Kazakhstan’s Position Regarding the Legal Status of the Caspian and Outlook for Economic Development of the Region
Bulat Sarsenbayev, Deputy Director of the International Legal Department of the Foreign Ministry of the Republic of Kazakhstan
In this article, I would like to review the approach of the Kazakhstani side to defining the legal status of the Caspian and the outlook for economic development in this region.
With an area of some 440,000 sq km, the Caspian is the largest landlocked body of water in the world. 90% of the global sturgeon resources are concentrated here. The region’s wildlife is very diverse: over 20 endangered species of animals and the same number of rare plant species live and grow there. The Caspian and adjacent territories boast a huge hydrocarbon potential.
Until 1991, there were two documents concerning the Caspian the Treaty between the RSFSR and Persia of 1921 and the Agreement on Commerce and Navigation between the USSR and Iran of 1940, which had basically regulated fishing and navigation. The current geopolitical situation requires the formation of a comprehensive legal status for the Caspian.
Dividing the Caspian
Kazakhstan supports dividing the seabed and subsoil of the Caspian into national sectors along a median line, and establishing littoral and fishing zones of a certain width. Under maritime law, the littoral zones will be sovereign state territory, just like in a territorial sea. Kazakhstan backs a stepwise approach to defining the legal status of the sea and considers it feasible to settle the issues of dividing the Caspian shelf and environmental problems in the first stage.
In our view, the following limits should be defined:
• the limit of full state sovereignty, having set corresponding fixed borders in the sea;
• the limits of certain sovereign rights which could stretch beyond the extent of sovereign state territory, in particular those regarding the seabed sector, its mineral resources for the purpose of subsoil use, laying pipelines, etc.
It is well known that negotiations between the Caspian states to define the legal status of the Caspian are ongoing.
Each of the five littoral states has a sovereign right to its own vision of the future legal status of the water body.
Notwithstanding the discord on the issue between states, there is progress in the negotiations in that all the parties are agreed on the possibility of applying a division principle to the Caspian. The positions are closest concerning the territorial seabed regimen. All the countries acknowledge that it is possible to divide the seabed into national sectors, as it is clear that the concept of complete sector-led division that the Azerbaijan Republic and the Islamic Republic of Iran are adhering to comprises a division of the seabed.
This is confirmed by the fact that the Agreement on Delimiting the Northern Part of the Caspian Sea for Exercising Sovereign Subsoil Use Rights was signed between Kazakhstan and Russia in 1998.
On 13th May 2002, the protocol of the above agreement was signed in Moscow. The protocol, which is an addendum and an integral part of the agreement, comprises the co-ordinates of the modified median line and conditions of joint use of mineral resources in the Kurmangazy, Central and Khvalynskoye structures-located along the agreed modified median line-by authorized Kazakh and Russian companies.
On 29th November 2001, a similar agreement was signed between Kazakhstan and Azerbaijan.
It is possible that a seabed division agreement will be signed with Turkmenistan.
As to recent statements in the Iranian press regarding the non-expedience of signing bilateral and trilateral agreements, the following should be noted.
It is no secret that for the time being all the littoral states are carrying out practical activities aimed at exploration and development of mineral resources in the seabed and subsoil of the Caspian. The fact this issue remains unsettled often leads to tensions in the region, has a negative impact on the investment climate in the Caspian states and is slowing down their economic growth. This makes this sphere a high priority for settlement.
The fact that Kazakhstan and Russia were the first countries to reach an understanding and accord on developing seabed resources once again confirms the inclination of our states to spur on strategic co-operation in all directions. Moreover, the protocol of the Agreement of 1998 testifies to the viability and appropriateness of our approaches to resolving Caspian problems; a strict division of subsoil use rights, and joint work on the effective use of the water and biological resources of the Caspian, preserving its unique ecosystem.
I would like to stress that the Soviet-Iranian agreements of 1921 and 1940 do not cover the most important aspects of developing the mineral resources of the Caspian seabed and subsoil. However Kazakhstan does not exclude the possibility of applying certain provisions of the above agreements when developing the Convention on the Caspian Legal Status, tailoring them to the changed geopolitical situation.
Signing bilateral international agreements on subsoil use is undoubtedly a success and points to the in principle co-ordinated approach of the three countries to reaching a consensus. We can see that a concept of defining specific co-ordinates of the line to delimit national seabed sectors through direct negotiations between corresponding states with neighbouring and opposite shores is being put into practice; one that meets the standards of international law and global practice in delimiting water territories.
In the event that these initiatives are implemented successfully, the legal formulation of the Kazakhstani sector of seabed and subsoil will be complete.
However, time is needed to reach penta-lateral agreements; it is crucial that the existing positions are co-ordinated through peaceful and civilized means.
We would hope that the principles and approaches to co-operation in the Caspian tested by Kazakhstan and Russia are welcomed by all the Caspian states. This will help everybody to set about co-ordinating a comprehensive Convention on the Legal Status of the Caspian.
Such a unique natural phenomenon as the Caspian Sea should be the property of all its littoral states and become a factor strengthening stability and co-operation in the Caspian.
As noted above, it seems reasonable to apply a stepwise approach to reaching a penta-lateral agreement on the whole raft of elements of the future status of the Caspian. The essence of this lies in first settling the urgent aspects. Environmental protection is one of these. The existing degradation of the Caspian environment may take an irreversible turn and lead to negative consequences (a ban on fishing, disappearance of the sturgeon population, a human-aggressive littoral natural environment, etc). For instance, last year on the recommendation of the CITES authorities, commercial catches of sturgeon in the Caspian were suspended. In subsequent years no legal catches of sturgeon may be permitted. There are certain conditions that would dictate such an unfortunate turn of events. It is no secret that closing down fisheries in littoral states would lead to negative socio-economic consequences for those countries. It is crucial to take collective measures to preserve the natural environment and biological resources of the Caspian.
A number of political statements and international agreements have established that all the Caspian states are striving for peaceful co-existence, and understand that the Caspian is their common property, seeing their task as harmonizing each other’s rights to the sea, taking account of national interests, justice and rational compromise. The Caspian states do not plan to solve the status problem by warlike methods.
The Caspian is a landlocked body of water which is characterized by an ongoing growth of offshore drilling and exploration operations and transport of oil through pipelines and by vessels, which poses a serious threat to the ecology of the Caspian.
The Caspian states, together with international environmental organizations, have developed a number of draft agreements on environmental protection in the Caspian: on using and preserving the biological resources of the Caspian, on protecting the Caspian’s environment, on setting up a committee for preserving and using the water biological resources of the Caspian, on co-operation between the Caspian states in hydrometeorology and environmental monitoring in the Caspian, and a draft framework convention on protecting the environment of the sea and the population of the littoral zone.
However the above projects remain just words. Certain littoral countries are only willing to consider sector-led agreements, environmental protection ones included, once an accord has been reached on the Convention on the Caspian Legal Status.
On 23rd-24th April 2002, a summit of the Caspian states was held in Ashgabad. The presidents of Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan participated. The Heads of State expressed the opinion that it has long been crucial to hold such a forum and define the status of the body of water. The common opinion was that the Caspian status problem should be solved stage by stage, taking account of the interests of all five littoral states.
The well-known substantial discords in approach and position on regulation of the status among the parties involved were again exposed during the summit.
Nevertheless, several conclusions can be drawn, summarizing the results of the summit:
• The summit, which crowned years of complicated negotiations, can be considered as a historic event, for it demonstrated the readiness of the states to regulate all discord at the negotiating table and not to allow the Caspian to turn into a new hotbed of tension.
• The emerging tradition of regular meetings is expected to create a mechanism of co-operation which will help the countries in the region to find common ground in a stepwise definition of the status of the Caspian, and ultimately gain the economic benefits that a regulated status will bring about.
• The feasibility of regulating the most urgent issues in the Caspian bilaterally and trilaterally has been confirmed, as reaching a penta-lateral consensus on the future legal status of the Caspian will take more time.
We would hope that the tested approaches and principles of co-operation will predominate in the Caspian and be accepted positively by all the Caspian states. This will allow us to move on to co-ordinating a comprehensive penta-lateral Convention on the Legal Status of the Caspian. Kazakhstan is proceeding on the grounds that such a unique natural phenomenon as the Caspian should be the property of all the littoral states and become a real factor in strengthening stability and co-operation in the Caspian.
The Economic State of the Region at the Current Time and the Outlook for Development
According to foreign experts’ estimates, energy resources will continue to play an important part in development of the global economy in the 21st century; so satisfying the growing demand for energy will still be topical. Over the next 20 years, international demand for hydrocarbons will grow by some 50%. Now that oil and gas are an engine of economic growth of the majority of countries, it is crucial to seek new energy sources in order to lessen negative impacts on sustainable development of international economies.
The Caspian, and, even more, Kazakhstan, have great potential in this regard. The main hydrocarbon reserves are concentrated in 14 large fields in West Kazakhstan.
The Caspian shelf is the item of greatest interest among the newly discovered oil-bearing territories in Kazakhstan. Recently, a consortium of companies completed drilling operations in West Kashagan. In compliance with test results, the management of the Agip KCO North Caspian consortium officially acknowledged large oil reserves in the Caspian off Kazakhstan.
This leads us to believe that the Caspian is one of the richest basins in the world. Taking account of this, a forecast can be made that the Caspian’s share of worldwide oil and gas production will be very high. This explains why not only the Caspian states, but also the entire world community, is taking a close interest in this region. In the event that the optimistic forecast of reserves is proven, at least $10-12bn in investment will be required per year.
Kazakhstan has been encouraging investment in the development of its oil and gas sector since gaining independence. The Kazakh government has succeeded in creating a legal framework meeting international standards and fostering a favourable investment climate in a short time.
Last year’s discovery of the Kashagan field changed attitudes not only towards Kazakhstan, but towards the Caspian region as a whole. The development of oil and gas fields in Kazakhstan is complicated generally by a number of factors, with the region’s remoteness from main oil markets being the most problematic.
Indeed, Kazakhstan’s big oil is located in the core of the Eurasian continent, far away from main transport routes. Therefore, resolving the oil transport issue is an international problem. Today, Kazakhstan’s transport potential comprises some 35m tonnes per year. However the growth in production from explored and developed fields requires an increase in the capacity of export oil pipelines. Developing projects in the Caspian shelf will also demand a considerable increase in the total capacity of export systems.
This is why several important projects for Kazakhstan’s oil sector are currently at the feasibility study stage of development.
Kazakhstan has performed a huge amount of work to study the routes of possible export oil transport pipelines from Kazakhstan to world markets. The historic location of Kazakhstan as a crossroads of commercial routes should foster the formation of transport corridors for energy. Astana supports a multi-directional principle in transporting hydrocarbons.
There is no doubt that the CPC is one of the main pipeline projects. On 27th November 2001, a ceremonial loading of oil into tankers took place.
Over the next ten years, oil production in Kazakhstan will be boosted and the CPC alone will be incapable of exporting all Kazakhstan’s oil. Therefore, Kazakhstan is playing an active part in developing alternative export oil pipelines.
Our states are providing political support to all promising export oil pipeline projects. Currently the government of Kazakhstan, together with oil companies, is studying the financial, economic and technical terms of various projects.
Taking account of the country’s vast gas reserves, the government is paying close attention to developing the gas industry and studying ways of exporting Kazakh gas to world markets or utilizing it domestically. A project to develop one of the largest fields in the region-Karachaganak oil and gas condensate field-developed by an international consortium, is receiving the most attention.
In addition, the subsoil of the Caspian also contains large reserves of natural gas. To carry out this task, Kazakhstan intends to co-operate closely with its Caspian neighbours. In our opinion, only intensive co-operation between the gas-producing countries of the Caspian will ensure that an effective system is built for exporting gas to world markets.
Many countries boasting large hydrocarbon reserves are focusing on the oil and gas sector as a strategically important direction in furthering economic development. To provide economic security and retain stability in the energy markets, Kazakhstan is planning to develop co-operation with large producers of hydrocarbons. The first step towards this goal was the country’s participation as an observer in sessions of the Oil Ministers of OPEC countries.
In conclusion, it should be emphasized that hydrocarbon reserves, rates of developing oil and gas fields and the successful policy pursued by the government of Kazakhstan to develop export pipelines, all point to the active role that Kazakhstan will play in the world oil market in the 21st century. The world is witnessing the formation of a new oil empire in the Caspian which will have a great influence on global energy issues for many decades to come.
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