The Foreign Service Journal, April 2003

expensive new pipelines. Of these, two giant projects stand out: the Blue Stream from Russia and the Trans-Caspian pipeline from Turkmenistan. The Blue Stream pipeline is intended to supply 16 billion cubic meters of gas per year over a period of 25 years, to be deliv- ered through an undersea pipeline reaching depths of 2,150 meters in the Black Sea (setting a record for underwater pipelines). The pipeline was completed last year, but the Turkish economic crisis brought expectations down to earth. Ankara canceled this year’s gas deliveries and negotiated with Russia to slash next year’s supplies by half. This makes it appear that, as with the BTC oil pipeline, the Blue Stream would turn into another technological feat with little chance of paying for itself. The Blue Stream did succeed in scuttling the rival Trans-Caspian project from Turkmenistan, despite Washington’s strong support for it. This tempted Turkmenistan to look east of the Caspian Sea. Construction of a 1,000-mile pipeline through Afghanistan has been under consideration since 1996 when Unocal won a contract to exploit the Dauletabad gas field in Turkmenistan, which is the fourth-largest on the planet. The project was halted due to Afghanistan’s growing insta- bility, but is now reportedly being revitalized with the help of Afghan President Hamid Karzai and President Bush’s former special envoy to Afghanistan, Zalmay Khalilzad — both of whom are former Unocal consultants. A Caspian Arms Race? The other major obstacle to exploration and produc- tion of the region’s oil and natural gas holdings is the lack of a mechanism for delimiting the territorial and maritime boundaries among the four new post-Soviet states in the Caspian Basin: Azerbaijan, Kazakhstan, Turkmenistan and Russia. The issue remained mori- bund until 1994, when Azerbaijan struck its so-called “Deal of the Century” with the first consortium of international companies on the development of oil fields in the middle of the Caspian — some of which Turkmenistan had also claimed. Accusing Azerbaijan of acting against the norms of international maritime law, Ashgabat promptly announced that it was close to signing $10 bil- lion in contracts to develop its own Caspian oil field, known as Serdar (which Azerbaijan calls Kiapaz). It also lodged new claims to other fields that are part of Azerbaijan’s package deal. Similar charges were brought against Azerbaijan in 2001 by Iran, the other littoral state, which cited Soviet-Iranian agreements regarding the Caspian Sea signed in 1921 and 1940. Iranian warships opened fire and drove back Azeri geo- logical survey vessels in what they claimed were the territorial waters of Iran. (In response, Turkey — one of Azerbaijan’s closest allies — sent its air force to con- duct a military show over Baku.) Tehran, which pos- sesses the strongest and most experienced land force in the region, has also conducted a number of army maneuvers along its frontier with Azerbaijan (which was historically part of Iran until Russia seized it during the wars of 1814-1828). Diplomatic talks among the five littoral states have dragged on for a decade without resolution. The major stumbling block has been how to apportion the rights to the seabed where the oil fields are located. Russia has argued for national sectors along a median line according to the length of each country’s shoreline, but only on the seabed, leaving the waters for common use. This formula would allow Russia’s navy to roam the waters at will and would give Iran (which has the short- est shoreline of the five countries) only 13 percent of the seabed. While Kazakhstan and Azerbaijan have agreed to this framework, Turkmenistan has not taken a position, and Iran continues to seek either joint con- trol of the sea or at least a 20-percent share of the seabed for each state. The presidents of all five states met for the first time for an overall discussion of the issue in Ashgabat in April 2002, but failed to reach any agreement. In fact, they were unable even to issue a joint communiqué. Thus, the only existing agreements on the Caspian remain the Soviet-Iranian agreements of 1921 and 1940, which call for a 50-50 split of the sea and its resources. F O C U S 46 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 3 Although the U.S.-backed BTC pipeline is “geopolitically correct,” many major oil companies doubt it is financially feasible.