The U.S. under the Trump administration is actively working to limit the sales of Iranian oil to force the regime to make significant changes in how it operates. Despite that, the Iranian regime continues to move forward to increase its oil production. One area is the resources of oil and gas in part of the Caspian Sea, which have been a source of contention between Russia, Iran, Kazakhstan, Turkmenistan, and Azerbaijan for years.
Disagreements over status slow exploration
While some countries have attempted to move forward with various offshore projects to tap these resources, there continues to be disagreements about the legal status of the Caspian Sea. On Sunday, one source of contention was addressed, as the nations agreed in principle to how they would divide up the sea’s resources.
“We have established 15-mile-wide territorial waters whose borders become state borders,” said Kazakhstan President Nursultan Nazarbayev. “Adjacent to the territorial waters are 10 miles of fishing water where each state has exclusive fishing rights.” He also noted that the agreement bars armed presence on the Caspian Sea by anyone other than the littoral states.
The seabed division remains undecided, but the leaders appeared to view the progress made in a positive light.
Iranian President Hassan Rouhani noted that the document was not the final solution to the issues regarding the Caspian Sea, but that further agreements and talks would be needed to address the rest of the issues. However, he also indicated that the agreement would be the base used to move forward.
Pipeline issue remains
For Russia, one of the reasons that this dispute remains so critical is that there are pipeline projects in the works that could be used to send oil and gas to Europe without going through Russia. The Russian government objects to the pipeline, citing environmental concerns. It remains unclear if the agreement will pave the way for the pipeline to move forward. Environmental concerns are built into the agreement and must be met before a pipeline can move forward.
“We consider a Trans-Caspian Gas Pipeline (TCGP) unlikely, even in the longer term. Clarity on the legal status will shine more light on the commercial and strategic obstacles to a TCGP, from infrastructure constraints to supply competition, not least from Azerbaijan itself,” said Ashley Sherman, principal Caspian analyst at energy consultancy Wood Mackenszie.
Even if this plan moves forward, it appears that the oil and gas production increases will be limited. Still, the hope is that joint projects can now move forward to develop this resource.
“The scale of the projects in disputed waters is not comparable to the existing super-giant fields, from Azeri Chirag Cuneshli and Shah Deniz in Azerbaijan to Kashagan in Kazakhstan,” said Sherman.
For Iran, the potential to develop their area in terms of oil and gas may be limited as sanctions come online, leaving the question of how the agreement benefits Iranians up in the air.