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Wednesday, June 30, 2021, 13:50 (GMT+7)
Azerbaijan-Turkmenistan oil deal: A bright spot about regional cooperation and security

On 21 January 2021, Azerbaijan and Turkmenistan leaders signed an agreement to jointly develop an oil and gas field in the Caspian Sea. This is believed to be a historic deal, which not only serves to end a two-decade long dispute, but also ushers in a new page in the two countries’ relations. It is also a new “bright spot” about regional cooperation and security.

Efforts to resolve disputes

The Caspian Sea, which covers an area of 370,000 square kilometres, is bordered in the north by Russia, in the south by Iran, in the east and west by Turkmenistan, Kazakhstan, and Azerbaijan. Previously, the Soviet Union and Iran demarcated the border in the Caspian Sea clearly. Nevertheless, since the dissolution of the Soviet Union, the newly independent states such as Russia, Azerbaijan, Kazakhstan, and Turkmenistan have not agreed on whether it is a sea or a lake. Each country declares their sovereignty over the sea according to their own approach, making it one of the most complex disputed areas. If it is classified as a sea, sovereignty of coastal countries must be determined under international maritime law, or more specifically the 1982 United Nations Convention on the Law of the Sea (UNCLOS). Accordingly, the coastal countries in the Caspian Sea exercise sovereignty, jurisdiction, and duties over the waters as stipulated by the Law of the Sea. The Law also determines the rights of other nations to resources in the waters. If the Caspian Sea is classified as a lake, sovereignty over this area will be equally divided among lakeside countries, including Russia, Azerbaijan, Kazakhstan, Turkmenistan, and Iran. Different perspectives lead to overlapping claims and long-lasting complex disputes. Azerbaijan and Turkmenistan are at odds with each other over the right to exploit some large oil and gas fields, in which dispute over the Dostluk gas field in the overlapping area is regarded as the “thorniest” issue. The two countries have sent their warships to this area several times, which worsened their relations and situation in the region.

On clearly understanding the importance of cultivating a peaceful environment for cooperation in exploiting rich resources of the Caspian Sea for economic development, leaders of the coastal states held a talk in Ashgabat, Turkmenistan in 2002 with a view to seeking for a proper solution to disputes in the sea. The Convention on the Legal Status of the Caspian Sea was signed by leaders of the five coastal countries in the Caspian Sea at the following Summits of Caspian nations held in Tehran, Iran in 2007, in Baku, Azerbaijan in 2010, and Astrakhan, Russia in 2014. After endless efforts, the Convention was ratified in Aktau, Kazakhstan in August 2018. This is considered a breakthrough in trade, security and environment, creating a legal regime for demarcating the largest body of water in the world. Accordingly, the Convention gives the Caspian “a special legal status”, defining it neither as a sea nor as a lake. The surface water will be in common usage by all the littoral countries beyond territorial waters, but the seabed, rich in natural resources, will be divided between them.

Although the Convention is not a complete document and many issues still need to be addressed, it serves to break the two-decade long deadlock among littoral countries in the Caspian Sea and pave the way for future cooperation projects among regional countries. Leaders of Azerbaijan and Turkmenistan signed an agreement on the exploitation and development of the Dostluk field in the Caspian Sea on 21 January 2021, which officially put an end to the two-decade long dispute and ushered in a new era of peace, friendship, cooperation, and mutual benefit between the two countries.

A “bright spot” about cooperation and security in the region

According to international analysts, the deal between Azerbaijan and Turkmenistan is a designed result produced by the Convention on the Legal Status of the Caspian Sea signed by five coastal countries in the Caspian Sea in August 2018. More importantly, it is the outcome of goodwill and great efforts made by leaders of the two countries to end disputes and foster warmer, better relations. In recent years, Azerbaijan and Turkmenistan have made many positive moves to heal their relationships. Accordingly, Azerbaijan agrees to be a major transit point for millions of barrels of Turkmen oil crossing the Caspian Sea every year to enter Baku – Tbilisi (Gruzia) – Ceyhan (Turkey) trunk line to reach international markets. The historic visit to Baku Capital, Azerbaijan paid by President G. Berdymukhamedov in March 2020 served to “melt the ice” and give a “new lease of life” to the two countries’ relationships. The agreement is fresh diplomatic progress and of significant importance in economic, political, and security terms. According to this agreement, Baku and Ashgabat will conduct further negotiation to reach consensus on financial terms, establish legal regimes and coordination regulations, promote technical cooperation in seismic survey, joint patrol, search and rescue, and so on. According to experts, given its massive reserves of natural gas, between 60 and 70 million tonnes of oil, the Dostluk oil and gas field is expected to attract huge investment from foreign countries. The large turnover will make positive contribution to development of the two economies. Moreover, this agreement enables the two countries to bring into play their great potential in oil and gas cooperation, first and foremost the project on building the Trans-Caspian Pipeline, worth billions of dollars, to transport oil and gas from Turkmenistan via Azerbaijan to Europe. The Caspian Sea has huge oil and gas reserves. It is estimated that approximately 50 billion barrels of oil and nearly 8.4 thousand cubic metres of natural gas lie beneath the seabed. Most of the natural gas is found in the east, the remote areas of Turkmenistan, Kazakhstan, and Uzbekistan. Due to long distance, lack of transport infrastructure, and other political hurdles, despite its vast potential, the Caspian oil market is less noticeable and more modest than other markets in the world. Therefore, the building of the Trans-Caspian Pipeline to transport oil and gas in the eastern part of the Caspian Sea via Azerbaijan to Europe is of strategic importance. It not only enables Turkmenistan and Azerbaijan to bring into full play their oil and gas potential, but also offers prospects for Caspian oil and gas, turning this area into one of the most crucial oil and gas centres in the world.

Additionally, the agreement on the joint exploitation and development of the Dostluk oil and gas field between Turkmenistan and Azerbaijan is likened to a “bright spot” in regional cooperation and security. Leaders of many countries regard the agreement not only as the “pioneering” one since the signing of the Convention on the Legal Status of the Caspian Sea, but also a “model” for other cooperation agreements in the region. The most prominent and important point of the deal is the political resolve to “close the past and head towards a bright future” of leaders of the two countries. This is manifested in the naming of the oil and gas field “Dostluk”, meaning “friendship” in Turkic language. Previously, the field was also known as “Serdar” in Turkmenistan and “Kapaz” in Azerbaijan. Thanks to the leaders’ political resolve, many “thorny” issues have been addressed through negotiation. The deal basically meets requirements and benefits both sides. Although this is an economic cooperation agreement, it has a positive influence on many other fields. In their Joint Declaration, leaders of Turkmenistan and Azerbaijan express their strong belief that the cooperation agreement will provide a solid foundation for the two countries to strengthen and broaden cooperation in many aspects, including military and national defence, which is very expedient to security, stability, and development of both countries and the region. According to many experts, apart from its massive oil reserves, the Caspian Sea also has diverse ecosystems and abundant resources with over 330 endemic species, including five precious species of sturgeon. Therefore, the agreement will pave the way for a series of bilateral and multilateral cooperation activities in not only oil and gas, but also in other key issues such as preservation and development of the marine ecosystems, exploitation and processing of marine resources, protection of maritime security and safety, and so forth.

The Caspian Sea occupies a strategic position and the two-decade long disputes in these waters have done avoidable damage to littoral countries and the region. International community expect that countries concerned need to make full use of current trend in peace dialogue on the basis of abiding by international law and Charter of the United Nations, respect for national independence, sovereignty, territorial integrity to enhance peace negotiations, find suitable solutions to disputes, promote cooperation, and make the Caspian Sea a sea of peace, cooperation, and development.


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