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Military tensions heightened over Caspian Sea oil

Fighter jets deployed: Five states disagree on how to divide rich reserves

Peter Goodspeed National Post, with files from news services Tempers are flaring like oil wells in the Caspian basin, a region plagued by border disputes, escalating ethnic tensions, corrupt governments, growing militarization -- and some of the world's most promising oil discoveries.

The level of hostility reached an alarming new high recently as Iran and Azerbaijan squared off in a series of military confrontations that have seen Iranian gunboats threaten to expel two oil survey ships working under an Azeri contract from part of the Caspian Sea claimed by both countries.

Since then, the steady escalation of diplomatic rhetoric and military countermeasures has triggered alarm bells across the region.

This week, the growing crisis climaxed in the temporary deployment of 10 Turkish F-16 fighter planes to Azerbaijan in a not-too-subtle warning to Iran.

At the heart of the dispute is an unresolved conflict over how to divide the Caspian Sea and its resources.

Iran and the old Soviet Union had a series of diplomatic agreements signed in 1921 and 1940 that gave Tehran a 13% share of the Caspian seabed. But after the 1991 collapse of the Soviet Union, the newly independent states of Kazakhstan, Turkmenistan and Azerbaijan demanded their share.

Ten years later, the five states are still arguing.

Russia, Kazakhstan and Azerbaijan insist Iran should be satisfied with its old boundaries. Iran, tentatively backed by Turkmenistan, is demanding it be given an equal 20% share.

The stakes are massive. Estimates of the oil reserves under the Caspian range from eight billion to 50 billion barrels of oil. Some experts predict the Caspian oilfields may soon surpass those in the North Sea in international importance.

Increasingly impatient over attempts by their neighbours to ignore its boundary claims, Iranian officials said recently, "We will not allow any foreign company to operate within Iran's share in the Caspian Sea without having Iran's consent."

They backed that claim up on July 23, when Iranian gunships intercepted the Azeri geological survey vessel Geophysic-3 as it prepared to hunt for oil in the Caspian, 150 kilometres south of the Azeri capital, Baku.

Azerbaijan calls the test site its Araz-Sharg-Alov oilfield, while Iran insists the area is part of its Alborz oil region.

The Iranian show of force triggered an immediate Azeri protest and a claim by Artur Rasizade, Azerbaijan's Prime Minister, that Iran's actions were "a gross violation of international norms."

After a series of diplomatic ripostes, in which Iranian diplomats publicly pointed out Azerbaijan was once a province of Iran, Tehran stepped up patrols on its border with Azerbaijan and began flying daily military reconnaissance flights deep into Azeri air space.

This week's show of Turkish solidarity with Azerbaijan, with the arrival of the 10 F-16 jet fighters, coincides with a visit to Baku by the Turkish army chief of staff.

At the same time, Turkey has just announced it will provide Kazakhstan with more than US$10-million in military aid, including two patrol boats, over the next decade.

Turkey's interest in the region stems from its support for construction of a multi-billion-dollar oil pipeline to carry Azeri crude to Western markets via Georgia and the Turkish Mediterranean port of Ceyhan.

Iran would like to see that oil pumped southward, where it could be refined in southern Tehran's huge oil refineries, then shipped out through the Persian Gulf.

In the next few weeks, yet another competing pipeline project is scheduled to open to the north of the Caspian. The US$2.6-billion Caspian Pipeline Consortium will carry oil from Kazakhstan's Tengiz oilfield on the northeastern shore of the Caspian to a Russian Black Sea port near Novorossisk.

In yet another sign of growing tensions in the region, Russia recently increased its fleet of highspeed boats, armed with missiles and heavy guns, and stationed them in the Caspian ports of Makhachkala and Kaspiisk.

Turkmenistan has responded by preparing to buy 20 speedboats from Ukraine, while Azerbaijan has just agreed to accept two 16-metre long coast guard cutters as military aid from the United States.

As tensions mount, Azerbaijan announced on Wednesday it had arrested six Muslim clerics as suspected Iranian spies.

The clerics, all Azeri citizens, were detained over the weekend in the Dzhalilabad region of southeastern Azerbaijan, near the border with Iran.

In a blunt warning to Iran, Vilayat Quliev, Azerbaijan's Foreign Minister told reporters, "We will not go into a war, but we will stand up for our rights"

-- Martin Thompson (, August 25, 2001


Caspian Power Struggle The flare-up of tension between Tehran and Baku is not only about oil.

By Nair Aliev in Baku (CRS No. 95, 24-Aug-01)

Some regional analysts are convinced that oil is not all that's at stake with the recent tensions between Iran and Azerbaijan in the Caspian Sea. The argument is based on the actual quantity of oil reserves which Iran is after which are small in comparison with deposits in the Iranian Gulf.

There is little sense, say the analysts, in Iran risking a military set-to over the disputed Alov oil field where an Iranian warplane buzzed two Azeri vessels July 23 before a gunboat was sent to escort them out of "Iranian waters". It was this incident which set off the recent escalation in tensions between the two countries.

More important say the experts is power-brokering in the region. Iranians are upset over what they see as trouble-stirring on the behalf of the Azeris. Although Azerbaijan has a population of just 8 million, up to 30 million Azeris live over the border in Northern Iran. Tehran has accused Azerbaijan of stirring up nationalist sentiment among this community. Iran also feels snubbed by Baku's rejection of offers to mediate between the Azeris and Armenia over the Nagorno-Karabakh dispute.

Iran's insistence on gaining a 20 per cent share of the Caspian rather than the 11 per cent it has now - based on Soviet Union's and Iran's division of the waters in the 1950s - is thus seen as a means of using its leverage on its littoral partners to expand its influence here.

The Azeri media answered these accusations in turn by saying that Iran was exporting the "Iranian model of political Islam" as a means of spreading its influence.

Much of the tub-thumping language used in Iran has seemed less tuned to feelings of economic or territorial sleight and more bolstered by nationalist motivation. This has gone so far as to suggest that Azerbaijan should go the way of the rest of its territory last century and become a part of Iran itself.

Secretary of the Iranian Legislative Council Mokhsen Rezai threatened to turn Azerbaijan into an Iranian province. "Iranian youth is more victory-oriented than ever," he said. The Tehran Times then reported on the mobilisation of Iranian armed forces on the border with Azerbaijan.

The Russia Journal, based in Moscow, quoted a professor at the Moscow Military Academy as saying that Iran was preparing to deploy tactical squadrons - including submarines, war ships and naval jets and said that in his opinion military confrontation was a possibility if Azerbaijan continues the active development of the disputed oil fields."

On August 7, the Iranian Foreign Ministry announced that it was prepared to defend its sector of the Caspian Sea and would not hesitate to take action against foreign companies active in Iranian waters. The comment referred to the vessel of British Petroleum, BP, which was one of the ships in the July 23 incident.

But analysts take the strategic scenario further to embrace western countries saying that their interest is also not primarily in the oil but in the region. Pointing once again at the small size of the oil reserves, the analysts suggest that geo-political interests are what makes the Caspian so important. Russia remains a major player in dialogue among the Caspian states.

Azerbaijan's first reaction to Iran's actions was to turn to the West for support. But the British oil giant decided to suspend operations in the area and made it clear that it expected Iran and Azerbaijan to resolve the matter at a state level. The US limited its reaction to an official statement expressing its concern. Staking the full Iranian claim to the Caspian, National Security official Hassan Rouhani told Azeri President Heidar Aliev and BP representatives in a meeting prior to the July 23 incident that "Iran will not permit foreign countries to launch any oil and gas activities within its 20 per cent control share of the sea".

The language on the Azeri side heated up, too, especially after an Iranian war plane violated Azeri airspace on July 29. Although President Aliev called the infraction a "minor incident", some politicians said that appropriate steps should have been taken and the plane either forced or shot down. While Defence Minister Safar Abiev insisted that Iran was "not a hostile country", he also said that "Azerbaijan's air defence system is ready to repulse an attack by air at any time". President Aliev's son, Ilham, who is being groomed to fill his father's shoes, also pitched in, saying that "adequate measures would be taken" if Iran attempted to use force again.

Turkmenistan, which is also in dispute with the Azeris over Caspian oil fields, has also resorted to fierce language. It has threatened to "send the navy to defend its oil fields" and has taken measures to strengthen its military muscle, signing several arms contracts with Ukraine, Georgia and Russia.

Unlike Iran, analysts say that Turkmenistan has sound economic arguments for fighting its corner. Not least is the money it needs to honour its part of a 6,000-kilometre pipeline project agreed with China.

Despite the many theories about possible reasons of the conflict, the incidents of late July and early August have not only complicated Azerbaijan's desire to explore the oil reserves of its sector in the Caspian Sea, but also added a military dimension to the Caspian quarrel, involving all Caspian countries.

Nair Aliev is a staff writer at the Baku independent newspaper Ekho. archive/cau/cau_200108_95_4_eng.txt

-- Martin Thompson (, August 25, 2001.

Even more interesting in light of recent developments in the Caspian. Apparently several major oil companies have pulled out of Caspian exploration in the past couple of months after their preliminary work showed there is less oil there -- much less -- than was initially thought. (Not an unusual occurrence these days.) The article emphasizing the nationalistic side of the issue seems to be right on.

-- Cash (, August 27, 2001.

Caspian Sea states wrestle over oil

Owen Matthews In Istanbul

ON A clear summer afternoon recently two Iranian jet fighters cleared the Iranian coast and headed north over the Caspian Sea. Their course put them on a direct path to Baku, the capital of Azerbaijan, less than 15 minutesí flying time away.

Low-level alerts flicked on automatically in Russian military radar bases and in the Azeri air defence headquarters.

But Baku was not the destination. Well beyond what Azerbaijan considers Iranís territorial waters, the jets turned towards their real target - the Geofizik 3, a lumbering Soviet-era exploration ship leased by the Azeris to British Petroleum. The ship was carrying BP engineers for five weeks of seismic tests on a new oilfield under the Caspian, which Tehran calls Alborz and Baku calls Alov.

The Iranian jets banked and buzzed the ship several times, but without firing. They were followed by an Iranian gunboat, which trained its weapons on the Geofizik and ordered it back to its home port, Baku.

The Revolutionary Guards officer aboard the Iranian boat claimed the Geofizik was trespassing in Iranís waters. The unarmed vessel quickly obeyed.

Within hours, a western diplomat recalled, "almost all hell broke loose" - a regional escalation that was close to war but without the shooting.

Iranian jets began flying sorties as close as 60 miles to Azerbaijanís capital; Baku threatened to respond in kind. Tehran radio announced "precautionary" troop movements near the border, and Mohsen Rezai, former leader of the revolutionary Guards and secretary of the Expediency Council, ominously noted: "Azerbaijan was once an Iranian province."

Turkey said it would not allow its political and ethnic ally to become "the next Kuwait" and last week sent its chief of staff, General Huseyin Kivrikoglu, to Baku, plus ten F-16s and a message that Turkey and Azerbaijan were "two states but one nation".

Not surprisingly, oil exploration in the south Caspian came to a juddering halt.

But despite the warlike noises, Iran does not seem to be ready or willing to start a shooting war in the Caspian - not least because is outgunned by the regionís policeman, Russia.

More likely, Iran is trying a piece of risky attention seeking by means of gunboat diplomacy with its eye on a bigger share of the Caspian seabed and the potentially vast oil riches beneath it.

But it also wants is to assert its rights as a major player in the Caspian and carve out a bigger role not just in extracting oil but in exporting it. After nearly a decade of diplomatic apathy, Iran has stood up - just as western oil majors are committing billions of dollars to build wells, pipelines and oilrigs.

Iranís gambit understandably worries western firms, which fear political instability could threaten their huge investments. "Oil companies are timid beasts ... one gunboat and one dead engineer is all it takes to turn the region into a war zone," says one Baku-based oil analyst.

It also worries the Bush White House, which in May reaffirmed the USís commitment to local western-aligned oil players such as Azerbaijan and ensuring that the Caspianís two wild cards, Iran and Russia, are sidelined as much as possible from controlling the seaís oil wealth.

But the stakes are so high that, if anything, it is surprising violence - or the threat of it - did not erupt sooner. The sea covers the largest new oilfields discovered in the world for three decades - by some estimates some 70 billion barrels, or 15 per cent of the worldís reserves.

Yet the five states that border the sea - Russia, Azerbaijan, Iran, Turkmenistan and Kazakhstan - have yet to determine universally accepted sea borders, although all the states except Iran have struck border accords with their immediate neighbours.

Iran claims 20 per cent of the sea on the principle of equal division - which happens to include the oilfield for which the Geofizik was heading.

Azerbaijan counters that Iran should stick to its 11.4 per cent from Soviet times, placing the disputed field in Azeri territory. Lawyers from the two sides, citing a tangle of treaties dating back 200 years, have wrangled for years over marine law defining sovereign rights differently according to whether the 750 mile Caspian is a lake or a sea.

Guive Mirfenendereski, author of A Diplomatic History of the Caspian Sea, says: "Ultimately it doesnít matter if the Caspian is defined as a lake, a sea or a bathtub - itís all down to negotiation." And as a short-term negotiating tactic, Iranís gunboats have proved far more persuasive than any lawyer.

While BP, Norwayís Statoil, ExxonMobil of the US and other members of an exploration consortium have paid for the right to drill, a BP spokesman said they will not resume operations "until thereís a safe environment for our employees".

Iran has shown it can scare off the Caspianís big-spending western investors if its voice is not listened to.

The Geofizik incident also played well at home, with newspapers across Iranís political spectrum hailing the move as a positive step towards defending Iranís rights in the run-up to an Caspian summit in December, where the sea will perhaps be finally and formally divided.

Some of the more hot-headed hard-liners in Iran see the war of words with Azerbaijan as a blow against what the hard-line paper Kayhan called "the puppet" of "Zionists" - the regime of the Azeri president, Heydar Aliyev.

But Iran cannot risk a new jihad because of its large ethnic Azeri population, which is thoroughly assimilated but could have divided loyalties.

Also, Russia, which during the early 1990s backed Iranís stand against exploration before the sea is formally divided, discovered oil in its waters in 1997 and quickly changed its tune. Any military conflict in the Caspian would quickly be put down by Russia, which has been quietly transferring warships from the Black Sea to the Caspian.

"Russia is the gorilla on the block," says an Cambridge Energy Research Associates analyst, Robin Bhatty. "Thereís no way Russia will allow a war in its back yard."

The irony of Iranís sabre-rattling is that the field could turn out to be dry, like many other fields in the Azeri zone of the Caspian. "You never know whatís down there until you sink the hole," Mr Bhatty says.

So far the real action in the Caspian has been in the north, off Kazakhstan, whose giant Tengiz and Kashagan fields hold by some estimates three times as much oil as in the whole of the Azeri sector.

But this bounty poses another set of problems - getting the oil to market. A new pipeline from Tengiz to the Russian Black Sea port of Novorossisk is to open this month. But even at full capacity, it cannot handle more than a small fraction of Kazakhstanís output.

BP has pledged to build a £1.85 billion pipeline from Baku to Turkeyís Mediterranean port of Ceyhan, but that will carry Azeri oil first and foremost, and there are doubts much room will be available Kazakh oil. That leaves only one alternative - transport it south to the Persian Gulf.

Iran could find its decisive role is not as a producer but as a gateway between Kazakhstanís oil and lucrative Asian markets. Iranís pipelines could be upgraded for as little as $300 million to take oil from its Caspian port of Neka to existing deep-water oil terminals on the Straits of Hormuz, on the Persian Gulf.

"Look at the map - Iran is the cheapest export route by far," says Iranís former deputy foreign minister, Abbas Maleki, pointing to a plethora of pipelines criss-crossing his country. "The only obstacle are US sanctions."

The US last month extended by five years the Iran-Libya Sanctions Act, which restricts western firms from investing more than $20 million in Iranís oil industry, in an attempt to cut Iran out of the Caspian bonanza. But the US is increasingly swimming against the tide.

The French oil major Total-Fina-Elf has done a feasibility study of a Caspian-Gulf pipeline and other companies will probably follow suit.

One Washington-based analyst said: "Big Oil will want to follow the money. And the Bush White House will have a hard time stopping them."

Whether Iran gets its bigger slice of the Caspian or not, one thing is certain - after the Geofizik incident none of the local powers can afford to ignore the fact that Iran is gearing up to play a major role in the Caspian. Which goes to show that a little gunboat diplomacy can be very effective after all.

-- Martin Thompson (, September 03, 2001.

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