International Institute For Caspian Studies




What Happened in the South Caspian?
Abbas Maleki,(
Chairman,The International Institute for Caspian Studies)
August 17, 2001

About a month ago, an Iranian warship confronted a BP-operated research vessel, the Geophysic-3, which belongs to the Azerbaijan Republic, and demanded that it stop marine exploration at once the Caspian Sea oil fields belonging to Iran.

  Although this was the first time that Iran has taken such a drastic measure to warn its neighbor, this was not the first time that Azerbaijan had encroached on Iran's borders in the Caspian Sea.
  In order to protect its sovereignty over its portion of the Caspian Sea, the Iranian government claimed one of the known oil field in the southwestern part region of the Caspian Sea in 1998. Iranians call this the Alborz oil field. In Azerbaijan, the name of the same structure in the southwest Caspian is Alov,which actually consists of three fields: Sharg, Alov, and Araz. These Persian names mean Sharg (East), Alov (flare), Araz (a river between Iran and Azerbaijan) and Alborz (a mountain in Iran).
  The Alborz/Alov field is located above the Astara-Husseinqoli line. This virtual line is created by drawing line between Astara, the last point in Azerbaijan-Iran border in Caspian and Hosseinqoli which is the last point of ground border between Turkmenistan-Iran. Azerbaijan claims in some oil and gas maps from Soviet era, this line is the last region of Soviet activities in the Caspian. The waters below this line is about 11% of total Caspian waters.  Should Iran acquires its 20 percent share of Caspian Sea resource, the Alborz field will be within the area possessed by Iran. However, if the Caspian Sea is divided along the median line, the Alborz field would be located just past Iran's territorial waters. In the legal regime of condominium, it is clear except for 12- 20 miles of the coastal waters, all of the waters are in common, and therefore the field would not fall in any one nation's waters. 
  British Petroleum reached an agreement for Sharg-Alov-Araz Production Sharing Agreement (PSA) with the Azerbaijan in July 1998 at 10 Downing Street in the presence of British Prime Minister, Tony Blair and Azerbaijan President, Heydar Aliyev.  . The Azerbaijan Republic claimed that the Alborz field was inside Azeri territorial waters. Azerbaijan has already authorized a consortium of oil companies to operate in this region. The Azeri Oil Company has a 40 percent share in this consortium, BP Amoco has 15 percent, the Norway's Stat Oil and ExxonMobil each have 15 percent, the Turkish Oil Company (TPAO) own 10 percent, and Canada’s Alberta Energy 5%. The Azeri government authorized the consortium to conduct seismology operations on Sharg-Alov-Araz in 1999, and within a month, the company started to conduct three-dimensional seismology in the Alov field. It was after the Ilham Aliyev interview in Baku in December 16, 1998 said “the government had opened tenders for the D-43, D-44 and D-74 off-shore oil structures in the southern Caspian. Iran at the same time opposed with the decision of Azerbaijan Republic and sent a letter to Azerbaijan Government in December 1998, showed its concerns over the Azerbaijan activities in the Caspian before the establishment of new legal regime in disputed portion of Caspian.
  After the completion of the study, BP officials said that results indicated that there is some 2.6 billion barrels of oil and 2.4 billion of gas in the field.
  In the last days of December 1998, National Iranian Oil Co. (NIOC), Royal Dutch/Shell Group, London independent Lasmo plc and then German Weba have formed a consortium with the name of KEPCO (Khazar Exploration and Production Company)  to conduct an exploratory survey of the southern Caspian Sea. The 18-month study comprised 1000 km of two-dimensional seismic survey, and geological and geophysical studies of the area. Azerbaijan protested the Iranian deal claiming that some of the areas to be studied are within its littoral boundaries.
  In September 1999, NIOC has assigned the Channel Islands-registered Petro Iran Development Company (PEDCO), to study, explore, and exploit oil from the Alborz 1, 2, 3, and 4 fields field.  The company invited a Norwegian-registered company called Fugro-Geoteam to cooperate in conducting two dimensional seismological studies of the field. This company's Russian ship, the Nalivkin, entered Iranian waters in October 1999 to carry out the study.
  In response, Ilham Aliyev, the Deputy Head of the State Oil Company of the Azerbaijan Republic (SOCAR), called on the regional manager of Fugro-Geoteam in Baku and threatened to seize all of the company's assets in Azerbaijan
  At the time, the Iranian foreign Ministry sent letters to the Azerbaijan Republic, and Iranian Oil Ministry sent letters to the companies active in the Caspian Sea. In these letters, Iran implicitly emphasized the necessity to defend its national interests.
  Following the evaluation of the results of seismological studies, the Azeri consortium intended to begin marine exploration and extraction in the Alborz filed last month. The Iranian foreign Ministry called on the ambassador of the Azerbaijan on July 21, and requested that the oil companies of Azerbaijan and the other foreign countries refrain from operating in Iranian territorial waters. The Iranian oil ministry also warned the companies active in the region to stay out of Iranian territorial waters.
  On July 22, the British ambassador to Iran was informed that unauthorized foreign companies would not be allowed to operate in Iran's twenty percent of Caspian. In an interview in Baku on July 22, Norouz Mohmmadov, who is in charge of the international section of the Azeri President's office, said that Azerbaijan has been extracting oil from the oil field of the Caspian Sea for fifty years, and that it would continue the process in the future. On the same day, the SOCAR spokesman in Baku told Reuters that SOCAR did not intend to suspend any of its contracts with foreign companies.
  The Azeri government apparently thought that the Islamic Republic of Iran would only resort verbal warnings. Ignoring Iran's warnings, two ships from Baku were sent to the Iran's oil field to carry out exploration operations. The Geophysic-3, accompanied by an escort ship, began operation on Monday July 23.
  An Iranian warship demanded that the two ships leave Iranian territorial waters, and the two ships returned to Baku on the same night. The Iranian ambassador to Azerbaijan was summoned by the Azeri prime minister  the following day, Tuesday, July 24th.
  It appears that Azerbaijan left no options for the Islamic Republic of Iran but to defend its interests. BP made a rational decision in announcing that it would refrain from in any activities in the disputed region without the consent of the two governments, and until the resolution of the dispute between Iran and Azerbaijan.
  The position of other regional countries in this regard should be mentioned. On Friday, July 27, Kazakhstan asked its Caspian Sea neighbors to settle their disputes through peaceful means, asking both sides to make the Caspian area a region of peace, friendship and cooperation. These are the very same measures referred to by Iran, and mentioned in the 1921 and 1940 treaties between Iran and the Soviet Union. The government of Turkmenistan also asked the Azeri government to end its unilateral exploitation of Turkmenistan's resources in the Caspian Sea, including the Kapaz, Osman and Khazar oil field. Turkmenistan had already recalled its ambassador to Baku due to the Azeri activities in these disputed areas. The Russian government also asked all sides to refrain from any hostile activities in the Caspian. The U.S. government expressed its concern about Iran's action, but during a meeting with Heydar Aliyev on July 26, Steven Mann, the U.S. president's special envoy to the Caspian Sea region and the former U.S. ambassador to Turkmenistan, limited the discussion to the transfer of oil through Turkey. Therefore, even the position of other countries shows that there exists a agreement that the exploitation of the Caspian resources should be delayed until a legal regime is defined. Otherwise, it is clear that any hasty action is doomed to fail.