Caspian Energy And Legal Disputes: Prospects for Settlement








June 2003



© Ifri 



In the past decade, the Caspian Sea has become one of the world’s most promising new regions for petroleum investment and development, as well as the focus of intense international competition for access and pipeline routes. The problems of ethnic tension, instability, slow democratisation, and geopolitical contest in the region are of great concern to neighbouring countries, major external powers and investors.


Border disputes and conflicting legal claims to offshore oilfields of the littoral nations of Azerbaijan, Iran, Kazakhstan, Russia, Turkmenistan are among serious risk factors for investors engaged in the development and export of hydrocarbons from the Caspian Sea.


Disputes over the legal status remain an omnipotent barrier for a resolution of the political and economic problems among the littoral states. The present situation, despite serious political and legal quarrels, is fortunately calm. However,
the absence of conflict or visible confrontation does not mean that unexpected tensions are ruled out. On the contrary, there are causes for predictions and anxiety, which have to be detected and resolved. Whether to consider the legal status of the Caspian Sea as “closed” or “opened”2 has direct implication towards the exploitation of the sea-bed or continental shelf zones under the principles of “common ownership” or “separate ownership”.


This paper aims to provide an overview of the Caspian energy prospects and politics on the global scene with a particular emphasis on the legal disputes and their impact on business operations.


It also elaborates on the investment environment, the geopolitical stakes and country positions for each key player as they relate to the legal arguments that are randomly advanced according to the perceived national interests. Turkey’s position as a consumer, transit country and security provider for Caspian energy shipments in relation to other major players active in the region is also of special interest to the paper. The paper puts forth a series of ideas for reaching a settlement of the disputes in the Caspian region.