The Battle Over Caspian Resources: Energy, Geopolitics, and the Struggle for Control

• Energy is a source of great power and income for the nations that produce it, but it also serves as leverage.
• The Caspian Sea territorial conflicts provide the area with yet another geopolitical facet.
• China currently dominates the global supply chain for critical minerals, controlling over 60-70% of rare earth elements processing and more than 80% of global lithium refining capacity.
• The region’s capacity to utilize those deposits, however, is dependent on how well it cultivates ties with the energy corporations of the United States and China due to the current state of the economy.

The planet is powered by energy. Energy has been the primary source of military might, in all nations and eras. In the twenty-first century, energy is now a key factor in economic expansion and a vehicle for financial growth worldwide. Energy thereby is a true global currency in the modern day. The geopolitics of energy has changed significantly over time in the Central Asian Republics (CARs). The energy industry is currently experiencing an unparalleled change in the 21^st century. The need for fossil fuel reserves is growing worldwide, energy prices are more volatile than ever, capital investment is getting harder to come by, and climate change is firmly assuming a prominent position on the political agenda. This is the moment when CAR’s energy security has gained prominence for great and regional powers such as China, the United States, Russia, Iran, India, Pakistan etc. 

Energy is a source of great power and income for the nations that produce it, but it also serves as leverage. Energy is a strategic asset for CARs, so denying it to an adversary makes them more vulnerable. Furthermore, one of the great frontiers for geological survey and research in the world is currently Central Asia. In this regard, the Capsian Sea has massive amounts of oil, gas, coal, nuclear, and other energy resources that can be found, produced, transported, and refined attributable to the opportunities it presents. In the Central Asian countries, energy is the most precious and plentiful natural resource. Oil and Gas are the main energy elements in this region, and hydrocarbons are abundant here. It is here, that Kazakhstan is particularly well-known for its substantial uranium deposits, massive coal and oil reserves, and other natural resources whereas Turkmenistan and Uzbekistan are famous for their gas reserves. Significant amounts of hydroelectric power are produced in Tajikistan and Kyrgyzstan. 

With the growing reliance on transportation systems, especially in China and the United States, energy politics have grown even more intricate. Thereby the commercial dominance of energy providers has transformed it into a struggle for economic and political power as well. The competition between importers and suppliers for supplies has increased pricing, suppliers’ wealth, and suppliers’ ability to participate in local and global politics.  From the perspective of both supply and demand, energy geopolitics has structural elements. The supply side comprises the amount of reserves in the world, their distribution patterns, discoveries, capacity building, and other associated factors. Regarding demand, the concerns pertain to the market’s dimensions and location, transportation logistics, delivery, and other factors. Since oil and gas serve as fundamental geopolitical commodities, they dominate the geopolitics of energy in the modern world, with nuclear power and coal resources coming in second. However, both the demand and supply sides of non-renewable energy geopolitics have been influenced in large part by elements such as politics, technology, and economics. 

The great powers, the United States and China tap for energy through pipelines in the Caspian Sea delve themselves in a quest of legality. The Commonwealth of Independent States shares borders with Central Asian Republics (CARs) due to which the resources of the Caspian Sea need to be divided. As of the latest verdict, the CARs have majority access to the Caspian Sea, a major benefit for the great powers, the US and China. Let us now delve into the understanding of the Legality of the Caspian Sea for amassing natural resource endowments in the form of non-renewable energy resources.  

The Caspian Sea separated the border of the former Soviet Union from Iran before the Soviet Union fell apart. Iran’s border with Russia was severed when the Soviet Union fell apart. Both the “1921 and 1940 treaties, which included the Caspian Sea region, were signed by the two nations during the Soviet era”. Amidst the geopolitical shifts in this region, the “Treaty of Friendship signed in 1921 between the Soviet Union and Iran (Persia) and the Soviet-Iranian Trade and Navigation Agreement of 1940” have lost their significance. 

All of the states that border the Caspian Sea must agree on a new legal status for the region in light of the shifting environment. Due to the region’s abundance of resources, ownership has become a contentious issue that is crucial to its stability and future growth. Until a new legally binding agreement determines the shares of seas and assets of the Caspian Sea, the legal dispute still revolves around the treaties that Iran as well as the former Soviet Union signed which did not include seabed borders and resource mining. They couldn’t decipher the Caspian waters as a ‘lake’ or as a ‘sea’. 

Turkmenistan objected to the “condominium” concept that Iran and Russia had put up for the research and use of the Caspian Sea’s natural riches in the early 1990s. The suggested principle calls for the individual littoral governments to have control over a “45 nautical mile coastal zone”, with the remaining area being used cooperatively. Iran and Russia argued that the Caspian Sea ought not to be controlled by the “1982 United Nations Convention on the Law of the Sea (UNCLOS)” since it is a lake and does not have an exit to another sea or ocean.

The “Law of the Sea stipulated that the five governments encircling the Caspian would split the sea and its underwater riches into national domains.” The national borders would be provided by a median line drawn from each nation’s coasts. The Caspian was not considered to fall within UNCLOS classifications such as “exclusive economic zones,” “continental shelf,” or “territorial waters,” according to Iranian and Russian perspectives. They stated that only the five littoral states’ agreement could be used to extract the oil and gas from the seabed.

Table 1: Caspian Legal Status Alternatives   

An agreement to temporarily extend Turkmenistan’s frontier into the sea to its median point was made in February 1997 with Kazakhstan. A collaborative agreement establishes the Caspian’s legal standing. They simultaneously acknowledged the right of all coastal nations to work together to develop the seabed’s mineral wealth. According to Turkmenistan, “the waters and seabed can’t be divided on a bilateral basis.”

But in April 1998; Azerbaijan declared that “not only the floor but additionally the water as well as surface of the seawater should be partitioned” and it applauded the national sector partition of the seafloor along a median line. The Caspian bottom should be divided into national sections, as both Azerbaijan and Turkmenistan decided after intense negotiations in March 1998. They were unable to settle their disagreement over sovereignty in several significant oil fields, such as the “Kapaz (Serdar) as well as Chirag oil fields” due to their divergent opinions on the subject. 

The government of Turkmenistan asked a global consortium to explore the resources at the Kapaz oil field, which is located closer to Turkmenistan than the coast of Azerbaijan, which escalated the territorial conflict between Azerbaijan and Turkmenistan. The US ExxonMobil Company-led multinational consortium that Turkmenistan inked an agreement within June 1998 was categorically rejected by the Azerbaijani government. Border conflicts, however, will influence each state’s stance on the Caspian’s legal status.

Nonetheless, Russia’s stance on the Caspian Sea’s partition has undergone substantial modifications. Resources in the Caspian Sea ought to be delineated by a “median line running through its centre, as agreed upon by Russia and Azerbaijan”. While they both agreed to partition the Caspian Sea under national areas, Russia insisted on sharing the seas to provide unrestricted passage and aid in the resolution of environmental issues. The conclusion of the Kazakh-Russian accord followed the same concept. 

The seafloor of the Caspian Sea was separated into national sections so that fishing and navigation could be shared. The biological resources and the Caspian waters were to be left open to shared usage, but the seabed with its wealth of minerals was to be split along a median line, according to the agreement. Azerbaijan, who insisted on dividing the sea’s surface as well as its seabed, vigorously opposed this arrangement. Iran was the country that opposed the “Kazakh-Russian accord” most strongly. Until all the states around the Caspian Sea came to a complete consensus on its legal status, Iran opposed the separation of the sea into national sections, whether on the “seabed or the surface”. Iran unequivocally declared that the 1940 and 1921 accords, which did not call for the split of the Caspian Sea, ought to remain in effect until a complete deal is reached by all littoral states. 

The Caspian Sea territorial conflicts provide the area with yet another geopolitical facet. “Shipping between Russia, Kazakhstan, and Iran would be permitted without violating the borders of Turkmenistan or Azerbaijan if the seabed and submerged resources were divided into national sectors and the surface remained an international waterway”. It would be possible to build subsurface pipes connecting each of the states without the intervention of a third state if such a proposition came to pass. On the other side, “Russia and Kazakhstan would forfeit their rights of passage to Iran if the sea’s surface were separated into national sectors, and Russia and Turkmenistan would also forfeit their shared border”. Azerbaijan stands to gain the most strategically from this divide. As the only country sharing a border with every state along the coast, Azerbaijan would continue to be an important hub for pipeline and commercial routes.

In the contemporary times, the Convention has the following essential elements, and it was decided to be in effect for an indefinite period: 

1. It creates a sovereign water zone that is 15 miles wide, with an extra “ten nautical miles of private fishing zones” that are followed by common waters;
2. It does not require parties to agree to build underwater pipelines.
   “A party wishing to build a pipeline merely needs to reach a bilateral agreement with the party whose territory the pipe will pass through”. Nevertheless, the pipeline’s route needs to be disclosed to the remaining signatories; 
3. Environmental standards and requirements, such as those outlined in the “Framework Convention for the Protection of the Marine Environment of the Caspian Sea”, must be complied with; and 
4. A “zone of peace” is established in the Caspian Sea, and only signatories are permitted to station armed forces there.  

The following table shows Caspian Basin’s proven and probable reserves for distribution.

Table 2: Caspian Basin’s proved and probable reserves for distribution

Thus, it can be observed the fact that the Caspian Basin possesses enormous reserves following the dispute. A significant portion of the reserves remain unexplored and are expected to be significantly larger than previously projected. It’s estimated that the basin could produce an extra “184 million barrels” of oil. When comparing the Caspian to the Middle East, the ratio of gas to oil is significantly larger.  The region’s capacity to utilize those deposits, however, is dependent on how well it cultivates ties with the energy corporations of the United States and China due to the current state of the economy.

Lakshmi Karlekar

Lakshmi Karlekar is a PhD Research Fellow at the Department of International Relations, Political Science and History at the CHRIST (Deemed to be) University, Bengaluru. Views expressed are the author’s own.