The Caspian- a Sea or a Lake?

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Case Description

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Geolocation:	40° 8' 3.3573", 51° 23' 45.9705"
Total Population	10000000 million
Total Area	400000400,000 km² 154,440 mi² km2
Predominent Land Use Descriptors	industrial use, urban
Important Uses of Water	Agriculture or Irrigation, Fisheries - wild, Industry - consumptive use

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Summary

Located in Western Asia, on the Eastern edges of Europe, the Caspian Sea is the biggest land-locked body of water in the world. With a surface area of roughly 400,000 km², it has characteristics common to both seas and lakes. It is often referred to as the largest lake in the world. Many fresh water rivers feed the Caspian, and once the water is collected it undergoes a special evaporation process, which creates salinity, hence it is not a fresh water lake. The Caspian’s special characteristics, such as high salinity, its climate and its isolation have created a unique eco-system. The Caspian basin collects 80% of its water from the Volga River, flowing in from Russia in he northwest. Saline pools present in the Caspian basin, attract a variety of bird life and biodiversity. The water of the Caspian is home to over 400 unique aquatic species, including the world-renowned sturgeon that makes for 90% of the world’s caviar catch. However, overfishing, oil exploration and exploitation, the discharge of wastewater as well as canals, which have introduced new water sources into the Caspian, have been jeopardizing this eco-system. As a result, the flora and fauna of this ecosystem have been affected.

The Caspian Sea is surrounded by 5 littoral states: Iran, Russia, Azerbaijan, Kazakhstan and Turkmenistan. In the past, prior to the fall of the Soviet Union, the only two states in the region, Iran (Persia) and the Soviet Union, signed a treaty agreeing on general terms for sharing the Caspian. Following the fall of the Soviet Union in 1991, three new states emerged, Azerbaijan, Turkmenistan and Kazakhstan, challenging the former treaty. Although since 1991, all five states have participated in many conferences of all levels, including the first summit in 2002 in Turkmenistan, and the second summit in 2007 in Tehran, they have so far failed to reach a compromise on the legal status of the Caspian Sea.

With a long history of oil and gas in the Caspian, the region is one of the oldest producers of oil in the world. However, new political developments have made Caspian oil more attractive globally as a possible alternative to the Persian Gulf oil (at least to some extent), making it a potential point of regional confrontation. The region is potentially the largest producer of oil in the world with oil reserves of more than 200 billion barrels (compared to Saudi Arabia’s 250 billion barrels), as well as 800 billion cubic meter of gas. However, territorial disputes are making it difficult to gain data on the true figures of the reserves, and these numbers are only estimates no one really knows how much oil exists. Since the collapse of the USSR, three new major factors were added to the Caspian story, adding more interests and tension to the disagreement on its legal status:

1. Discovery of new reserves. 2. New post-soviet states are striving for foreign investment and are therefore of the few countries in the world with oil reserves welcoming western oil majors. 3. These new countries have no direct export access to the world market.

Natural, Historic, Economic, Regional, and Political Framework

Timeline

Prior to 1813- Control of the Caspian shifts between the two major players in the region, Russia and Persia.

1813+1828- Gulistan Treaty and Turkmenchai Treaty - giving the Russian Empire the full rights of the waters.

1921- Russia and Persia sign a new treaty, granting Persia with its legitimate maritime access and water rights to the Caspian.

1922- Following the formation of the Soviet Union in 1922, some provisions to the treaty were necessary, however the formation a new treaty is delayed.

1934- A secret Soviet directive draws an unofficial borderline between Astara and Hasankuli, which in essence becomes the border on the ground.

1940 - WWII pressures the Soviets and Iran to ensure their equal rights to the Caspian. The 1940 treaty grants both countries with a 10-mile fishing zone while the rest of the Caspian is considered common with exclusive rights for navigation. Both countries violate the 10-mile fishing zone occasionally with no real consequences, but vessels of neither country ever cross the unofficial borderline, with the exception of WWII. Neither this treaty nor any of the former ones ever addresses the issues of whether the Caspian is a Lake or a Sea, nor were the water and seabed boundaries determined.

1958- The concept of ‘continental shelf’ is introduced.

1982- Conclusion of the Convention of the Law of the Seas in 1982, also introduces the concepts of EEZ, coastal jurisdiction and obligations to ecological norms.

1991- Following the collapse of the Soviet Union, three new countries are introduced to the Caspian: Azerbaijan, Turkmenistan and Kazakhstan. A new understanding and agreement on the Caspian’s boundaries is mandated between the five littoral states.

1996- Four of the five states, excluding Azerbaijan, agree that each has the right to exploit the Caspian and its resources 45 miles from its coast. They also agree that the sea beyond the 45 miles provision will be shared jointly. Azerbaijan, objects this agreement, as some of its oil wells are far beyond 45 miles from its coast. The agreement does not discuss the legal status of the Caspian, and the dispute remains unresolved.

1997- Kazakhstan and Azerbaijan bilaterally agree to adhere to the borders of the sectors along the median line. Kazakhstan and Turkmenistan sign a communiqué following median line.

1998- Russia and Kazakhstan agree to follow media line concept until a permanent solution for the legal status of the Caspian is found.

2001- Russia and Azerbaijan agree to follow media line concept until a permanent solution for the legal status of the Caspian is found.

2003- All five littoral states sign the Framework for the Protection of the Marine Environment of the Caspian Sea (Tehran Convention). First legally binding regional agreement signed by all five states.

2007,2008, 2011,2012,2014- Meetings of ‘Conference of the Parties’. In the mean time a status quo regime, which involves bilateral treaties around the North part of the Caspian Sea, and disputed boundaries around the South part of the Caspian.

Issues and Stakeholders

Legal Status of the Caspian

NSPD: Values and Norms
Stakeholder Types: Federated state/territorial/provincial government, Sovereign state/national/federal government

Main issues of conflict between the five littoral states:

1. Demarcation of the Caspian’s waters and seabed
2. Access to mineral resources (oil and natural gas)
3. Access to fishing and navigational rights
4. Access to international water, mainly through canals connecting Russia’s Volga River to the Black and Baltic Sea.
5. Environmental responsibility and protection of the Caspian basin.

At the basis of the argument is the fact that depending on interpretation, legally the Caspian Sea can be labeled as either a Lake or a Sea, each has different implications:

• The Caspian labeled as a Sea, will be recognized in international law under the United Nations Convention of the Law of the Seas (UNCLOS). An important criteria to determine the Caspian as a Sea is access to an ocean, or the existence of a “narrow passage” linking the body of water to the other sea or ocean. For those who support labeling the Caspian as a Sea, its connection with the Black Sea via the Volga-Don canal and the Baltic Sea via the Volga-Baltic canal is sufficient to comply with the criteria. If the Caspian is labeled as a Sea, each littoral state is entitled to 12 nautical mile of territorial sea as determined from its maritime coastal baseline, with water beyond that point considered international waters. UNCLOS also recognizes a 200 nm Exclusive Economic Zone (EEC) that recognizes a sovereign’s right to resources, but does not grant sovereignty of the water.

• The Caspian labeled as a Lake or internal water, is not subject to UNCLOS. Under international law, the territories of internal waters are determined similarly to those of land boundaries, through bilateral/multilateral treaties and agreements between the bordering states.

Each legal status implies different strategic impacts on each of the five littoral states; as a result each holds a different position on the matter that favors its own interests:

Iran: Wants the Caspian to be labeled as a Lake and take the condominium approach, since if it is considered a Sea Iran’s rights will be limited proportionally to the length of their seashore, which will consequently grant it with a smaller share. Iran insists on defining the Caspian as a Lake and splitting the water into 5 equal parts, granting 20% of the water and seabed to each of the littoral states. Kazakhstan and Azerbaijan insist that if it is labeled as a Lake, then Iran can only get a 13% share proportionally to the length of its seashore.

Russia: While the three landlocked states, Azerbaijan, Kazakhstan and Turkmenistan, find it vital to gain access to the Volga River, Russia opposes the use of its inland waterways to foreign vessels. If the Caspian were defined as a sea, then there would be stronger legal demands for Russia to grant access to foreign vessels into its Volga River.

Azerbaijan and Kazakhstan: the two countries holding the highest deposits of oil in the Caspian region advocate that the Caspian should be considered a Sea. If it considered a Lake, then Iran’s claim to split the rights 5 way, means they will be getting a lesser share. In addition, labeling the Caspian as a Sea strengthens their argument regarding their right to use the Volga-Don canal. Azerbaijan, objects the 1996 understanding between the other 4 countries regarding the 45 NM rights as some of its oil wells are far beyond 45 miles from its coast.

Turkmenistan: With a slight tilt towards defining the Caspian as a Lake, seems to be changing its preference periodically. Caspian Sea Optional divisions

Stakeholders Assessment Summary

The littoral States:

All five states are suffering from environmental damage and pollution, endangering the ecological system in their area of the Caspian as well as the health of their population. Although some states are suffering more than others in terms of environmental damage, all seem to put the environmental issue second in priority to their rights to the Caspian resources.

• Iran – Holds the fourth largest proven oil reserves in the world, and the second-largest natural gas reserves. However, international sanctions are greatly impacting the Iranian energy sector, and it requires further foreign investment to bring it to its full capacity. Iran has an important strategic access to the Strait of Hormuz, an important oil export route.

• Russia – The second largest producer of natural gas in the world, and third largest producer of liquid fuels in the world. Russia’s economy is highly depended on its energy sector, with oil and gas making more than 50% of its federal budget revenue.

• Turkmenistan - The least developed of the Caspian countries, holding some of the largest natural gas reserves in the world. However, its geographical position, far from end-user, together with harsh competition from other energy-rich states in the region, which are more developed and attract more foreign investment and its rigid economic structure, are making it difficult for Turkmenistan to become a stronger player in the energy market.

• Kazakhstan - Holds the second largest oil reserves and oil production among the former Soviet republics after Russia.

• Azerbaijan – Wholly located within the Caspian Sea basin. With 90% of the Country’s export accounted for oil and gas exports (according to IMF data), the development and exports of oil and gas are essential for its economy. Azerbaijan serves as one of the region’s important strategic opening to the west.

In addition:

• Global and regional environmental bodies and NGOs -Including the UNEP, are seeing the enormous ecological damage to the Caspian Sea, due to a long list of misuse of its resources. However, in the current status quo situation it is difficult to determine the states’ jurisdictions and responsibility for the damage, the repair or the required changes in conduct.

• International energy companies together with the US and Europe Concerned with shortening access to the energy reserves in the region. Each of these stakeholders is interested in an agreement that will favor its preferable partner in the region.

Negotiations and current situation

Since 1991, there have been numerous multi-party negotiations regarding the legal status of the Caspian Sea. Currently the dominant form of agreements on the general issues is bilateral and not regional. The one issue the parties were able to supposedly agree on is an environmental plan to minimize the damage to the environment in the region, and they have been working together with the UN and the world bank to achieve this.The focus on the environment certainly brought all parties to collaborate. However, other issues are successfully addresses. In addition to the partitioning of the rights to the Caspian, there is the contentious issue of the passage through the Volga River. Also, it seems like the countries are not too keen on joint energy projects (although Russia and Turkmenistan are cooperating on one). Moreover, although the parties are proudly presenting their collaboration on the environment issue, it seems like practically there is not much being done- the parties are committed to a mutual plan, but this plan seems to be vague, with no mechanism for enforcement and does not include much mutual work but rather individual national work. The littoral states were able to form a plan for environmental research in the Caspian, with specific requirements for each state to provide an environmental impact assessment regularly, and share it with the other member states. They also agreed to have all five States present each other with their execution of the mutually agreed upon plan for preserving the environment. They also conduct some regional research projects, but there is no permanent mutual body running these studies.

The Member States have agreed to create a governing body, the Conference of the Parties (the “Conference” or “COP”), for the purpose of applying the Tehran Convention and an administrative body, the Secretariat, to assist with that task. It is unclear how effective these bodies are as in essence the body does not have any legal authority, and so there is no true way to enforce decisions. Also, it does not hold frequent meetings (once every 1-2 years). Some mutual bodies exist in the environmental context however they seem to have little capacity, authority or influence (CEP-Caspian Environment Program). The solutions presented in the case are generally bilateral and are defined as temporary until a permanent solution is found. The reality of the Caspian sitting between all five states means that if not all the parties agree to a solution, its reliability is questionable. Hence, the solutions are temporary at best, and do not have political credibility. The Tehran convention treaty is also not very strong politically as it has no mechanism of enforcement and includes vague language in terms of conflict and resolution mechanisms. Any dispute arising between the Member States regarding the “application or interpretation of the provisions” of the Tehran Convention will be “settle[d] by consultations, negotiations or by any other peaceful means of their own choice." It seems that the energy issue, which is high in its stakes and high in uncertainties, is demotivating the parties to reach a solution as they don not want to commit to something that might have different future implications then expected.

The Member State are required to “designate a National Authority to coordinate implementation of the provisions” of the Tehran Convention . The parties do meet regularly and have the Secretariat body as their coordinator, however it seems like the meetings and their consequential plans are of the ‘rubber stamp’ type, and are advancing the issues including the environmental one.

Openning New Oil Export Routes

NSPD: Assets
Stakeholder Types: Sovereign state/national/federal government

Additional contention in the region: Oil export routes- with the discovery of new oil and gas reserves, the question of what route an oil pipeline would travel out of Caspian, and eventually out of the Caspian Sea, has become a contentious dispute. In this regard three main options are being discussed: 1. The Northern option (Russian) 2. The Central option (Caucasus) 3. The southern option (Iranian)

Obviously, each state wants the pipeline to pass through its territories in order to gain financial benefits. External international players with strong interests, such as the US and Europe, concerned with global energy stability, and therefore want to open a route that bypasses Russia in order to diversify the location of pipes. The southern (Iranian route) is also one the US would like to avoid since it has diplomatic relations with Iran.

Environmental Impact

NSPD: Ecosystems, Values and Norms
Stakeholder Types: Federated state/territorial/provincial government, Environmental interest

Environmental Damage

The five littoral states are blaming each other for the damage to the environment, with Russia cynically using that as an excuse to slow down the entry of foreign oil companies. The reality is all five are contributing to the environmental damage, with overfishing, untreated wastewater and industrial discharge. There is no doubt that the development of the oil and gas industry has significant impacts on the environment, and new proposed projects, are posing an additional threat to the environment. The implications are devastating destruction of the Caspian ecosystem. The Caspian states are suffering polluted irrigation and drinking water, as well as contaminated soil including in some recreational beach areas, and deteriorating health of the Caspian population. Generally, the local authorities have not been addressing this problem effectively. While they use the backing of NGOs to confront industrial organizations, they are not doing much to support the local people with treatment or alternative housing.

Analysis, Synthesis, and Insight

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Seperating foriegn interests from the main dispute

How can an agreement overcome energy reserves interests.

Contributed by: AEZ (last edit: 13 May 2014)

Key Questions

Power and Politics: How does asymmetry of power influence water negotiations and how can the negative effects be mitigated?

The five littoral states differ greatly in their political and economical power. For the new states, projects which will enhance their economy are very attractive, and so they are welcoming foreign energy players to start cooperating as soon as possible. Russia and Iran, which are much more advanced in the field of energy, and have reserves outside the Caspian Region, are much more causious about the involvement of foreign players.

Power and Politics: To what extent can international actors and movements from civil society influence water management? How and when is this beneficial/detrimental and how can these effects be supported/mitigated?

In this case, some internaitonal actors are allowing for more pressure on the littoral states, as they try to push their own agenda regarding the energy reserves. This is contributing to the parties hestiance in reaching an agreement.