“The great interests of

Kondourova Victoria, Master of International Relations (MIR), KIMEP

Today we see oil kings, governmental transactions, and dissatisfaction with non-open projects. Subjective economic interests, geopolitical dependence and diversity of players in the Caspian game for oil still push aside goals of paramount importance – the great interests of the Caspian. Yet the Caspian – is not merely a see, it is a sea which requires concerns. Ecology and legal status – are the main problems of the Caspian.
Treaty on legal status of the Caspian Sea still has not been signed. Separate bilateral and trilateral agreements and treaties on legal status currently de-facto regulate legal relations on sea. Ecology has taken another form in the problems of the Caspian Sea. However the above mentioned does not prevent many key geopolitical and economic players resolve problems with development of oil and gas fields in the regions.

Geopolitics
Considering great interest of Europe, USA and China in resources of the Caspian region, activity of those countries in lobbying and financing of oil pipelines projects from the Caspian is well predictable.
On the other hand, Azerbaijan and Kazakhstan, as the main producers of the Caspian oil, should be resolving transportation problems. It is well known, that oil pipeline Baku-Novorossiysk, the Caspian Pipeline Consortium (CPC), and also Atyrau-Samara pipeline are practically the only active oil transport routes to western markets for those countries.
Yet, with the changing political situation in the region, the development of alternative transportation directions recommenced with renewed vigor. In the summer 2006 completed grandiose project – Baku-Tbilisi-Djeyhan (BTD) pipeline. Oil pipeline connecting the Caspian with the port on the Mediterranean Sea with great volume of potential transportation of oil has resolved the problem of Azerbaijanian export to the western markets.
For Kazakhstan, however, the opening of BTD has not fully resolved the problem with transportation of oil to foreign markets. Thus, for the country, one of the alternative routes became China – another regional power, possessing along with Russia, great political power and economic potentials in the Central Asian region. The route of Kazakhstanian-Chinese pipeline after the completion of the whole project would go from the Caspian Sea and would connect to the existing oil pipeline Atasu-Akashankou. On the meeting in January the speaker of Senate of the Parliament of the RK, K. Tokayev and the Prime Minister of PRC Hu Dzintao has stated that “We need to ensure the completion of the construction of second turn, begin and complete the construction of the oil pipeline from Kazakhstan to China on time”1. The agreement on authorization of the oil transportation of Gazpromneft Russian company for the oil pipeline Atasu-Alashankou has been reached.  
Project of an alternative transportation of hydrocarbons of Kazakhastani Trans-Caspian pipeline is planned to be laid on the bottom of Caspian Sea. The pipeline was lobbied by USA due to the shortage of Azerbaijan oil in order to backfill BTD.
However project is not supported by Russia and Iran because its implementation will reinforce the independence of the oil industry of Kazakhstan and Azerbaijan. Russia and Iran which have exit to the world waters and alternative to Caspian carbohydrate resources are not the main producers of hydrocarbons in Caspian region. For Russia it is important to strategically control the oil industry of Azerbaijan and Kazakhstan, and for Iran – to strengthen its positions in the world and region.
The initiative of Trans-Caspian pipeline is unconditionally approved by Azerbaijan, Kazakh leaders and foreign investors and world powers which are looking for diversification its oil-and-gas imports. Trans-Caspian pipeline is planned to be connected to BTD which will dramatically increase its rate of flow. However the possible danger to environment of Caspian Sea is successfully used as main Russian-Iranian “veto” for this project. Russia and Iran state that such issues cannot be resolved without consensus based on legal status.
The latest Caspian alternative of oil transportation for Kazakhstan project Caspij-Azov initiated last year by presidents of Russia and Kazakhstan is planned to connect Caspian Sea and Sea of Azov via 700km channel which can be used for class river-sea tankers. Russia however is considering another option – construction of channel Volgo-Don-2, which is twice as long as Kazakh “Eurasia”2 project. Due to this fact Kazakh project is still in a process of consideration and has to deal with environmental issues. 
Kazakhstan still does not have enough options for its oil transportation to the world market. Conversely, Kazakh-Russian policy and cooperation in oil-and-gas industry strategically remains the most optimal. This was the reason for Kazakhstan to reach first agreements on legal status with Russia when in 1998 another agreement was made “about the delimitation of the bottom of northern part of Caspian Sea along modified middle line3 in order to establish sovereign rights for the utilization of the bowels of earth”4.  This agreement remains one the most important regulating legal relationship of Northern Caspian countries.
Conversely, geopolitics has always been and will be the most significant factor not only in Caspian region but also in global politics. Political interests of Caspian countries are the main determinant in the issues of Caspian basin. Moreover political interests establish not only refocus the attention from certain issues but also make general problems and dangers the weapon for oil!

Ecology and Caspian legal issue
Apart from geopolitical assets of power environmental issues are not the last means of achieving interests for Caspian resources. It can be seen in the example of Trans-Caspian pipeline project.
However, one of the most disappointing results of all these relationships is the fact of developing of environmental issue, i.e. the preservation of unique flora and fauna of Caspian Sea which is now the main priority and means of power for Caspian countries. Such priorities oriented on oil extraction only cannot lead to the effective development in nearest future except for the destruction of biological diversity of the basin, which is according to experts can happen very soon. Although certain progress in understanding and ensuring ecological safety of the basin (as in legal status in a sphere of demilitarization of the sea and non-interference of the third countries in achieving the safety in the region) along with meetings of Caspian countries is achieved, another tendency can be observed. Oil-and-gas companies which are working in Caspian region continue contaminating the basin with waste products. The oil dispense is likely to happen which is in the conditions of such closed basin as Caspian Sea can become global catastrophe. Neither ecological taxes nor fines paid by these companies can rehabilitate its unique biological diversity especially with the active cooperation with all five leaders of Caspian basin.
Rapidly contractile population of Caspian seal, sturgeons and rare species of birds are not the small part of ecological problem of Caspian Sea. The only difference between the resources of hydrocarbons and biological flora and fauna of Caspian is that with efficient attitude animals and birds can be preserved for many years. According to the experts the reserves of oil will be fully extracted in 40-50 years; fish potential can be maintained for many ages with efficient assistance5.
Along with undetermined legal status which is the key to the solution of the environmental issues, not coordinated well enough actions of frontier troops, which allow the “black market” to exist, lead to bad consequences. Poaching is one the main resource of profit in Caspian region. According to the experts poaching also prevents the profits of oil-and-gas industry. For example, considering average prices in 2001 one ton of oil was about US140-150 while one ton of black caviar was US500000-7000006. It is important to mention that the Caspian markets are receiving goods from the “black market”. Black caviar of bad quality became a reason for poisoning of people. “Pure” caviar goes for export.
First and the most important step in solving all these problems, according to A.Butaev, is needed to be made for the determination of legal status of Caspian Sea. As Butaev thinks environmental situation of Caspian Sea is due to irrational consideration of the Caspian issues by the governments of Caspian countries, which concentrate all their attention on oil industry, while biological diversity of the basin is more important issue. Butaev considers the issue of Caspian Sea as a complex problem and has to be solved along with the issues of delimitation of carbohydrate resources of the sea, economic strategies of the Caspian countries and political decisions. Moreover, political interest is the barrier in this issue7.

Kazakhstan: domestic perspective
Year 2008. The partition of Caspian “property” is not finished but determined by certain countries. However, the engineering of deposits on Caspian shelf which was started by Azerbaijan during the Soviet period is continued nowadays. The negotiations of independent countries on legal status, scramble for national sectors which took place in early 1990s are gone.    The sectors of northern part are determined. Deposits that were the reason for conflict are being engineered by the cooperation of Russia and Kazakhstan (Tsentralnoe, Hvalynskoe, Kurmangazy), Russia and Azerbaijan (Alama). In southern part of Caspian Sea the issue of partition is not solved yet. However, the engineering of deposits is autonomous, while the negotiations still continue between Azerbaijan and Iran (Shah Deniz), between Azerbaijan and Turkemnistan (Azeri and Chirag).
The issue of basic positions in legal status which took place in the middle of 1990s is solved. Currently, everybody knows how much it costs to make a mistake in Caspian politics. The signing of the “Contract of the age” in 1994 between Azerbaijan and foreign consortium of the companies, and after that the presence of LUKOIL in this project showed that guarantees can be given to foreign investors.  Such course of events stopped the Ministry of Foreign Affairs of Russia in preventing the agreement of 5 countries about legal status. The agreement of Chernomyrdin’s government with the leaders of Azerbaijan about mutual engineering of the deposits of Caspian Sea on the territory of Azerbaijan was quite a surprise for Yelstin. In this agreement negotiation about Azerbaijan territory were made and therefore its sector. Russian and Azerbaijan companies were given an opportunities and rights for this engineering, including LUKOIL with the agreement of 10% from the future profits.
The agreement of 1998 year was crucial. Russia is ready to protect its own interests with the situation of its position in Caspian Sea with Iran; and now Russia wants its own business on the deposits and its part in Kazakh and Azerbaijan projects. Azerbaijan and Kazakhstan successfully protected their interests in the partition of the sea for national sectors.
 Azerbaijan has offered the status of lake, Kazakhstan wanted to offer the Convention of UN on sea law which 1) would have given the rights to Caspian countries for the zones of influence (territorial sea – 12 sea miles, zone of economic interests – 200 sea miles, continental shelf8) and 2) would have made Russian channels(artificial channels Volgo-Don and Volgo-Baltic) international. After several meetings in 1996-2002 years, “northern alliance” (Kazakhstan, Russia, Azerbaijan) came to the decision: the bottom is partitioned, water is general. In 2001, after Putin’s visit to Baku, the government of Azerbaijan agreed for the partial usage of sea and lake statuses of the sea. In this case the borders were along the modified middle line while waters were in general usage. Moreover, Volgo-Baltic and Voldo-Don channels were not international.
More or less the positions were determined, contracts with investors were singed. From 1992 to 2008 years the engineering of the deposits were conducted without any significant breaks. Moreover, Kazakhstan and Azerbaijan which were oriented on Western course granted good opportunities for the profits of successful foreign oil-and-gas industries. For example, the shares of Azerbaijan company in the Shah Deniz project were 10% while British Petroleum had 25.5%9. Kazakhstan did that because of financial interests while Azerbaijan had to think about guarantees of safety, which were given to Azerbaijan by the West in an exchange of huge projects on the Caspian shelf
Kazakhstan, however, opened its doors too wide and currently tries to correct the mistakes. It is impossible to make it diplomatically. This is the reason for Kazakhstan to redistribute oil deposits for benefit of national companies, i.e. weakening of the international positions in Caspian game through investment and tax policy and changes in oil elite of Kazakhstan. According to the latest Russian press, people who made arrangements in 1992-2002 are becoming more powerful. For example, Nurlan Balgimbaev, ex-chairman of the oil-and-gas ministry, prime minister, president of national KazakhOil Company (currently KazMunaiGas) has become a special representative in the utilization of resources of Caspian Sea10. It is difficult to limit the relationship when the phase has overcome all expectation.
Moreover, the tendency of weakening of international positions can be observed in case of huge Kazakh oil-and-gas giant KazMunaiGas and government in relationship with foreign investors. Recently, in his speech in the Ministry of Energetic and Mineral Resources chairman of the government Karim Masimov declared “I entrust to suspend any negotiations (especially KazMunaiGas) with investors about making agreements on old conditions”11.  It is connected to the preparation of new Internal Revenue Code which will be ready in June 200912. Before that all projects with (new) foreign investors will be suspended.
The boost of tariffs can be observed as well. Starting for January 1, 2008 the tariff for the oil pumping has been risen for 24.9%  along the pipelines of KazTransOil. On the forum of the workers Masimov stated “We have to exclude the agreement about partition the production as a kind of contract for the utilization of bowels”13. In this way prime minister annulled the law “About SRP during the conduction of operations in sea” based on granting the benefits on the shelf to the bowel users which guarantees inflow of investments and development of oil industry in RK.
Foreign companies had to forget about benefits on the Caspian shelf. One of the examples of such politics can be Caspian Kashagan project. All the works in April 2008 in this project were suspended. The reason for that was severe politics of the government that was used against foreign participants of the project. Eni, Exxon Mobil, Royal Dutch Shell and other participants including KazMunaiGas are the members of this project. According to press, due to new date of start of the project (from 2008 to 2012-2013), official Astana the showed the following requirements: increase of percentage share for KazMunaiGas in the project and fine from US 7 to 30 billions14. Such conditions are not suitable for the investors considering the difficult situation of the deposit Kashagan. 
The leaders explain their actions as a reaction to the rise of oil prices on the world market and dissatisfaction with slippage of dates of first extraction. Foreign companies state that the deals are due to technical difficulties and waiting of additional operator. According to January agreement with government, Eni will split its responsibilities with other foreign participants. The part of KazMunaiGas in the project according to the same agreement will be increased as twice15.

The choice is made
Considering the governmental politics, it is clear that Kazakh oil dollars are more important than environmental catastrophe and prior agreements. Foreign companies will not get any guarantees and benefits from Kazakh government and environmentalists will not get objective picture and solutions considering legal status of Caspian Sea due to the fact that all the projects are in the process of engineering. Moreover, considering weak qualification and shortage of personnel in the national sector of oil-and-gas industry, the engineering and establishing projects like Kashagan can be held over for a long time.
For Kazakhstan it is still important to find alternative ways of transportation because the growth of “national” part in contracts guarantees big profits for national sector only. There are certain doubts that Trans-Caspian project and Eurasia channel will be approved by Russia. Another option is China. Goals and perspectives are possible. It is possible that courses in Iran and Afghanistan can be taken into consideration one more time which is an option for Turkmenistan as well.

Special thanks to the independent expert for helping to collect and discuss the materials.

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