Institute for War and Peace Reporting | Giving Voice, Driving Change

Turkmen-Azeri Ties Stay at Low Ebb

Long-running dispute on Caspian oil reserves creates tensions which may ultimately harm Ashgabat more than Baku.
By Rauf Orujev

The contentious issue of how the Caspian Sea and its huge oil and natural gas reserves should be divided is once again souring relations between Turkmenistan and Azerbaijan.

Elkhan Huseinov, Azerbaijan’s ambassador in Ashgabat, left for home on June 29 for “consultations about the situation in Turkmenistan”, diplomatic sources in Baku said. Officials remained tightlipped, but there was speculation that the envoy was recalled because of concern in Azerbaijan at its Caspian Sea neighbour’s plans to build up its military forces.

Huseinov’s return to Turkmenistan two weeks later avoided a further deterioration in relations, but diplomats and analysts interviewed by IWPR suggested the underlying problems between the two countries remained unresolved.

The heart of the dispute is the oil and gas lying below the waters of the Caspian. Turkmenistan has made plans to develop a disputed oil field which Azerbaijan has already started work on, but which both countries claim.

Baku is also worried by a deal under which Turkmenistan will acquire weapons and military equipment worth 500 million US dollars from Ukraine, paying for it with natural gas supplies. Although the military hardware may pose little actual threat to Azerbaijan, the apparent sabre-rattling by its neighbour has further complicated the oil dispute.

“Relations between our countries are rather cold,” an Azerbaijani diplomat told the Baku newspaper Ekho on condition of anonymity.

Before 1991, the sea was divided between the Soviet Union and Iran. The Soviet successor states around the sea have been unable to agree boundaries, and new oil and gas discoveries in central waters have made the debate more than academic.

Azerbaijan reached a deal with Russia and Kazakstan in 2003 assigning a proportionate segment of the sea to each. But the two other maritime states – Turkmenistan and Iran – have not signed up to this, so that there is no common view on how much of the southern Caspian belongs to them and how much to their neighbour Azerbaijan.

Despite these unresolved matters, Azerbaijan has since 1994 gone ahead with developing major deposits including the Azeri, Chirag and Guneshli fields. Turkmenistan claims at least part of these fields, depending on how the final border lines would be drawn.

Particularly contentious, however, is the Kapaz field, which the Turkmen call Serdar. Ownership has been under discussion since 1997, when Azerbaijan engaged the Russian companies Lukoil and Rosneft to develop the field, only to find that they backed out following protests from Ashgabat.

There were further attempts by both countries to set up development deals for Kapaz/Serdar, but all failed. However, in January 2005, a Canadian company called Buried Hill Energy announced it had agreed a deal with Turkmenistan to begin work in the area.

Azerbaijan’s foreign ministry swiftly dispatched a message to the Canadian firm detailing its concerns and warning that no work should begin until a final ruling is made on who owns Kapaz/Serdar.

A spokesman for Azerbaijan’s foreign ministry Tair Tagizade was more conciliatory in an interview with IWPR, saying he was confident the long running dispute would eventually be sorted out.

“I would say that there are a number of issues between Azerbaijan and Turkmenistan where the two sides have not reached a full mutual understanding, including the sectoral division of the Caspian and specifically the maritime borders,” said Tagizade. “But this is a working problem and can be solved. So I wouldn’t dramatise relations between the two countries.” Oil is not the only unresolved question between the two countries, however, and relations between the two have been near collapse over a number of issues including millions of dollars that Turkmenistan is claiming for gas it supplied to the Azerbaijanis a decade ago.

Turkmenistan has not had an embassy in Baku since 2001, and diplomatic ties worsened the following year after Turkmen president Saparmurat Niyazov, also known as Turkmenbashi, said some of those involved in an alleged attempt on his life entered the country via Azerbaijan, whose leadership, he hinted, effectively sponsored them.

Baku was particularly irritated by the recent visit of Ukrainian president Viktor Yuschenko to Ashgabat, during which a defence deal was signed promising deliveries of naval vessels from Ukraine as well as crew training, and servicing and repairs to ships.

Azerbaijan political expert Rasim Musabekov says Turkmenistan cannot solve its Caspian problems by beefing up its military might.

“No matter how Turkmenistan builds up its navy, it is unlikely that the country will draw any benefit from it because hardware alone is not enough,” he said.

“It’s quite impossible to develop a resource base on the Caspian founded on the constant presence of armed forces. No investor is going to put money into an area like that or send staff there.”

Alienating Azerbaijan, with its more developed oil industry and a huge export pipeline ending at the Mediterranean port of Ceyhan, may not be in the interests of Turkmenistan, which apart from the Caspian is landlocked. The country is already dependent on Russian goodwill for exporting almost all its gas, and sales of oil and gas via Iran remain on a small-scale because of the latter country’s political isolation.

According to Musabekov, “Even if Turkmenistan did find an investor, it will face the fact that this project [Serdar] is not sufficiently profitable, unless it uses Azerbaijan’s infrastructure and onward transportation for the product.”

An official with the Turkmenistan oil and gas ministry who asked to remain anonymous agreed that his country would benefit from friendlier relations with Azerbaijan, saying, “Turkmenistan cannot attract foreign investors to work in the Caspian sector which it believes to be its own, because any investor wishing to work in Turkmenistan... is above all interested in operating with the support of Azerbaijan’s infrastructure.”

Rauf Orujev is an IWPR contributor in Azerbaijan.

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