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Petroleum industry

Russia's Shift in Caspian Strategy: Regional Rivalries and Oil Interests

Strategic Insights

— 2 min read

In a move to facilitate the development of oil and gas resources in the Caspian Sea, Russia has reversed its stance on the region's legal status, now advocating for a division of the seabed among the five littoral states. This change in strategy has led to improved relations with Kazakhstan and Azerbaijan, but strained Russia's alliance with Iran, which finds itself isolated with Turkmenistan.

Key Takeaways:

  • Russia's new approach allows for the division of the Caspian seabed, enabling the development of its own sector while creating a legal obstacle for the construction of oil and gas pipelines across the sea.
  • Moscow's bilateral declaration with Kazakhstan has helped to delineate a contested area of the north Caspian, with both countries agreeing to joint development of the disputed Kurmangazy oil and gas structure.
  • Azerbaijan is next in line to sign a similar declaration, with Russia's deputy prime minister, Viktor Kalyuzhny, confident that the Azeri government will agree to do so during President Vladimir Putin's upcoming visit.
  • Azerbaijan has pressing economic reasons for signing the declaration, including fuel shortages and threats from Transneft to increase crude oil transit to the Black Sea port of Novorossiysk.
  • Iran and Turkmenistan are left out of the Russia-led camp, with Iran refusing to change its stance on the issue and Russia accusing Tehran of "dragging out without any grounds" a proposed summit.
  • A consortium of Royal Dutch/Shell, Lasmo, Veba, and National Iranian Oil Co. (NIOC) is carrying out a seismic study of several blocks off the Iranian coast, which may change Iran's views on the legal status of the Caspian.
  • Turkmenistan has laid claim to a large chunk of Azerbaijan's offshore riches, including the Chirag field, potentially threatening the Baku-Ceyhan pipeline.

Statistics:

  • 3 billion cubic meters of natural gas: the amount Russia has agreed to supply to Azerbaijan over the next 12 months.
  • 1921 and 1940: the years in which Iran signed treaties with the Soviet Union governing the Caspian's legal status.
  • 1 billion barrels: the amount of proven oil in the contested Kyapaz/Serdar field.
  • 5 years: the amount of time Turkmenistan has laid claim to Azerbaijan's offshore riches, threatening legal action.

Sources:

  • Viktor Kalyuzhny's remarks during his visit to Baku, source: RIA Novosti, June 10.
  • Treaty signed between Iran and the Soviet Union in 1921 and 1940, source: Iranian Ministry of Foreign Affairs.
  • Seismic study of several blocks off the Iranian coast by Royal Dutch/Shell, Lasmo, Veba, and National Iranian Oil Co. (NIOC), source: Shell Press Release, May 20.

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