision of the current status and new problems. For example, under the pretext of the defense of national interests navigation may be limited. Indeed, the United States and Turkey have already suggested that third countries should be allowed to control the cargoes moved from Russia to Iran.12

Recently Turkmenistan has drawn closer to the positions of the other three post-Soviet states, yet it will probably not sign any status-related documents. This was made clear by the results of the Moscow meeting of the two presidents in January 2002. The summit produced a vaguely worded joint communiqué on the status problem that promised to concentrate on and continue consultations. No other documents were signed. It seems that in order to avoid looking too inflexible and opposed to the positions of the regional neighbors Saparmurad Niyazov invited Moscow to strengthen cooperation in the oil and gas sphere by setting up the Eurasian Alliance of Gas Producers that the journalists called a gas OPEC.13

The position of Turkmenistan appears to be inflexible, yet it is absolutely logical: an agreement may complicate its relations with Iran, which Ashghabad was supporting until the most recent time. In addition, Turkmenistan has to resolve its controversy with Azerbaijan about several contested oil fields. After that, the country will be prepared to discuss the variant favored, on the whole, by Russia, Azerbaijan, and Kazakhstan. As distinct from Kazakhstan and Azerbaijan, neither Turkmenistan (with negligible offshore oil reserves) nor Iran (with rich oil fields in the Gulf) need to haste with status settlement. This explains why they are procrastinating: they have nothing to lose and hope to reap fruit.

This shows that each of the Caspian states is guided by its own political and economic interests when discussing the legal status of the Caspian as either a lake or a sea. Russia is becoming increasingly convinced that Iran is responsible for procrastination. Being aware of the dangers of its possible confrontation with Moscow, Tehran is seeking support of China as a potential Caspian player and a political heavyweight. The Peoples Republic of China has already demonstrated its interest in the region.

It should be said that there is no harmony even in the Russia-Azerbaijan-Kazakhstan trio. The Russian-Iranian document was signed in Moscow in 1998 that registered Moscows readiness to take into account Irans equal shares principle. On 12 March, 2001 Russia and Iran made a joint statement to the effect that they both did not officially recognize maritime frontiers until the legal regime of the Caspian Sea is perfected. Baku and Astana believed that this statement contradicted the agreements earlier signed with them.

The meeting of deputy foreign ministers of the five Caspian states held in Moscow on 23-24 January, 2002 that agreed on elaborating a convention on the legal status of the sea raised hopes that the positions could be drawn closer. This decision may encourage foreign investments in oil and gas extraction, transportation, and processing. At the same time, life has shown that companies do not need the formal legal decision on the status. In fact, it is a long way toward the final decision: each of the Caspian states with aims and landmarks of its own breeds additional problems. Obviously, a compromise on delimitation of the water body is hard to attain. It will be even harder to reach a compromise on the use of its resources. This is testified to by the economic and political rivalry (that is unfolding before our eyes) for control over the regions oil-bearing areas.

Contested Oilfields

The mutual claims of Azerbaijan and Iran and Azerbaijan and Turkmenistan on certain oil fields are serious enough to cause confrontation among them.

Tehran is convinced that the zone to the south of Astara-Hasan Kuli belongs to it. According to the Soviet tradition, the line was interpreted as the Iranian-Soviet frontier despite the fact that the treaties of that time did not mention frontiers in the Caspian.14 From this it follows that both Azerbaijan that wants to use its coastal waters as it sees it fit and Iran that claims part of the Azeri marine sector are not completely right from the legal point of view.

Official Tehran proceeds from the Soviet-Iranian treaties that outlined the boundaries of the Soviet sector and is convinced that they are not applicable to the new post-Soviet states.15 The Iranian side declared that until the talks on the status and division of the Caspian among the coastal states are complete prospecting and development of the oil-bearing structures in the zone will be regarded in Tehran as violation of Irans rights.16 Baku, in its turn, does not recognize Iranian claims on the oil-bearing areas in the southern part of the Azeri sector as completely unjustified. It argues that Astara is on the western coast, on the Azerbaijani frontier with Iran while Hasan Kuli is opposite it, on the frontier between Iran and Turkmenistan.

The countries are contesting the Alov oilfield (known as Alborz in Iran) in the central part of the sea. In 1998 the State Oil Company of the Republic of Azerbaijan signed a contract with a consortium of oil companies on developing the highly promising Alov, Araz and Sharg fields. Under the contract the State Oil Company of Azerbaijan controls 40 percent of the shares. British Petroleum is the operator of the $4 billion-worth project. In summer 2001 prospecting on the Alov site nearly caused a serious incident between Azerbaijan and Iran. As the first step Iran sent an official note with a demand to stop the work; on 23 July, 2001 an Iranian warship forced the Azerbaijani research vessel Geofizik-3 with representatives of British Petroleum on board to leave the zone of oil extraction. The Ministry of Oil Industry of Iran issued a statement to the effect that Tehran would consider void any contracts signed by foreign companies on non-sanctioned activity in the Iranian sector of the sea. The chargé daffaires of Azerbaijan in Iran received a protest against the plans of his country to extract oil in the Iranian sector.17 Ali Ahani, special representative of the Iranian president for the Caspian problems (in the rank of deputy foreign minister) announced that his country was resolved to firmly discontinue activities of foreign companies that would contradict Irans national interests.18 In connection with this British Petroleum informed that it would discontinue prospecting on the oil field until the conflict was peacefully resolved.19 The Baku visit of Ali Ahani in late August 2001 seemed to have settled the incident, yet the official visit of President Aliev to Iran was postponed several times. Moreover, very soon after that, the president of Azerbaijan invited the Russian president to limit the status talks by the CIS-five coastal states minus Iran format.20

It seems that the Iran-incited storm was aimed not only against Baku, the post-Soviet relations with which being far from simpleIran aimed at Western companies to teach them to take its position into consideration. This action can also be interpreted as political probing on the regional scale. Tehran is very much concerned with the upset balance of power there and the regions militarization. In particular, the United States supplied Azerbaijan with several coastal patrol crafts equipped with latest radars; Turkey presented it with a patrol ship. Before that, at the beginning of February 2001 Iranian Foreign Minister Kamal Kharrazi had criticized any military activity on the Caspian. The remark was caused by the naval maneuvers of the Caspian Navy timed to President Putins visit to Baku in January 2001.21 Moscow shared Tehrans concern over possible flights of American aircraft over the Caspian during the antiterrorist operation in Afghanistan.22

The United States and Turkey condemned Iranian actions during the Azerbaijani-Iranian incident. While in Baku U.S. Assistant Secretary of State Elisabeth Jones confirmed that the United States was prepared to extend political support and offer financial assistance to Azerbaijans border guards in its [Azerbaijans] conflict with Iran on the Caspian.23 Turkey went even further: it promised Baku its help in case of hostilities.24 These developments testified that a new and very dangerous situation had taken shapethere was a threat of a conflict and a possibility of its turning into an international one.

Ashghabad alone supported Tehran: even before the incident it had informed Baku about its intention to close its embassy in Azerbaijan (opened in summer 1999).25 The president of Turkmenistan condemned all forms of involvement of foreign companies in developing contested fields and their one-sided development. The reasons behind this were absolutely mercantile.

First, the recently discovered large gas reserves in Shah Deniz made Azerbaijan a potential rival of Turkmenistan: Baku demands a large quota of gas transportation for itself along the trans-Caspian pipeline planned to be laid on the seabed to move Turkmenian gas to Turkey. As a result Ashghabad started a policy of delaying construction. Second, the two countries have been quarrelling for a long time over the Sharg (Altyn Asyr in Turkmenistan), Azeri (Khazar), Chirag (Osman) and Kiapaz (Serdar) fields. Ashghabad asked to stop prospecting and developments there until the status of the Caspian Sea was finally agreed up. In 1997 developments on Kiapaz were stopped.26 On the other hand, the discussions revealed many inconsistencies. There is information that at one of his meetings with the Turkmenian president Aliev said that Baku did not claim the Kiapaz site. Later, however, the Turkmenian side accused Azerbaijan once more of illegal activity on this and other fields.

By hastily signing contracts with foreign companies Baku demonstrates its unwillingness to wait till the Caspian is finally divided. Azerbaijan insists that the sites claimed by Iran and Turkmenistan belong to it as having been prospected by Azerbaijani geologists. Ashghabad and Tehran respond with statements to the effect that prospecting itself was illegal as being conducted unilaterally and without prior agreement on marine delimitation and territorial issues.

Obviously, involvement of foreign partners in prospecting is fraught with international conflicts. So far, Baku demonstrates its indifference to political moves of Ashghabad and Tehran. In autumn 2000 Iran threatened with the International Court of Justice.27 The rigid stand demonstrated by the leaders of Azerbaijan was obviously prompted by an active American support and the position of Russia that is outwardly indifferent to the contest, yet, in fact, is on the side of Baku. This is quite logical: the top crust in Russia has probably taken the interests of certain oil companies close to heart. The oil giants want even greater involvement in the international projects on the oil-rich Azeri sector of the Caspian. The LUKoil leaders, for example, want to take part in developing the Alov-Araz-Sharg site. It is negotiating a purchase of 10 to 15 percent of the State Oil Companys packet of 40 percent of shares.28

It seems that the contest over the sites will spoil the relations among the Caspian states for a long time to come. The final settlement depends on the legal status of the sea and an all-embracing international agreement among all regional playerssomething that is very hard to attain in the nearest future.

Outside Players

Like Russia, the United States is mainly interested in the Caspian oil and gas resources to alleviate Western dependence on the Gulf oil and to cut down oil prices. There is another reason: the United States needs a more stable and large-scale presence in the region to minimize Iranian influence and to make it easier to control Central Asia, the Southern Caucasus, and, most important, China.

The Caspian oil has become an object of bitter rivalry between the United States and Western Europe. All western states are using post-Soviet instability and Russias temporal weakness to step up their political activity and business contacts in the Caspian region made easier by the local states acute need for foreign investments and Western aid. Foreign investors are much freer there than in many old developing countries. Extra-economic factors are also at play.

The financial upheavals of 1998 and the August crisis in Russia greatly affected the Caspian states by triggering negative uncontrolled economic and financial trends. The crisis greatly affected the Eurasian corridor project and the Caspian developments in the oil and gas sphere. Western investors became more cautious and more selective in their assessments and estimations of projects of extracting hydrocarbon fuels in the region and of their transportation to the world markets.

Being totally oriented to foreign investments the Azerbaijani economy was badly hit. The recent oil contracts were mainly of the political or even propaganda nature, yet Baku is convinced that the Americans will not withdraw: while not interested in immediate developments in the oil sector they want to drive all possible rivals away and remain the only masters of the oil fields to develop them as they will see it fit in 50 to 60 years time.

In its time the Clinton administration paid lip-service to Moscows right to promote its interests and avoided a direct confrontation with Russia on the Caspian Sea. At the same time Washington was openly trying to contain Moscow so that to squeeze it out of the Caspian zone and the adjacent regions. According to American political scientist Ariel Cohen, Russia, from the very beginning, was seen as a partner of secondary importance and not as the dominating player with full power in the region.29

In the 1990s, having declared the Caspian the sphere of its vital interests, the United States stepped up its activities there and tried to play an independent role in post-Soviet conflicts. It was late in the 1990s that the contradictions between Russia and America became obvious in such questions as Russias politics in Chechnia, American encouragement of anti-Russian sentiments (in the form of accusations of new imperialism hurled at the Kremlin), and involvement of the local states in NATO structures with the help of Turkey. The American stand on oil transportation routes was openly anti-Russian: while hailing the multiple pipelines principle the American politicians were actively lobbying the Baku-Ceyhan main pipeline.

In their reports the American experts of the Russian and Eurasian Program of the Carnegie Endowment for International Peace had the following to say about the results of what the Clinton administration had done in the Caspian and its contribution to the oil fever: U.S. policy in the 1990s slowed the development of the Caspian reserves and did little to advance U.S. interests. While designed to enhance the independence of the Caspian states, it only served to weaken them by slowing the development of energy, hampering the economy of poorer states such as Georgia that stand to benefit greatly from the increased transit of oil and gas, and putting the richer states at risk as well. Moreover, U.S. efforts to win over the leaders of the resource-rich states furthered local corruption. Many of the regions leaders set themselves up as presidents for life, and huge signing bonuses never turned up in national treasuries.30 The American experts recommend the policy of multiple pipelines in which market conditions alone will determine pipeline routes; there should be no U.S. government subsidies to construct routes through Turkey or other favored nations; the United States should no longer work to block the development of routes that go through Iran or Russia; no U.S. interest is served by maintaining a competitive relationship with Russia in the Caspian.31

Facts tell a different story: the new administration has not created a new regional strategy. To the accompaniment of assurances that the United States has no intention to set up permanent military bases in Central Asia and is prepared to consult Russia32 America has struck root in the oil-rich Caspian region thanks to its operation in Afghanistan. Its top officials continue the pipeline diplomacy of the previous administration by supporting the Baku-Ceyhan project considered unprofitable by U.S. companies. During his recent visit to the region U.S. State Secretary Colin Powell spoke about the fundamental importance of Kazakh oil and insisted on an oil pipeline to Turkey across Georgia (the Baku-Ceyhan project.D.M.) to avoid dependence on the Russian networks.33 Some of the prominent members of the Bush team and the president himself, like many figures in the previous administration, are connected with the oil business: Vice President Richard Cheney headed an oil corporation that did business in Azerbaijan while national security advisor Condoleezza Rice worked in Chevron.

The United States assurances of its respect for Russias interests and an absence of intentions to remain in the region is a smokescreen through which its real aims can be seen. There is talk that the United States is no longer quite comfortable in the states that for many decades have been regarded as strategic partners (Saudi Arabia and Pakistan): fundamentalists have strengthened their positions there while anti-American sentiments are rising. Today, the situation in Central Asia and the Caspian region is favorable: the local leaders and the majority of the population welcome the United States as a guarantor of their stability and future prosperity. The religious and ethnic factors there are not as prominent and confrontational as in the Middle East. In addition, its presence on the Caspian shores and Central Asia allows the United States to exercise strategic control over Russia and China.

Different approaches of the U.S. and Russia to the Caspian problems will inevitably result in rivalry and tension, yet one can see more fields for cooperation than for contradictions. The two countries may cooperate in the following spheres: resistance to new threats and challenges to regional security such as drug trafficking, religious and political extremism; conflict prevention; encouragement of economic and political reforms as an instrument of stability and sustainability; development of multiple pipelines and discontinuation of the efforts to squeeze Russia out of the region and to interfere with its participation in oil extraction and transportation.


The legal status of the Caspian Sea will not be settled in the nearest futurethe situation from which Azerbaijan profits more than other countries. It needs no international agreements to actively and successfully attract foreign capital into the Caspian sector which it regards as its own.

Normal relations between the U.S.A. and Iran and between Azerbaijan and Iran may considerably improve the situation in the region. In this case Iran will probably join the agreement already signed by Russia, Kazakhstan, and Azerbaijan. Turkmenistan will probably side with the majority.

If the optimistic forecasts of oil reserves in the Caspian are even partly confirmed, rivalry may become even sharper. There will be a much greater danger of a conflict of political and economic interests among the regional players and among those outside the region.

The relations between Iran and Azerbaijan are most conflict-prone. Both countries cannot afford a more bitter rivalry: Azerbaijan is still at war with Armenia over Nagorny Karabakh while Iran has very complicated relations with the Persian Gulf countries, tension is rising in its relations with the United States. Stepped up tension in the Caspian would have spelled a catastrophe for both countries. At the same time Tehran profits from a certain degree of tension in the region that quenches business activity of foreign oil and gas companies in Kazakhstan and Azerbaijan, its two rivals.

Despite the fact that the U.S. war against international terrorism has boosted the developed countries interest in alternative raw material sources, the Caspian region will hardly develop into the second Persian Gulf. It has even fewer chances to replace it. Such developments will be even more improbable if OPEC joins the political processes in the region: it cannot afford the landslide of the oil prices that will happen if Caspian oil reaches the world market.

1 See: Z. Brzezinski, The Grand Chessboard, Basic Books, New York, p. 125.

2 See, for example: A. Konoplianik, A. Lobzhanidze, Kaspiiskaia neft na evraziiskom perekriostke, Moscow, 1998; Vneshnii faktor energeticheskoi bezopasnosti Rossii, Moscow, 2000; The Security of the Caspian Sea Region, ed. by Gennady Chufrin, New York, 2001.

3 See: G. Bahgat, The Caspian Sea Geopolitical Game: Prospects for the New Millennium, OPEC Review, Oxford, Vol. 23, No. 3, 1999, p. 200.

4 See: Ibid, p. 202.

5 See: K.S. Gadzhiev, Geopolitika Kavkaza, Moscow, 2001, pp. 415-420.

6 James A. Baker III Institute for Public Policy. Unlocking the Assets: Energy and the Future of Central Asia and the Caucasus: The Political, Economic and Cultural Analysis, Rice University, Houston, April 1998, p. 2.

7 For more detail, see: A.V. Malgin, Osnovnye napravleniia politiki Rossii v ontnoshenii energoresursov, Mezhdunarodnye i vnutrennie aspekty regulirovaniia politicheskikh i sotsialnykh konfliktov v Rossiiskoi Federatsii, Moscow, 1999.

8 See: I.S. Zonn, Trista let na Kaspii, Moscow, 2001, p. 91.

9 See: L.E. Skliarov, Problema statusa Kaspiia: more ili ozero? Doklady rossiiskikh ekspertov na mezhdunarodnoi konferentsii po Kaspiiu, Moscow, 1995.

10 See, for example: Iu.G. Barsegov, Kaspii v mezhdunarodnom prave i mirovoi politike, Moscow, 1998; L.E. Skliarov, op. cit.

11 Viktor Kaliuzhniy, Medlit s opredeleniem Kaspiia opasno, Nezavisimaia gazeta, 2 October, 2001.

12 See: N. Gnatovskaia, Status Kaspiia i geoekonomicheskie interesy Rossii, Ekonomika i politika Rossii i gosudarstv blizhnego zarubezhia, Moscow, February 2001, p. 91.

13 E. Grigorieva, O. Gubenko, Kremlbashi, Izvestia, 22 January, 2002.

14 The Treaty on Navigation between the U.S.S.R. and Iran of 1935 introduced delimitation of the water, or rather created a 10 mile-wide fishing zone for each state. In practice, the Soviet Union guarded the Astara-Hasan Kuli line (432.3 km), beyond which the Iranian ships were not allowed (see: L.M. Kulagina, E.V. Dunaeva, Granitsa Rossii s Iranom, Moscow, 1998, pp. 63, 69).

15 See: S. Novoprudskiy, Sektor nefti, Finansovye izvestia, No. 25, 6 May, 1999; O. Auezov, Kaspii nikak ne mogut podelit, Delovaia nedelia (Almaty), 7 May, 1999.

16 Ibid.

17 See: V. Shiriaev, Iuzhnaia neft zapakhla porokhom, Novye izvestia, 1 August, 2001.

18 See: A. Gadzhizade, Kto vinovat v intsidente na Kaspii? Nezavisimaia gazeta, 26 July, 2001.

19 See: E. Pulina, Syrievye resursy ozera-moria ostanutsia nevostrebovannymi, Nezavisimaia gazeta, 8 August, 2001.

20 Four plus one principle will dominate the talks on the Caspian [].

21 See: A. Dubnov, Poslednii kaspiiskii argument Rossii [].

22 See: V. Mukhin, Rossiia i Iran protiv proleta nad Kaspiem samoletov SShA, Nezavisimaia gazeta, 5 October, 2001.

23 S. Shermatova, Prizrak voiny nad Kaspiem, Moskovskie novosti, No. 3, 31 July-6 August, 2001.

24 See: A. Khanbabian, Tretia mirovaia voina mozhet nachatsia na Iuzhnom Kavkaze, Nezavisimaia gazeta, 18 August, 2001.

25 See: N. Pereverten, Protivostoianie na Kaspii obostriaetsia, Nezavisimaia gazeta, 6 June, 2001.

26 See: E.A. Telegina, M.A. Rumiantseva, S.V. Pokrovskiy, I.R. Salakhov, Vneshnii vektor energeticheskoi bezopasnosti Rossii, Moscow, 2000, p. 278.

27 See: S. Davydov, Berega kaspiiskikh protivorechii, Nezavisimaia gazeta, 27 June, 2001.

28 See: E. Akhundova, Proekt veka zainteresoval i Rossiiu, Obshchaia gazeta, No. 2, 10-16 January, 2002.

29 See: A. Cohen, The New Great Game: Pipeline Politics in Eurasia, Eurasia Studies (Ankara), Vol. 3, No. 1, 1996.

30 U. S. Russian Relations. Agenda for Renewal. A Report by the Russian and Eurasian Program of the Carnegie Endowment for International Peace, 2001, p. 28.

31 Ibid., pp. 28-30.

32 This was said by some of the highly placed U.S. officials during their visits to the region: the Assistant Secretary of State for Europes Countries and Eurasia Elisabeth Jones and General Tommy R. Franks, Commander in Chief, United States Central Command (see: V. Vassilieva, S. Kozlov, V. Panfilova, Bazy v obmen na stabilnost i protsvetanie, Nezavisimaia gazeta, 28 January, 2002).

33 See: K.S. Karol, Aziatskaia Ialta Busha i Putina [].

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