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caspian sea convention – will it really finally happen?

Caspian Sea Convention – Will It Really Finally Happen?

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Jul 18, 2018

Since the fall of the Soviet Union more than a quarter century ago, the littoral states of the Caspian Sea -- Azerbaijan, Iran, Kazakhstan, Russia, Turkmenistan – have been negotiating to demark/delimit one of the world’s largest inland bodies of water.  On August 12 in Aktau, Kazakhstan, leaders of Caspian littoral states will come together to discuss the proposed convention on the legal status of the Caspian Sea.  Signals are now emerging that this Fall the five might well reach final agreement; both Russia and Azerbaijan have signaled they are ready to sign.  This is important because Russia has long been the most significant hold-out. This might seem esoteric to many, but it has significant strategic importance across a stretch of the globe reaching from China to Europe for two reasons:  1) the immense hydrocarbon deposits in the Caspian Sea and its littoral states, and 2) the impact it could have on China’s Belt and Road Initiative.  On the other hand, perhaps more important to the countries in the region, it could well pave the way for more connectivity and trade within the region.   It is a very unfortunate fact that intra-regional trade is only around 10 percent, which is far from its real potential. First, looking simply at the hydrocarbon resources of the Caspian Sea – the immense fields of Tenngiz, Kashagan, and Karachaganak in Kazakhstan; Galkynysh in Turkmenistan; and Shah Deniz in Azerbaijan, to name only the most well-known, although there are many other significant ones – we see that the two states of Azerbaijan and Turkmenistan alone have the potential to supply significant amounts of oil and, especially, natural gas to Europe.  This has already been proven with the Baku-Tbilisi-Ceyhan pipeline and several other under-construction pipelines and onward links planned to reach as far into Europe as Italy. This Caspian Sea agreement would be highly significant strategically and would further guarantee the sovereignty, independence, and prosperity of the Trans-Caspian region because it would move the vast natural gas resources of the Caspian region to Europe without tying into the Russian pipeline system, giving Europe a further element of freedom from the Russian monopoly.  In fact, mutual support to bringing Caspian natural gas to Europe via the Southern Gas Corridor was mentioned once again during the EU -U.S. Energy Council meeting that took place in Brussels on the sidelines of NATO Summit as the latter voiced concerns over implementation of Russia’s Nord Stream 2 project.  Caspian gas and U.S. LNG supplies are seen as the main complementary sources for European energy diversification. Specifically, agreement on a Caspian Sea Convention would signal that Azerbaijan and Turkmenistan are finally ready to move forward on the long-envisioned Trans-Caspian Pipeline/TPC.  But even in the best of all possible worlds, this would not happen immediately. The first step would be an “interconnector” that, in fact, could be rapidly constructed, most say within months, linking each country’s current production sites in the Caspian that could deliver a relatively modest 8-10 billion cubic meters/BCM of natural gas per year into the pipelines leading to Europe. The construction of the full TCP pipeline that could deliver 30-40 BCM from Turkmenistan would require further changes in Turkmen policy and law that restrict, to various degrees, foreign investment in Turkmenistan’s national economy. Second, China would likely look kindly on a Caspian Sea Convention because of its Belt and Road Initiative/BRI.  So far, China has focused its BRI in the region primarily on land-based infrastructure and industrial investment projects in Central Asia, especially in Kazakhstan, and has not yet invested in upgrading existing and building new port facilities in the Caspian and Black Seas.  The key investors there, so far, have actually been several of the regional states themselves, especially Azerbaijan and Kazakhstan.  However, a ratified Caspian Sea Convention would open new links from China to Europe, and further Chinese investment would be expected. Most important, the achievement of a Caspian Sea Convention would further guarantee the independence, sovereignty, and prosperity of the Trans-Caspian Region from Central Asia, through the southern Caucasus, and into Europe via Turkey, an important trade and transportation corridor that largely skirts Russia and Iran.  A significant development in the Trans-Caspian region that could well benefit the further development of this corridor is the new government of Shavkat Mirzyoyev in Uzbekistan that is looking outward for the first time in a quarter century and is eagerly building new relations with the countries – and leaders – in the region. Further, the carefully cultivated warming of relations between Azerbaijan and Turkmenistan is promising.  The longer-term goal would be for the countries of the region to institute their own international organization that would further insulate them from pressure by Russia, China, and other global powers.  Standing on their own, they would prosper significantly on their own terms. The Caspian Sea Convention would probably not resolve all the outstanding issues among the signing parties, but it would be indeed a significant step forward that the littoral states of the Caspian Sea, finally on August 12 in Aktau, achieve the Caspian Sea Convention.  That would be an important strategic game changer that the United States needs to support and build on for its own economic, security, and geo-political interests in the region.

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