By OGJ editors
WASHINGTON, DC, May 24 -- US officials and foreign policy analysts said May 23 that the odds are getting better that industry will soon see a satisfactory resolution to a decades-old border dispute between Azerbaijan and Iran over Caspian Sea boundaries. The disagreement has led some Western oil companies to scale back some but not all investment plans in the oil-rich region.
"The failure to break the deadlock over the Caspian's legal status threatens to hamper oil exploration and heightens instability in the already volatile region," said the Eurasia Group, a foreign policy think tank.
Eurasia Group noted that of the five Caspian Sea littoral states, Iran and Azerbaijan are the furthest from agreement on how to divide the Caspian for oil development purposes.
An April summit again failed to yield a regional consensus, and since then individual countries have made their own deals with each other; the most recent was between Russia and Kazakhstan earlier this month (OGJ Online, May 15, 2002).
Historic summit
An historic 3-day summit between the presidents of Iran and Azerbaijan in Tehran did not yield a formal resolution to their border dispute. Nevertheless, the two leaders are encouraging informal discussions between the two countries on joint development of disputed oil fields, according to US officials and Caspian diplomats speaking on condition of anonymity. An Iranian delegation is expected to visit Baku in late July, with diplomats anticipating a bilateral agreement can be reached before September. Industry meanwhile is hopeful the two countries can strike a deal to jointly explore and develop the Araz-Alov-Sharg prospects, now claimed by both countries. Last year tensions between the two countries flared when the Iranian military forced two Azeri seismic vessels hired by BP PLC to retreat from the block containing the prospects. Azerbaijan awarded a production-sharing agreement covering the blocks to a group led by BP in 1998 (OGJ, July 27, 1998, p. 37).
"Although, on the record, [Azeri President Heydar] Aliyev's visit focused solely on trivial issues and produced no tangible results in the short term, the shift in Iran's policy regarding bilateral agreements for the division of the sea's resources increased the prospects for the resolution of the conflict in the long term," Eurasia Group said.
But a compromise may prove elusive if there is a sharp deterioration in US-Iran relations that would push the latter to assume a more hawkish stance, Eurasia cautioned.
The White House over the past several months has continued to maintain that many of Iran's more conservative clerics help harbor and train terrorists that want to destroy US interests. Iran denies that charge.
