A final agreement between Azerbaijan, Kazakhstan, Russia, Turkmenistan and Iran on the division of Caspian waters and seabed would allow increased exploration and development, which up to now has been thwarted by disagreements. The bad news for Western energy companies, however, is that future exploitation would seem to be, on the basis of the agreements recently concluded, the sole prerogative of the littoral nations themselves.

The Second Conference of Caspian Sea Littoral States achieved a greater consensus among the participants than at any time since the dissolution of the Soviet Union in 1991. The first Caspian Sea summit was held in Ashgabat, Turkmenistan, in 2002. Regarding the thorny issue of Iran's position on delineation of the seabed, which differs from the other four littoral states, Iran's Foreign Ministry spokesman Mohammad Ali Hosseini said, "Iran's position so far in this connection has been to defend her natural rights in the Caspian Sea."

While in the past, Iran has held to its position the five littoral states should receive an equitable 20 percent share of the Caspian's waters, that position may be changing as the conference's concluding declaration states, "The sides agree that the Caspian Sea legal regime should be drafted as soon as possible."

Russian President Vladimir Putin, Azerbaijani President Ilham Aliyev, Kazakh President Nursultan Nazarbayev, Turkmen President Gurbanguly Berdymukhammedov and Iranian President Mahmoud Ahmadinejad participated in the summit and signed the conference's concluding 25-article Caspian Declaration.

For hopeful Western investors, perhaps the most significant article of the Caspian Declaration stated, "The sides hereby announce that only Caspian Sea littoral countries are allowed to use the resources of the sea," a statement that will undoubtedly factor in Western investment in future Caspian energy projects. Further limiting Western transport options, other clauses limit passage of the Caspian solely to the merchant vessels of littoral countries, which would seem to preclude the possibility of Western tankers plying the Caspian's waters.

The real winner at the Tehran summit is Ahmadinejad's regime. For months, rumors about an imminent military attack on Iran's nuclear installations have swirled around the corridors of power in Jerusalem and Washington. For Iran's beleaguered government, the most important clause of the Caspian Declaration states simply, "The sides reiterate that they would not let any country use their soil for a military attack against other littoral states." The declaration represents a significant change in Azerbaijan's relationship with the United States and NATO in particular, as it has participated in all of NATO's Partnership for Peace programs since its inception in 1994 and despite CIA Director Gen. Michael Hayden's low-key visit to Baku on Sept. 28. The declaration would seem to rule out any "northern option" in the event of an attack on Iran.

Putin was upbeat on the accomplishments of the summit as a basis for further cooperation, telling journalists, "We agreed that economic cooperation between these countries should become active. And we agreed with the Iranian president's proposal to establish an economic cooperation organization as the first step. To this end, we have to hold a conference next year in Russia in relation to the economic issues of Caspian Sea countries."

Putin might find concrete accomplishments a bit more difficult to come by at next year's conference, however. While the summit achieved broad consensus on previously contentious questions, important differences nevertheless remained on certain issues, most notably the construction of trans-Caspian undersea natural gas and oil pipelines. Citing environmental concerns, Putin reiterated Moscow's position, supported by Iran, that the Caspian's unique ecology and the potential risk to it posed by oil and gas projects necessitated that any such pipelines be unanimously approved by all five nations.

This assertion does not sit well with Kazakhstan and Turkmenistan, both of which are seeking alternative export routes by passing Russia's pipeline monopoly. Only Azerbaijan has escaped Russian domination through its use of the Baku-Supsa and Baku-Tbilisi-Ceyhan pipelines, and Baku has long maintained that all littoral states have sovereign rights to lay trans-Caspian pipelines in their delineated sectors of the Caspian seabed and the right to link such pipelines to others. Nazarbayev has consistently supported Azerbaijan's position and stated at the summit that Caspian pipeline projects "need only be agreed upon by the countries whose seabed would be used." Significantly, Turkmenistan's new president also declined to support Moscow and Tehran's position on the issue.

The five presidents agreed to hold a Third Conference of Caspian Sea Littoral States in October 2008 in Baku; it will be interesting to see if the unity displayed this week in Iran survives until then.

(e-mail: [email protected])

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