A few aspects of Russia’s policy in the Caspian region *
Viktor Kalyuzhny, Deputy Minister of Foreign Affairs of the Russian Federation, Special Representative of the President of the Russian Federation for Issues Concerningthe Settlement of the Status of the Caspian Sea
* This article is a condensed version of the author’s address to the 5th annual CERA Conference “A Tale of Three Seas - Eurasia, the Middle East and the Search for Energy Markets” (Istanbul, 25-27 June, 2002)
As a Caspian state, Russia regards the Caspian region as a priority in its foreign policy. The Caspian Sea is very important to us in every respect, including national security considerations. Hence, the need for a multifaceted Russian presence in the region, which, however, does not mean that Russia desires to isolate it from the rest of the world. In our view, we should promote security and stability in the Caspian region, strengthen good neighbourliness with all coastal states, promote cooperation within the “Caspian Five”, and develop constructive interaction with extra-regional partners.
A presidential meeting of the five coastal states, held in Ashghabad on 23-24 April last year, was the main political event of the year in the Caspian Sea region. The road to the Caspian Summit was not smooth. Relations between several Caspian states were rather difficult. Certain forces which were not interested in consolidating the “Caspian Five” hindered the convening of that meeting. For various reasons, the Summit was postponed several times. Yet, eventually it was held, which, according to the joint view of all its high level participants, was a great success for the “Caspian Five”.
In this connection, I cannot help responding to the attempts of certain analysts to present the fact that no final instrument was signed in Ashghabad as a failure, or even a “fiasco” for the Summit. At the same time, some often argue that a convention on the legal status of the Caspian Sea should have resulted in such an instrument. These kind of statements are based on either lack of information or lack of integrity.
It is well-known that, under the agreement between the five coastal states, a new legal status can only be approved on the basis of general consensus between them. It is also well-known that, on the eve of the Summit, along with concurring positions, there were still major differences between Caspian states concerning the future status of the Caspian Sea. If, under those conditions, the Summit had been convened with a view to overcoming all those differences once and for all, then there would be every reason to talk about a failure. But nobody ever set such a goal before the Summit. Its task was to define and compare, at the highest level, the positions of the parties and, on that basis, to agree on future lines of action. All these goals were achieved at Ashghabad.
Summing up the outcome of the Summit and its closing meeting, Mr. V. Putin, President of the Russian Federation, said: “This is the first time that we have gathered in this format.” It may be for the first time in the history of relations in the Caspian Sea region that the heads of the Caspian states have discussed all aspects of interaction in the Caspian Sea region in such detail. We agreed that we should continue our consultations in all the directions in which we cooperate”. This relates to fisheries, ecology, use of water space and mineral resources and, of course, the eventual determination of the final status of the Caspian Sea.
Thus, the Summit has provided a powerful incentive to the future negotiating process in the Caspian region. We will not over-dramatize the fact that the Caspian states still have differences over status. We fully understand that the status issues have a direct bearing on the national interests of the coastal states, and we do know how much hope they are pinning on exploitation of the region’s resources. Russia respects the views of each of its Caspian partners. As President V. Putin rightly put it, for the sake of compromise Russia has materially adjusted its initial position on the status of the Caspian Sea.
Summing up the outcome of the Summit, I would like to draw attention to the agreement by the five Presidents to hold future meetings on a regular basis. This essentially means a new phase in multilateral interactions among “the Caspian Five”, which is fully in line with current trends in the field of shaping a new multipolar world.
I would like to note in passing that the exchange of views at the Summit was not limited to status issues, and demonstrated a concurrence or similarity of positions held by the presidents on a broad range of urgent international and regional problems.
As for Russia’s approaches to the solution of the Caspian Sea status issues, these are well-known. The main elements of our position are a: “shared seabed and joint waters” formula and the principle of step-by-step progress towards settlement, since, as more than 10 years’ experience of negotiations has shown, it is not possible to reach agreement all at once on the whole set of problems relating to the Caspian Sea status.
As V.V. Putin put it in Ashghabad, it would be a mistake to divide the Caspian Sea into five separate seas. At the same time, Russia advocates the idea of a degree of expansion of the national jurisdiction of the Caspian Sea States over coastal waters. Here, an important new aspect has emerged in our position. It is well known that we had previously discussed the issue of establishing two coastal zones of agreed width in the Caspian Sea, the so-called zones of national control, in which each coastal state would perform border, customs, health and other controls, and zones in which states would have exclusive fishing rights. In Ashghabad, the Russian side proposed consideration of a possible simplification of the issue, with unification of these two. It was suggested that the possible width of such a zone could be 15 miles (it is well known that there is currently a ten-mile fishing zone in the Caspian Sea under the Iranian-Soviet Treaties of 1921 and 1940). Submitting that proposal, Russia proceeded from the assumption that any extension of the national jurisdiction of the Caspian states in coastal waters should not infringe the “shared waters” principle. Beyond these zones, the Caspian Sea should be open to vessels of all states of the “Five”.
Advocating a step-by-step approach, we propose to settle issues concerning the use of mineral resources, fisheries and protection of the Caspian environment as a matter of priority.
Over the past year, some major positive shifts have occurred in the field of settling the mineral resource use issues. In Moscow on 13 May, a Protocol to the 1998 Agreement between the Republic of Kazakhstan and the Russian Federation on delimitation of the seabed of the Northern part of the Caspian Sea for the purpose of realization of sovereign rights to use mineral resources was signed at Presidential level. The Protocol has established the modified median line dividing the mineral resource use zones of the two countries as well as the regime of joint development of mineral deposits located on the boundary between these zones. President Putin hailed the signing of that Protocol as a break-through in the Caspian settlement. As a result of protracted (over about four years) and often difficult negotiations, the Parties have managed to achieve a well balanced and mutually advantageous solution.
An agreement to divide adjacent areas of the Caspian seabed between Azerbaijan and Russia will be the next major step. Taking into account a similar agreement signed between Kazakhstan and Azerbaijan last November, it can be concluded that favourable conditions have been created in the northern and central parts of the Caspian Sea for a settlement of the issues of mineral resource use based on bilateral agreements.
It is no secret that bilateral agreements on the use of mineral resources have been criticized by our Iranian partners. While respecting their position, we cannot agree with this point of view.
It is well known that the idea of dividing the seabed while preserving the water column and water surface for common use was advocated as a compromise after it became clear that the concept of establishing a regime of common use of water and mineral resources in the Caspian Sea, i.e. condominium, was not realistic. Under that approach, states bordering and opposite to each other, i.e. states having seabed areas of the Caspian Sea adjacent to their coasts that overlap and therefore require delimitation, become directly interested in solving the issues of use of mineral resources. Naturally, it is those states that should reach agreement with each other on the delimitation of the seabed, including on a delimitation methodology. No other state is in a better position to do that or is more interested in so doing.
The legal vacuum in the sphere of use of natural resources in the Caspian Sea region has given rise to the problem of disputable deposits which, in turn, has led to friction and tension and is fraught with conflicts. Agreements on the delimitation of the seabed have tended to remove the disputable points problem, thus eliminating the threat of conflicts and promoting mutual understanding and trust between neighbouring states. As a result, we are witnessing an improvement of the political climate in the region.
Economic benefits are also evident - conclusion of bilateral agreements makes it possible to initiate the exploitation of the deposits that, in the situation of controversies, were not developed.
We regard bilateral agreements on the use of mineral resources as a valid and useful practice and as a contribution to the solution of that problem in the Caspian region as a whole. In our view, the experience gained in the Northern and central parts of the Caspian Sea could be used for solving disputes in its Southern part. Situation there is difficult but not hopeless. Patient negotiations and spirit of compromise are needed.
And in those cases when the parties cannot directly agree with each other, Russia suggests that an international legal mechanism be established to solve the differences in the Caspian Sea region - an independent Caspian arbitration composed of authoritative lawyers from coastal states. In our opinion, there is no need to involve any “third forces” in the solution of the Caspian controversial problems. This would not be in line with the common understanding, that determination of the legal status of the Caspian Sea as well as forms and methods of its use is a prerogative of the Caspian states themselves.
It is well known that the state of Caspian Sea environment is worsening and that the situation of its unique sturgeon population is nearing a critical point. That is due to a great number of factors, but probably the most important among them is lack of international legal framework which would make it possible to unite efforts of the Caspian states and take urgent joint measures to stabilize and improve the situation. It is for that reason that Russia is so active in urging our Caspian partners to conclude, without further delays, a set of pentalateral “ecological” agreements on fishery and environmental protection.
At the Ashghabad Summit, Russia confirmed its proposal to establish, on a permanent basis, a pentalateral intergovernmental Caspian Centre to monitor the state of the Caspian environment. We stressed that the activities of that Centre would significantly increase the practical output of the funds spent by each Caspian state for environmental protection.
In our view, ecological and other agreements should be negotiated simultaneously and should be put into effect as they are prepared without any conditions as to the progress in respect of other instruments, including the convention on the status.
Taking into account the existing realities, Russia’s approach to the establishment of a new Caspian Sea status is generally flexible and pragmatic. Russia is prepared to conclude agreements with all countries; if, however, it is not possible to reach agreement simultaneously with all states, we will rely upon bilateral arrangements. When consensus on the whole set of issues is not possible we will carry out negotiations on individual aspects.
Now a few words about the energy sector. Due to historical reasons, Russia forms an integral part of the Caspian oil and gas complex and is a traditional partner of the coastal states in the sphere of fuel and energy. We intend to further develop this cooperation, including transportation of Caspian oil and gas to global markets through the territory of Russia.
We have never denied that Russia has quite specific business interests, and we are not denying it now. From the Soviet Union we inherited a unique and highly efficient pipeline network. To characterize the existing situation, the term “monopoly” is now used; moreover, it is used deliberately in its negative sense. However, it is only one of many realities emerged as a result of the collapse of the Union. No one has ever created purposefully this situation. And what shall we do about it now? Should we deliberately reduce the utilized capacity of our pipelines? Neither in Europe no overseas did we meet such altruism.
Pipelines form part of our national wealth and we are simply obliged to make them working for Russia. And this means that we have to ensure the maximum use of their capacity to receive appropriate income from transit. It is clear that in order to solve the issue of the use of our pipelines’ capacity we must create favourable conditions for oil and gas producers. This concerns transit volumes and tariffs satisfactory for them, observance of the interests of high-grade oil producers, provision of safety and security. And the emerging situation is that of interdependence, rather than unilateral dependence. We are also dependent both on producing countries and companies and transit states through which Caspian hydrocarbons go from Russia to Europe.
I shall not assert that we have already solved all those issues, but we are solving them.
We negotiate with our Azerbaijani partners a broadened cooperation on the Baku - Novorossiisk route, including transit tariffs and issues concerning preservation of quality of the transported raw materials. The pipeline capacity could be increased, without major additional costs, to 18 million tonnes.
After the commissioning of the Tengiz - Novorossiysk pipeline of the Caspian Pipeline Consortium and signing of the long-term agreement with Kazakhstan on the transit of oil, Russian-Kazakh cooperation has raised to a new level. CPC’s design capacities permit to meet the export requirements of Kazakhstan in a long term. However, this company is not to become a monopolist. The capacity of the Atyrau-Samara pipeline has been increased to 15 million tonnes a year. Commissioning of the Baltic pipeline system at the end of the past year added to attractiveness of this route. Druzhba and Adria systems integration project can become another “door” to global markets for Kazakhstani and perhaps Azerbaijani oil. Together with the Novorossiysk - Burgas - Alexandroupolis route project which is under discussion, the above-mentioned pipelines would make it possible to divert part of oil flows, bypassing the Black Sea straits.
In my opinion, sincere concern about the issue of the oil “overburden” of the straits is often accompanied by artificial exciting of passion. Taking into account the growing traffic via the straits, we do understand the concern of Turkey about the need to ensure safe navigation and protection of the marine environment within their borders. Russia is cooperating and is prepared to continue to cooperate with Turkey in finding solutions to those issues both bilaterally and within international organizations. At the same time, the Montreux Convention governing the regime of the straits, signed in 1936, should be strictly observed.
At the Ashghabad Summit President V. Putin clearly defined Russia’s position on the construction of new pipelines. “We are by no means allergic to the multiple energy flows concept. It is important, however, that politics should not be behind the choice of new pipeline routes and that those projects should be valid both economically and ecologically. Whether Russian companies should participate in specific projects, they should decide it themselves according to whether those projects are commercially interesting for them. This fully relates to Baku - Tbilisi - Ceyhan pipeline project. Lukoil company, for example, did not consider that project economically attractive; by the way, the American Exxon-Mobil firm took the same view. As a representative of the Russian Government, I welcome that decision because I am first of all concerned about the utilized capacity of the Russian pipeline infrastructure, of which the BTC project is a competitor. However, the Government is not able to order the Lukoil private company what position it should take in that matter. By the way, another Russian company - Stroitransgaz - decided to take part in the tender for the construction of a long BTC section across the territory of Turkey. It means that the company considers the project lucrative.
I think that it is the commercial aspect of the issue that is underlined in the part of joint statement by President V. Putin and President G. Bush on a renewed Russian-American energy dialogue that concerns multiple options of Caspian pipelines.
I would like to note that, together with Northern and Western vectors, there is also such a promising Eastern direction for Caspian hydrocarbons. According to reliable forecasts China alone plans to import 50 million tonnes by 2003, 90-100 million tonnes by 2010, and 200 million tonnes of oil annually by 2020.
I cannot help mentioning also the Southern, Iranian direction, which could have demonstrated its high competitiveness already now, if not hindered by the well-known political factors.
As to the intensification and development of regional cooperation in the field of energy, the idea of creating a gas alliance within the CIS with the leading role of the Caspian states seems promising. Joint declaration by the Presidents of Russia, Kazakhstan, Turkmenistan and Uzbekistan on a long-term strategic cooperation development in the field of natural gas production and transportation, adopted last March 1 in Alma-Ata, became a milestone in that sphere. The alliance is to ensure the protection of the interests of producing countries and will promote the resource potential growth and efficiency of the gas sector in the Caspian region. Consumers will also benefit from that project: regulation, security and stability of the natural gas market will improve.
Since Eurasia is mentioned in the theme of our Conference, I cannot but remind you that in May 2001 the treaty on the establishment of a Eurasian Economic Community (EurAsEC) concluded between Byelorussia, Kazakhstan, Kyrgyzstan, Russia and Tajikistan entered into force. Last May, Moldavia and Ukraine receive an observer status in the Community. The purpose of the Community is to develop a common economic space providing for a common economic policy and establishment of a common market of services, labour and capital, harmonization of national legislations, implementation of agreed social scientific and technological policies. The Community is open to all states sharing its goals and principles. It is not a counterbalance or alternative to the CIS and is called upon to promote cooperation within the common format of the Commonwealth of Independent States.
A few aspects of Russia’s policy in the Caspian region * Viktor Kalyuzhny
The Second International Oil and Gas Summit-The Caspian in the 21st Century: from Politics to Business. Results and Recommendations
Kazakhstan’s Position Regarding the Legal Status of the Caspian and Outlook for Economic Development of the Region Bulat Sarsenbayev
Legal Framework Of Kazakhstan’s Telecommunications Sector Thomas C. O’Brien, Victoria P. Simonova
Alternatives in international dispute resolution* Sigvard Jarvin