Political issues
Many of the islands along the Azerbaijani coast continue to hold significant geopolitical and economic importance because of the potential oil reserves found nearby. Bulla Island, Pirallahı Island, and Nargin - which was used as a former Soviet base and is the largest island in theBaku bay, all hold oil reserves. Ashuradeh is situated on the easternmost end of Miankaleh peninsula to the north east of Gorgan Bay, near the Iranian coast. It was separated from the peninsula after islanders created a channel.
The oil in the Caspian basin is estimated to be worth over US $12 trillion[citation needed]. The sudden collapse of the USSR and subsequent opening of the region has led to an intense investment and development scramble by international oil companies. In 1998 Dick Cheneycommented that "I can't think of a time when we've had a region emerge as suddenly to become as strategically significant as the Caspian."[27]
A key problem to further development in the region is the status of the Caspian Sea and the establishment of the water boundaries among the five littoral states (see below). The current disputes along Azerbaijan's maritime borders with Turkmenistan and Iran could potentially affect future development plans.
Much controversy currently exists over the proposed Trans-Caspian oil and gas pipelines. These projects would allow western markets easier access to Kazakh oil, and potentially Uzbek and Turkmen gas as well. The United States has given its support for the pipelines. Russia officially opposes the project on environmental grounds. Analysts note that the pipelines would bypass Russia completely, thereby denying the country valuable transit fees, as well as destroying its current monopoly on westward-bound hydrocarbon exports from the region.[28]Recently both Kazakhstan and Turkmenistan have expressed their support for the Trans-Caspian Pipeline.[29]
Disclosed US diplomatic cables by WikiLeaks revealed that BP covered up a gas leak and blowout incident in September 2008 at a gas field under production in the Azeri-Chirag-Guneshi area of the Azerbaijan Caspian Sea.[30][31]
International disputes
Southern Caspian Energy Prospects (portion of Iran). Country Profile 2004
Negotiations related to the demarcation of the Caspian Sea have been going on for nearly a decade among the states bordering the Caspian – Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran.
The status of the Caspian Sea[32] is the key problem. There are three major considerations affected by the Caspian Sea status: access to mineral resources (oiland natural gas), access for fishing and access to international waters (throughRussia's Volga river and the canals connecting it to the Black Sea and Baltic Sea). Access to the Volga River is particularly important for the landlocked states ofAzerbaijan, Kazakhstan and Turkmenistan. This matter is of course sensitive toRussia, because this potential traffic will move through its territory (albeit onto the inland waterways). If a body of water is labeled as Sea then there would be some precedents and international treaties obliging the granting of access permits to foreign vessels. If a body of water is labeled merely as lake then there are no such obligations. Environmental issues are also somewhat connected to the status andborders issue.
It should be mentioned that Russia got the bulk of the former Soviet Caspian military fleet (and also currently has the most powerful military presence in the Caspian Sea). Some assets were assigned to Azerbaijan. Kazakhstan and especiallyTurkmenistan got a very small share because they lack major port cities.
According to a treaty signed between Iran (Persia) and the Soviet Union, the Caspian Sea is technically a lake and it is to be divided into two sectors (Persian and Soviet), but the resources (then mainly fish) would be commonly shared. The line between the two sectors was to be seen as an international border in a common lake, like Lake Albert. Also the Soviet sector was sub-divided into administrative sectors of the four littoral republics.
After the dissolution of the Soviet Union not all of the newly independent states assumed continuation of the old treaty. At first Russia andIran announced that they would continue to adhere to the old treaty.
After the old Soviet Union split into fifteen nations, including Caspian Sea neighbors Azerbaijan, Turkmenistan and Kazakhstan, Iran has called for an equal division of the Caspian Sea among the five countries: Iran, Azerbaijan, Turkmenistan, Kazakhstan, and Russia. If this division does not come to pass, then Iran intends to recognize only its old treaty (between Iran and Russia) and will challenge Russia to divide its 50% share among the three littoral states – Azerbaijan, Turkmenistan and Kazakhstan – over a more friendly position toward the West and the U.S., such as opening of U.S. interest section in Tehran.[citation needed][clarification needed]
Kazakhstan, Azerbaijan and Turkmenistan announced that they do not consider themselves parties to this treaty.
Later[clarification needed] followed some proposals for common agreement between all littoral states about the status of the sea:
Azerbaijan, Kazakhstan and Turkmenistan insisted that the sectors should be based on the median line, thus giving each state a share proportional to its Caspian coastline length. Also the sectors would form part of the sovereign territory of the particular state (thus making them international borders and also allowing each state to deal with all resources within its sector as it wishes unilaterally).
Iran insisted that the sectors should be such that each state gets a 1/5 share of the whole Caspian Sea. This was advantageous to Iran, because it has a proportionally smaller coastline.
Russia proposed a somewhat compromising solution: the seabed (and thus mineral resources) to be divided along sectoral lines (along the two above-described variants), the surface (and thus fishing rights) to be shared between all states (with the following variations: the whole surface to be commonly shared; each state to receive an exclusive zone and one single common zone in the center to be shared. The second variant is deemed not practical, because of the small size of the whole sea).[citation needed]