In the 1990s, substantial new oil deposits were discovered under the Caspian Sea.
Oil extraction is most advanced in two parts of the sea:
- The area near the port of Atyrau, Kazakhstan in the northeastern part of the Caspian
- The area east of Baku, Azerbaijan, in the southwestern part of the Caspian
Oil extraction is also being developed off the Caspian coasts of Russia and Turkmenistan—although gas is more important for Turkmenistan.
Disputes of two kinds have arisen among the countries involved in developing Caspian oil.
- One dispute concerns whether and how the Caspian seabed should be divided up among the five coastal states—Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran.
- The other dispute concerns the routes to be used to get the oil out for sale on the world market.
Disputes over the southern seabed
The main dispute is between Azerbaijan, Turkmenistan, and Iran over division of the southern part of the seabed. Both Azerbaijan and Turkmenistan lay claim to some oilfields situated midway between their coasts. Iran and Azerbaijan have an ongoing dispute over their offshore borders. In July 2001, an Iranian gunboat challenged two Azerbaijani vessels surveying for oil in the contested area.
In 2003, Russia, Azerbaijan, and Kazakhstan signed an agreement on the division of the northern and central parts of the seabed. This covered about 64% of the seabed.
The leaders of the five Caspian littoral states attended a summit meeting in Tehran in 2007, but failed to make progress in resolving the outstanding border and legal issues dividing them.
The littoral states met again in Baku in 2010 to discuss Caspian Sea issues. They could not resolve the dispute over who owns what oil.
In 2011, Caspian Sea region officials met in Moscow. Participants formed a working group to draft a convention on the legal status of the Caspian Sea. Russia, Azerbaijan and Kazakhstan signed an agreement on demarcation of the northern part of the sea. These countries—the ‘Caspian coalition’— advocate that seabed borders be an equal distance from the coastal countries’ territories. This would give Kazakhstan 30% share, and Russia, Azerbaijan and Turkmenistan – about 19% each, and Iran – 14%. Such a solution is the most favorable to the ‘Caspian coalition’ states.
Iran is a vocal opponent of the proposal. Iran, having consistently insisted that the Caspian is a lake, claims to possess an equal share (20%) of the seabed. This would require Azerbaijan to transfer 1/3 of its Caspian sea territory to Iran, which is totally unacceptable to Baku. One month prior to the Moscow meeting, Iran announced that it had made its first oil discovery in the Caspian Sea in more than 100 years, breaking a 2001 agreement with Azerbaijan not to develop resources in the Caspian Sea until demarcation issues were settled.
The latest flare-ups between Azerbaijan and Turkmenistan took place in 2012. Turkmenistan announced plans to start geographic sampling at one of the oil fields in dispute. Azerbaijan asserted that this violated a bilateral agreement than banned work in the field until the ownership issue was resolved. Subsequently, an Azeri patrol boat stopped a Turkmen vessel it claimed was carrying out scientific work in another part of the Caspian.