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July 03, 2012, Tuesday

The Caspian conundrum of TANAP

Last week, Turkey and Azerbaijan signed an intergovernmental agreement on the trans-Anatolian natural gas pipeline project (TANAP). TANAP, set to be completed in six years, will pipe 16 billion cubic meters of gas a year from Azerbaijan's Shah Deniz II field. The agreement promises to breathe new life into bilateral relations and, in this sense, Azerbaijan has hailed TANAP as a signpost “towards a new age of partnership.”

Following this, on June 28, the Shah Deniz II consortium gave their backing to the Nabucco West pipeline -- the rival to Russian South Stream -- as one of two potential routes to transport gas from TANAP to European markets. On Monday, Azerbaijan state energy company SOCAR, along with France's Total and GDF Suez, confirmed the discovery of important gas reserves in the depths of Azerbaijan's Caspian Sea territory. These developments will not mean smooth sailing, however, as energy politics in and around the Caspian remain embattled.

Turkey and Azerbaijan have been warned both formally and informally by Russia; Iran is also clearly unhappy about these new developments. Predictably, in the case of Turkey, the Russian state-backed energy giant Gazprom sent a warning message to Ankara to the effect that Russia will not provide an emergency gas supply if Turkey proceeds with TANAP. Gazprom officials indicated to Ankara that “until 2018, when TANAP is complete, you are dependent on Moscow, not Baku.” The second move came when Iran raised the price of the natural gas it sells to Turkey to $524 per 1,000 cubic meters despite drops in price in global markets -- for comparison, Turkey pays $282 per 1,000 cubic meters to Azerbaijan.

Before the realization of the TANAP intergovernmental agreement, Russia, Turkmenistan and Iran became “Caspian troublemakers.” In the first week of June, Russian presidential aide Yuri Ushakov warned the EU that any decision it makes regarding the Trans-Caspian Gas Pipeline should first be adopted by the Caspian littoral states, despite the fact that the pipeline's route does not pass through any disputed territory to which Russia or Iran could lay claim and is independent of arguments about delimiting the Caspian.

After Russia's message to the EU, this “good cop” ploy was followed up by a “bad cop” message from Turkmenistan.

In the second half of June, Turkmenistan began exploration of and scientific research at the disputed Kapaz (Serdar) deposit in the Caspian Sea, a maneuver which the Azerbaijani Foreign Ministry's press service has declared is in violation of a 2008 Turkmen-Azerbaijani agreement. Under this agreement, parties will not carry out exploration or extraction work until the depth divisions of the Caspian Sea in the zones where the Azerbaijani and Turkmen sectors intersect, currently disputed, have been resolved. The Azerbaijani Foreign Ministry summoned the Turkmen ambassador on June 18, after which the Turkmen Foreign Ministry protested against alleged “illegal actions by the Azerbaijani Border Service toward a civilian vessel that was doing scientific research in a Caspian Sea sector that had no relation to Azerbaijan.”

What is important here is that joint access of Azerbaijan and Turkmenistan to the European gas market meets European interests in terms of reducing economic dependence on Russian gas. In this regard, Turkmenistan's “scientific research” is not seen as Ashgabat's decision alone and, moreover, this type of incident is not without precedent. The Kapaz/Serdar field has been the subject of disagreements between Baku and Ashgabat for years and was the main cause of the breakdown in Turkmen-Azerbaijani relations in the 1990s. Only after the death of Turkmen leader Saparmurat Niyazov in 2006 and a visit by the new leadership to Baku in 2008 were the two sides able to come to an agreement on their mutual interests. But even in light of this positive development, Turkmen President Gurbanguly Berdimuhamedow, following a low-profile meeting with Turkmen-Azerbaijani experts on the status of the Caspian, suddenly announced in July 2009 that his government would take Azerbaijan to the International Court of Arbitration over contested the Caspian Sea oil fields. The promise was reiterated last week by Turkmenistan's oil and gas minister, Kakageldy Abdullayev. Abdullayev told local media that Turkmenistan will go to the UN International Court of Justice with claims on three offshore oil and gas fields.

Turkmenistan's threat to go to the International Court of Justice is an empty one, given that territorial disputes, including those around maritime borders, are dealt with by the International Court of Justice in The Hague and, in order to be able to submit the dispute to one these courts, both Azerbaijan and Turkmenistan have to recognize the court's jurisdiction in the particular case, precluding any unilateral action.

The final move in this game of regional energy politics was made by Iran on June 30, 2012: Iranian navy top brass Admiral Abbas Zamini told the Fars news agency that Iran will dispatch light submarines to the Caspian Sea. He would not elaborate on how many subs would be deployed or what the nature of their missions would be. In light of the Turkmen-Azerbaijani dispute, it seems clear that Iran has found a new means with which to threaten Azerbaijan. Tehran is seeking to destabilize US/EU plans in the Caspian. The international context to this is the EU's oil embargo, which is significantly damaging Iran's foreign-exchange reserves and, with US support, Saudi Arabia is increasing its oil exports, further weakening Iran's energy-based threats.

The old game of energy politics is being played in the Caspian with a new set of “soft” and “hard” methods. Moscow seems to be watching while the action comes out of Iran and Turkmenistan. A few days ago, Uzbekistan left the Collective Security Treaty Organization (CSTO), weakening Moscow's position in this region and strengthening the US position. Now there are no longer any legal barriers if Tashkent wants to begin military cooperation with the US. Arguably, the Caspian conundrum that stems immediately from TANAP is a sign of deeper, further reaching problems across Eurasia.

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