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urasia
E
How to Allocate the Value of the Caspian Seabed Oil and
Natural Gas Among the Five Caspian States
a report by
Majid Sheikhmohammady,
1
Marc Kilgour
2,3
and Keith W Hipel
3
1. Department of Systems Design Engineering, Khaje Nasir Toosi University of Technology, Tehran;
2. Department of Mathematics, Wilfrid Laurier University, University of Waterloo; 3. Department of Systems Design Engineering, University of Waterloo
Regional Focus –
Recently, we used various methods taken from the negotiation and 1941. Arguably, these treaties are still in effect, but their significance in
social choice literature to predict the outcome of the continuing the current situation is unclear. Since 1992, there have been more than
negotiations over the Caspian Sea, one of the world’s most intractable 30 meetings of the five littoral states, but the legal status of the Caspian
problems.
1
In this article, we will summarise some of our calculations Sea has not yet been settled. Based on applicable international laws and
and comment on our results. analogies with other shared water bodies, five regimes have been
proposed for sharing, among Azerbaijan, Iran, Kazakhstan, Russia and
The Caspian Sea lies between the Caucasus Mountains and Central Asia. Turkmenistan, the waters and the seabed of the Caspian Sea, as follows:
Although it is a salt-water body, it is considered by many to be the
world’s largest lake; its area, 376,000km
2
, is more than four times that C: condominium status (joint ownership) of both the sea surface
of Lake Superior (82,414km
2
), the largest of the Great Lakes of North and the seabed. This would mean that all five states have equal
America and the world’s largest freshwater lake. Until 1991, the Caspian sovereignty over all areas of the Caspian Sea.
Sea was jointly governed by the USSR and Iran – the only two littoral D
m
: this division is based on UNCLOS, which implies that the sea
countries (i.e. countries with shoreline). However, when the former would be apportioned to the five countries on the basis of
Soviet Union collapsed, the Caspian Sea suddenly had five littoral states: equidistant median lines, so that each point of the sea, or the
Azerbaijan, Russia, Kazakhstan, Turkmenistan and Iran (see Figure 1). seabed, would belong to the closest country.
D
e
: equal division (20%) of the sea, and the seabed, to each littoral
By 1992, the status of the Caspian Sea in international law had become state, which would mean that each state would own a portion of
unclear. The Caspian Sea is a water body of immense size, and is the sea surface and seabed determined approximately by distance,
surrounded by several states, so it is like a sea; but it is completely but subject to the equality constraint.
enclosed, like a lake.
2
Is it more like the Mediterranean Sea or the Black D
s
: this division follows Soviet maps (which were developed by
Sea, or more like one of the four Great Lakes shared by the US and the former regime as an aid for administering Caspian Sea oil-
Canada? If it is a sea, each littoral state may claim an exclusive economic exploration projects after World War Two), and is based on the
zone, but the area outside that zone would fall under the UN Convention extension of the internal borders of five former Soviet republics:
on the Law of the Seas (UNCLOS) and would be considered international Azerbaijan, Turkmenistan, Kazakhstan, Dagestan and Kalmykia.
4
waters, or at least administered in common. If it is a lake, it would be DC: a combination of D
m
, applied to the seabed, and C, applied to
shared by the states that border it, but exactly how it is apportioned the sea surface.
would be up to the states to negotiate. The five states surrounding the
Caspian Sea began to negotiate in 1992, and these discussions are These five schemes for sharing the Caspian Sea imply four different
ongoing. Simply put, the dispute is over who owns which part of the arrangements for ownership of the oil and gas in the seabed. By
Caspian Sea, or whether all five countries share the entire sea in some analysing the distribution of these assets we formulated Table 1, which
sense. The negotiations have taken on greater priority because of the describes the consequence of division based on the International Law
existence of immense amounts of petroleum in the Caspian seabed. of the Seas (D
m
), showing how much of the estimated oil and natural
The proven and suspected reserves total 201 billion (10
9
) barrels of oil gas reserves would be owned by each of the five countries. Table 2
and about 570 trillion (10
12
) cubic feet of natural gas.
3
follows up by showing how the economic values would be split among
the five countries based on the average oil and natural gas prices in the
Of course, there are many reasons for the five states to wish that the region in 2006. Note that Tables 1 and 2 apply equally if the legal
status of the Caspian Sea were settled, in addition to its potential for oil status of the Caspian Sea were determined by scheme DC, as the
and gas development. At one time there was a healthy fishing industry condominium status of the surface is irrelevant to the seabed, which
on the Caspian Sea, but its economic value has declined due to would be divided by equidistant median lines, as in D
m
.
environmental degradation, lack of regulation and lack of enforcement.
More generally, it will take integrated measures to resolve regional Similar exercises could be carried out for D
e
and D
s
. If the legal status of
environmental problems. Nonetheless, in this article we will consider the Caspian Sea is C, the countries would receive equal shares of oil
only values that are associated with oil and gas development, which (40.32bbl) and gas (114.4tcf). It is important to note that D
e
would not
would be particularly important for Azerbaijan, Kazakhstan and imply equal sharing of the revenue. What would be divided equally is the
Turkmenistan as it could be a significant boost for their economies. area of the sea surface and the seabed; however, the deposits of oil and
gas are not spread uniformly throughout the Caspian Sea, so economic
Negotiations and Possible Resolutions values would in fact be unequal if this scheme were implemented. It is
As previously stated, the Caspian Sea was shared by the USSR and Iran, reasonable to expect that preferences over the sharing methods depend
which enjoyed stable relations based on treaties signed in 1921 and on these distributions. We assume that each country prefers one division
© TOUCH BRIEFINGS 2009
34
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